``creditor'' « créancier »	``creditor'' of a particular person includes a person to whom the particular person is obligated to pay an amount under a mortgage or similar obligation and, where property was sold to the particular person under a conditional sales agreement, the seller of the property (or any assignee with respect to the agreement) shall be deemed to be a creditor of the particular person in respect of that property;
``debt'' « dette »	``debt'' includes an obligation to pay an amount under a mortgage or similar obligation or under a conditional sales agreement;
``person'' « personne »	``person'' includes a partnership;
``property'' « bien »	``property'' does not include
	(a) money, or
	(b) indebtedness owed by or guaranteed by the government of a country, or a province, state, or other political subdivision of that country;
``specified amount'' « montant déterminé »	``specified amount'' at any time of a debt owed or assumed by a person means
	(a) the unpaid principal amount of the debt at that time, and
	(b) unpaid interest accrued to that time on the debt.
Surrender of property	(2) For the purposes of this section, a property is surrendered at any time by a person to another person where the beneficial ownership of the property is acquired or reacquired at that time from the person by the other person and the acquisition or reacquisition of the property was in consequence of the person's failure to pay all or part of one or more specified amounts of debts owed by the person to the other person immediately before that time.
Proceeds of disposition for debtor	(3) Where a particular property is surrendered at any time by a person (in this subsection referred to as the ``debtor'') to a creditor of the debtor, the debtor's proceeds of disposition of the particular property shall be deemed to be the amount determined by the formula
	(A + B + C + D + E - F) x G H
	where
	A is the total of all specified amounts of debts of the debtor that are in respect of properties surrendered at that time by the debtor to the creditor and that are owing immediately before that time to the creditor;
	B is the total of all amounts each of which is a specified amount of a debt that is owed by the debtor immediately before that time to a person (other than the creditor), to the extent that the amount ceases to be owing by the debtor as a consequence of properties being surrendered at that time by the debtor to the creditor;
	C is the total of all amounts each of which is a specified amount of a particular debt that is owed by the debtor immediately before that time to a person (other than a specified amount included in the amount determined for A or B as a consequence of properties being surrendered at that time by the debtor to the creditor), where
	(a) any property surrendered at that time by the debtor to the creditor was security for
	(i) the particular debt, and
	(ii) another debt that is owed by the debtor immediately before that time to the creditor, and
	(b) the other debt is subordinate to the particular debt in respect of that property;
	D is
	(a) where a specified amount of a debt owed by the debtor immediately before that time to a person (other than the creditor) ceases, as a consequence of the surrender at that time of properties by the debtor to the creditor, to be secured by all properties owned by the debtor immediately before that time, the lesser of
	(i) the amount, if any, by which the total of all such specified amounts exceeds the portion of that total included in any of the amounts determined for B or C as a consequence of properties being surrendered at that time by the debtor to the creditor, and
	(ii) the amount, if any, by which the total cost amount to the debtor of all properties surrendered at that time by the debtor to the creditor exceeds the total amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, and
	(b) in any other case, nil;
	E is
	(a) where the particular property is surrendered at that time by the debtor in circumstances in which paragraph 69(1)(b) would, but for this subsection, apply and the fair market value of all properties surrendered at that time by the debtor to the creditor exceeds the amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, that excess, and
	(b) in any other case, nil;
	F is the total of all amounts each of which is the lesser of
	(a) the portion of a particular specified amount of a particular debt included in the amount determined for A, B, C or D in computing the debtor's proceeds of disposition of the particular property, and
	(b) the total of
	(i) all amounts included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person because the particular debt was settled, or deemed by subsection 80.01(8) to have been settled, at or before the end of the taxation year that includes that time,
	(ii) all amounts renounced under subsection 66(10), (10.1), (10.2) or (10.3) by the debtor in respect of the particular debt,
	(iii) all amounts each of which is a forgiven amount (within the meaning assigned by subsection 80(1)) in respect of the debt at a previous time that the particular debt was deemed by subsection 80.01(8) to have been settled,
	(iv) where the particular debt is an excluded obligation (within the meaning assigned by subsection 80(1)), the particular specified amount, and
	(v) the lesser of
	(A) the unpaid interest accrued to that time on the particular debt, and
	(B) the total of
	(I) the amount, if any, by which the total of all amounts included because of section 80.4 in computing the debtor's income for the taxation year that includes that time or for a preceding taxation year in respect of interest on the particular debt exceeds the total of all amounts paid before that time on account of interest on the particular debt, and
	(II) such portion of that unpaid interest as would, if it were paid, be included in the amount determined under paragraph 28(1)(e) in respect of the debtor;
	G is the fair market value at that time of the particular property; and
	H is the fair market value at that time of all properties surrendered by the debtor to the creditor at that time.
Subsequent payment by debtor	(4) An amount paid at any time by a person as, on account of or in satisfaction of, a specified amount of a debt that can reasonably be considered to have been included in the amount determined for A, C or D in subsection (3) in respect of a property surrendered before that time by the person shall be deemed to be a repayment of assistance, at that time in respect of the property, to which
	(a) subsection 39(13) applies, where the property was capital property (other than depreciable property) of the person immediately before its surrender;
	(b) paragraph 20(1)(hh.1) applies, where the cost of the property to the person was an eligible capital expenditure;
	(c) the description of E in the definition ``cumulative Canadian exploration expense'' in subsection 66.1(6), the description of D in the definition ``cumulative Canadian development expense'' in subsection 66.2(5) or the description of D in the definition ``cumulative Canadian oil and gas property expense'' in subsection 66.4(5), as the case may be, applies, where the cost of the property to the person was a Canadian exploration expense, a Canadian development expense or a Canadian oil and gas property expense; or
	(d) paragraph 20(1)(hh) applies, in any other case.
Subsequent application with respect to employee or shareholder debt	(5) Any amount included under paragraph 6(1)(a) or subsection 15(1) in computing a person's income for a taxation year that can reasonably be considered to have been included in the amount determined for A, C or D in subsection (3) as a consequence of properties being surrendered before the year by the person shall be deemed to be a repayment by the person, immediately before the end of the year, of assistance to which subsection (4) applies.
Surrender of property not payment or repayment by debtor	(6) Where a specified amount of a debt is included in the amount determined at any time for A, B, C or D in subsection (3) in respect of a property surrendered at that time by a person to a creditor of the person, for the purpose of computing the person's income, no amount shall be considered to have been paid or repaid by the person as a consequence of the acquisition or reacquisition of the surrendered property by the creditor.
Foreign exchange	(7) Where a debt is denominated in a currency (other than Canadian currency), any amount determined for A, B, C or D in subsection (3) in respect of the debt shall be determined with reference to the relative value of that currency and Canadian currency at the time the debt was issued.
Definitions	79.1 (1) In this section,
``creditor'' « créancier »	``creditor'' has the meaning assigned by subsection 79(1);
``debt'' « dette »	``debt'' has the meaning assigned by subsection 79(1);
``person'' « personne »	``person'' has the meaning assigned by subsection 79(1);
``property'' « bien »	``property'' has the meaning assigned by subsection 79(1);
``specified amount'' « montant déterminé »	``specified amount'' has the meaning assigned by subsection 79(1);
``specified cost'' « coût déterminé »	``specified cost'' to a person of a debt owing to the person means
	(a) where the debt is capital property of the person, the adjusted cost base to the person of the debt, and
	(b) in any other case, the amount, if any, by which
	(i) the cost amount to the person of the debt
	exceeds
	(ii) such portion of that cost amount as would be deductible in computing the person's income (otherwise than in respect of the principal amount of the debt) if the debt were established by the person to have become a bad debt or to have become uncollectable.
Seizure of property	(2) For the purposes of this section, a property is seized at any time by a person in respect of a debt where the beneficial ownership of the property is acquired or reacquired at that time by the person and the acquisition or reacquisition of the property was in consequence of another person's failure to pay to the person all or part of the specified amount of the debt.
Creditor's capital gains reserves	(3) Where a property is seized at any time in a particular taxation year by a creditor in respect of a debt, for the purpose of computing the income of the creditor for the particular year, the amount claimed by the creditor under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in computing the creditor's gain for the preceding taxation year from any disposition before the particular year of the property shall be deemed to be the amount, if any, by which the amount so claimed exceeds the total of all amounts each of which is an amount determined under paragraph (6)(a) or (b) in respect of the seizure.
Creditor's inventory reserves	(4) Where a property is seized at any time in a particular taxation year by a creditor in respect of a debt, for the purpose of computing the income of the creditor for the particular year, the amount deducted under paragraph 20(1)(n) in computing the income of the creditor for the preceding taxation year in respect of any disposition of the property before the particular year shall be deemed to be the amount, if any, by which the amount so deducted exceeds the total of all amounts each of which is an amount determined under paragraph (6)(a) or (b) in respect of the seizure.
Adjustment where disposition and reacquisition of capital property in same year	(5) Where a property is seized at any time in a taxation year by a creditor in respect of one or more debts and the property was capital property of the creditor that was disposed of by the creditor at a previous time in the year, the proceeds of disposition of the property to the creditor at the previous time shall be deemed to be the lesser of the amount of the proceeds (determined without reference to this subsection) and the amount that is the greater of
	(a) the amount, if any, by which the amount of such proceeds (determined without reference to this subsection) exceeds such portion of the proceeds as is represented by the specified amounts of those debts immediately before that time, and
	(b) the cost amount to the creditor of the property immediately before the previous time.
Cost of seized properties for creditor	(6) Where a particular property is seized at any time in a taxation year by a creditor in respect of one or more debts, the cost to the creditor of the particular property shall be deemed to be the amount, if any, by which the total of
	(a) that proportion of the total specified costs immediately before that time to the creditor of those debts that
	(i) the fair market value of the particular property immediately before that time
	is of
	(ii) the fair market value of all properties immediately before that time that were seized by the creditor at that time in respect of those debts, and
	(b) all amounts each of which is an outlay or expense made or incurred, or a specified amount at that time of a debt that is assumed, by the creditor at or before that time to protect the creditor's interest in the particular property, except to the extent the outlay or expense
	(i) was included in the cost to the creditor of property other than the particular property,
	(ii) was included before that time in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts of the creditor, or
	(iii) was deductible in computing the creditor's income for the year or a preceding taxation year
	exceeds
	(c) the amount, if any, claimed or deducted under paragraph 20(1)(n) or subparagraph 40(1)(a)(iii) or 44(1)(e)(iii), as the case may be, in respect of the particular property in computing the creditor's income or capital gain for the preceding taxation year or the amount by which the proceeds of disposition of the creditor of the particular property are reduced because of subsection (5) in respect of a disposition of the particular property by the creditor occurring before that time and in the year.
Treatment of debt	(7) Where a property is seized at any time in a taxation year by a creditor in respect of a particular debt,
	(a) the creditor shall be deemed to have disposed of the particular debt at that time;
	(b) the amount received on account of the particular debt as a consequence of the seizure shall be deemed
	(i) to be received at that time, and
	(ii) to be equal to
	(A) where the particular debt is capital property, the adjusted cost base to the creditor of the particular debt, and
	(B) in any other case, the cost amount to the creditor of the particular debt;
	(c) where any portion of the particular debt is outstanding immediately after that time, the creditor shall be deemed to have reacquired that portion immediately after that time at a cost equal to