(4) Subsections (1) to (3) apply to taxation years that end after February 21, 1994.
	19. (1) The Act is amended by adding the following after section 56.1:
Reserve claimed for debt forgiveness	56.2 There shall be included in computing an individual's income for a taxation year during which the individual was not a bankrupt the amount, if any, deducted under section 61.2 in computing the individual's income for the preceding taxation year.
Reserve claimed for debt forgiveness	56.3 There shall be included in computing a taxpayer's income for a taxation year during which the taxpayer was not a bankrupt the amount, if any, deducted under section 61.4 in computing the taxpayer's income for the preceding taxation year.
	(2) Subsection (1) applies to taxation years that end after February 21, 1994.
	20. (1) The Act is amended by adding the following after section 61.1:
Reserve for debt forgiveness for resident individuals	61.2 There may be deducted in computing the income for a taxation year of an individual (other than a trust) resident in Canada throughout the year such amount as the individual claims not exceeding the amount determined by the formula
	A + B - 0.2(C - $40,000)
	where
	A is the amount, if any, by which
	(a) the total of all amounts each of which is an amount that, because of the application of section 80 to an obligation payable by the individual (or a partnership of which the individual was a member) was included under subsection 80(13) in computing the income of the individual for the year or the income of the partnership for a fiscal period that ends in the year (to the extent that, where the amount was included in computing income of a partnership, it relates to the individual's share of that income)
	exceeds
	(b) the total of all amounts deducted because of paragraph 80(15)(a) in computing the individual's income for the year,
	B is the amount, if any, included under section 56.2 in computing the individual's income for the year, and
	C is the greater of $40,000 and the individual's income for the year, determined without reference to this section, section 56.2, paragraph 60(w), subsection 80(13) and paragraph 80(15)(a).
Deduction for insolvency with respect to resident corporations	61.3 (1) There shall be deducted in computing the income for a taxation year of a corporation resident in Canada throughout the year that is not exempt from tax under this Part on its taxable income, the lesser of
	(a) the amount, if any, by which
	(i) the total of all amounts each of which is an amount that, because of the application of section 80 to a commercial obligation (in this section having the meaning assigned by subsection 80(1)) issued by the corporation (or a partnership of which the corporation was a member) was included under subsection 80(13) in computing the income of the corporation for the year or the income of the partnership for a fiscal period that ends in the year (to the extent that the amount, where it was included in computing income of a partnership, relates to the corporation's share of that income)
	exceeds
	(ii) the total of all amounts deducted because of paragraph 80(15)(a) in computing the corporation's income for the year, and
	(b) the amount determined by the formula
	A - 2(B - C - D - E)
	where
	A is the amount determined under paragraph (a) in respect of the corporation for the year,
	B is the total of
	(i) the fair market value of the assets of the corporation at the end of the year,
	(ii) the amounts paid before the end of the year on account of the corporation's tax payable under this Part or any of Parts I.3, II, VI and XIV for the year or on account of a similar tax payable for the year under an Act of a province, and
	(iii) all amounts paid by the corporation in the 12-month period preceding the end of the year to a person with whom the corporation does not deal at arm's length
	(A) as a dividend (other than a stock dividend),
	(B) on a reduction of paid-up capital in respect of any class of shares of its capital stock,
	(C) on a redemption, acquisition or cancellation of its shares, or
	(D) as a distribution or appropriation in any manner whatever to or for the benefit of the shareholders of any class of its capital stock, to the extent that the distribution or appropriation cannot reasonably be considered to have resulted in a reduction in the amount otherwise determined for C in respect of the corporation for the year,
	C is the total liabilities of the corporation at the end of the year (determined without reference to the corporation's liabilities for tax payable under this Part or any of Parts I.3, II, VI and XIV for the year or for a similar tax payable for the year under an Act of a province) and, for this purpose,
	(i) the equity and consolidation methods of accounting shall not be used, and
	(ii) subject to subparagraph (i) and except as otherwise provided in this description, the total liabilities of the corporation shall
	(A) where the corporation is not an insurance corporation or a bank to which clause (B) or (C) applies and the balance sheet as of the end of the year was presented to the shareholders of the corporation and was prepared in accordance with generally accepted accounting principles, be considered to be the total liabilities shown on that balance sheet,
	(B) where the corporation is a bank or an insurance corporation that is required to report to the Superintendent of Financial Institutions and the balance sheet as of the end of the year was accepted by the Superintendent, be considered to be the total liabilities shown on that balance sheet,
	(C) where the corporation is an insurance corporation that is required to report to the superintendent of insurance or other similar officer or authority of the province under whose laws the corporation is incorporated and the balance sheet as of the end of the year was accepted by that officer or authority, be considered to be the total liabilities shown on that balance sheet, and
	(D) in any other case, be considered to be the amount that would be shown as total liabilities of the corporation at the end of the year on a balance sheet prepared in accordance with generally accepted accounting principles,
	D is the total of all amounts each of which is the principal amount at the end of the year of a distress preferred share (within the meaning assigned by subsection 80(1)) issued by the corporation, and
	E is 50% of the amount, if any, by which the amount that would be the corporation's income for the year if that amount were determined without reference to this section, section 61.4 and subsection 80(17) exceeds the amount determined under paragraph (a) in respect of the corporation for the year.
Reserve for insolvency with respect to non-resident corporations	(2) There shall be deducted in computing the income for a taxation year of a corporation that is non-resident at any time in the year, the lesser of
	(a) the amount, if any, by which
	(i) the total of all amounts each of which is an amount that, because of the application of section 80 to a commercial obligation issued by the corporation (or a partnership of which the corporation was a member) was included under subsection 80(13) in computing the corporation's taxable income or taxable income earned in Canada for the year or the income of the partnership for a fiscal period that ends in the year (to the extent that, where the amount was included in computing income of a partnership, it relates to the corporation's share of the partnership's income added in computing the corporation's taxable income or taxable income earned in Canada for the year)
	exceeds
	(ii) the total of all amounts deducted because of paragraph 80(15)(a) in computing the corporation's taxable income or taxable income earned in Canada for the year, and
	(b) the amount determined by the formula
	A - 2(B - C - D - E)
	where
	A is the amount determined under paragraph (a) in respect of the corporation for the year,
	B is the total of
	(i) the fair market value of the assets of the corporation at the end of the year,
	(ii) the amounts paid before the end of the year on account of the corporation's tax payable under this Part or any of Parts I.3, II, VI and XIV for the year or on account of a similar tax payable for the year under an Act of a province, and
	(iii) all amounts paid in the 12-month period preceding the end of the year by the corporation to a person with whom the corporation does not deal at arm's length
	(A) as a dividend (other than a stock dividend),
	(B) on a reduction of paid-up capital in respect of any class of shares of its capital stock,
	(C) on a redemption, acquisition or cancellation of its shares, or
	(D) as a distribution or appropriation in any manner whatever to or for the benefit of the shareholders of any class of its capital stock, to the extent that the distribution or appropriation cannot reasonably be considered to have resulted in a reduction of the amount otherwise determined for C in respect of the corporation for the year,
	C is the total liabilities of the corporation at the end of the year (determined without reference to the corporation's liabilities for tax payable under this Part or any of Parts I.3, II, VI and XIV for the year or for a similar tax payable for the year under an Act of a province), determined in the manner described in the description of C in paragraph (1)(b),
	D is the total of all amounts each of which is the principal amount at the end of the year of a distress preferred share (within the meaning assigned by subsection 80(1)) issued by the corporation, and
	E is 50% of the amount, if any, by which the amount that would be the corporation's taxable income or taxable income earned in Canada for the year if that amount were determined without reference to this section, section 61.4 and subsection 80(17) exceeds the amount determined under paragraph (a) in respect of the corporation for the year.
Anti-avoidanc e	(3) Subsections (1) and (2) do not apply to a corporation for a taxation year where property was transferred in the 12-month period preceding the end of the year or the corporation became indebted in that period and it can reasonably be considered that one of the reasons for the transfer or the indebtedness was to increase the amount that the corporation would, but for this subsection, be entitled to deduct under subsection (1) or (2).
Reserve for debt forgiveness for corporations and others	61.4 There may be deducted as a reserve in computing the income for a taxation year of a taxpayer that is a corporation or trust resident in Canada throughout the year or a non-resident person who carried on business through a fixed placed of business in Canada at the end of the year such amount as the taxpayer claims not exceeding the least of
	(a) the amount determined by the formula
	A - B
	where
	A is the amount, if any, by which
	(i) the total of all amounts each of which is an amount that, because of the application of section 80 to a commercial obligation (within the meaning assigned by subsection 80(1)) issued by the taxpayer (or a partnership of which the taxpayer was a member) was included under subsection 80(13) in computing the income of the taxpayer for the year or a preceding taxation year or of the partnership for a fiscal period that ends in that year or preceding year (to the extent that, where the amount was included in computing income of a partnership, it relates to the taxpayer's share of that income)
	exceeds the total of
	(ii) all amounts each of which is an amount deducted under paragraph 80(15)(a) in computing the taxpayer's income for the year or a preceding taxation year, and
	(iii) all amounts deducted under section 61.3 in computing the taxpayer's income for the year or a preceding taxation year, and
	B is the amount, if any, by which the amount determined for A in respect of the taxpayer for the year exceeds the total of
	(i) the amount that would be determined for A in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer's income for any preceding taxation year, and
	(ii) the amount, if any, included under section 56.3 in computing the taxpayer's income for the year,
	(b) the total of
	(i) 4/5 of the amount that would be determined for A in paragraph (a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer's income for any preceding taxation year,
	(ii) 3/5 of the amount that would be determined for A in paragraph (a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer's income for the year or any preceding taxation year (other than the last preceding taxation year),
	(iii) 2/5 of the amount that would be determined for A in paragraph (a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer's income for the year or any preceding taxation year (other than the second last preceding taxation year), and
	(iv) 1/5 of the amount that would be determined for A in paragraph (a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer's income for the year or any preceding taxation year (other than the third last preceding taxation year), and
	(c) where the taxpayer is a corporation that commences to wind up in the year (otherwise than in circumstances to which the rules in subsection 88(1) apply), nil.
	(2) Subsection (1) applies to taxation years that end after February 21, 1994.
	21. (1) Paragraph 66(4)(a) of the Act is replaced by the following:
	(a) the amount, if any, by which
	(i) the total of the foreign exploration and development expenses incurred by the taxpayer before the end of the year
	exceeds the total of
	(ii) such of the expenses described in subparagraph (i) as were deductible in computing the taxpayer's income for a preceding taxation year, and
	(iii) all amounts by which the amount described in this paragraph in respect of the taxpayer is required because of subsection 80(8) to be reduced at or before the end of the year, and
	(2) Subsection (1) applies to taxation years that end after February 21, 1994.
	22. (1) The formula in the definition ``cumulative Canadian exploration expense'' in subsection 66.1(6) of the Act is replaced by the following:
	(A + B + C + D + E + E.1) - (F + G + H + I + J + J.1 + K + L + M)