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(a) the remaining unapplied portion of the
forgiven amount at that time in respect of
the obligation shall be applied (to the extent
designated in a prescribed form filed with
the debtor's return of income under this Part
for the taxation year that includes that time)
to reduce immediately after that time the
adjusted cost bases to the debtor of capital
properties (other than shares of the capital
stock of corporations of which the debtor is
a specified shareholder at that time, debts
issued by corporations of which the debtor
is a specified shareholder at that time,
interests in partnerships that are related to
the debtor at that time, depreciable property
that is not of a prescribed class,
personal-use properties and excluded
properties) that are owned by the debtor
immediately after that time;
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(b) an amount may be applied under this
subsection to reduce, immediately after that
time, the capital cost to the debtor of a
depreciable property of a prescribed class
only to the extent that
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(i) the capital cost immediately after that
time to the debtor of the property
(determined without reference to the
settlement of the obligation at that time)
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(ii) its capital cost immediately after that
time to the debtor for the purposes of
paragraphs 8(1)(j) and (p), sections 13
and 20 and any regulations made for the
purpose of paragraph 20(1)(a)
(determined without reference to the
settlement of the obligation at that time);
and
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(c) for the purposes of paragraphs 8(1)(j)
and (p), sections 13 and 20 and any
regulations made for the purpose of
paragraph 20(1)(a), no amount shall be
considered to have been applied under this
subsection.
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| Reduction of
adjusted cost
bases of
certain shares
and debts
|
(10) Where a commercial obligation issued
by a debtor is settled at any time in a taxation
year and amounts have been designated by the
debtor under subsections (5), (7), (8) and (9)
to the maximum extent permitted in respect of
the settlement, subject to subsection (18) the
remaining unapplied portion of that forgiven
amount shall be applied (to the extent that it is
designated in a prescribed form filed with the
debtor's return of income under this Part for
the year) to reduce immediately after that time
the adjusted cost bases to the debtor of capital
properties, owned by the debtor immediately
after that time, that are shares of the capital
stock of corporations of which the debtor is a
specified shareholder at that time and debts
issued by corporations of which the debtor is
a specified shareholder at that time (other than
shares of the capital stock of corporations
related to the debtor at that time, debts issued
by corporations related to the debtor at that
time and excluded properties).
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| Reduction of
adjusted cost
bases of
certain shares,
debts and
partnership
interests
|
(11) Where a commercial obligation issued
by a debtor is settled at any time in a taxation
year and amounts have been designated by the
debtor under subsections (5), (7), (8), (9) and
(10) to the maximum extent permitted in
respect of the settlement, subject to subsection
(18) the remaining unapplied portion of that
forgiven amount shall be applied (to the extent
that it is designated in a prescribed form filed
with the debtor's return of income under this
Part for the year) to reduce immediately after
that time the adjusted cost bases to the debtor
of
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(a) shares and debts that are capital
properties (other than excluded properties
and properties the adjusted cost bases of
which are reduced at that time under
subsection (9) or (10)) of the debtor
immediately after that time; and
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(b) interests in partnerships that are related
to the debtor at that time that are capital
properties (other than excluded properties)
of the debtor immediately after that time.
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| Capital gain
where current
year capital
loss
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(12) Where a commercial obligation issued
by a debtor (other than a partnership) is settled
at any time in a taxation year and amounts
have been designated by the debtor under
subsections (5), (7), (8) and (9) to the
maximum extent permitted in respect of the
settlement,
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(a) the debtor shall be deemed to have a
capital gain for the year from the
disposition of capital property (or, where
the debtor is non-resident at the end of the
year, taxable Canadian property), equal to
the lesser of
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(i) the remaining unapplied portion of the
forgiven amount at that time in respect of
the obligation, and
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(ii) the amount, if any, by which the total
of
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(A) all of the debtor's capital losses for
the year from the dispositions of
properties (other than listed personal
properties and excluded properties),
and
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(B) 4/3 of the amount that would,
because of subsection 88(1.2), be
deductible under paragraph 111(1)(b)
in computing the debtor's taxable
income for the year, if the debtor had
sufficient income and taxable capital
gains for the year,
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(C) all of the debtor's capital gains for
the year from the dispositions of such
properties (determined without
reference to this subsection), and
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(D) all amounts each of which is an
amount deemed by this subsection to
be a capital gain of the debtor for the
year as a consequence of the
application of this subsection to other
commercial obligations settled before
that time; and
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(b) the forgiven amount at that time in
respect of the obligation shall be considered
to have been applied under this subsection
to the extent of the amount deemed by this
subsection to be a capital gain of the debtor
for the year as a consequence of the
application of this subsection to the
settlement of the obligation at that time.
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| Income
inclusion
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(13) Where a commercial obligation issued
by a debtor is settled at any time in a taxation
year, there shall be added, in computing the
debtor's income for the year from the source
in connection with which the obligation was
issued, the amount determined by the formula
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(A + B - C - D) x E
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where
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A is the remaining unapplied portion of the
forgiven amount at that time in respect of
the obligation,
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B is the lesser of
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(a) the total of all amounts designated
under subsection (11) by the debtor in
respect of the settlement of the obligation
at that time, and
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(i) the residual balance at that time in
respect of the settlement of the
obligation, and
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(ii) the amount, if any, by which the
amount determined for C in respect of
the settlement exceeds the amount
determined for A in respect of the
settlement,
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C is the total of all amounts each of which is
an amount specified in an agreement filed
under section 80.04 in respect of the
settlement of the obligation at that time,
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D is
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(a) where the debtor has designated
amounts under subsections (5), (7), (8),
(9) and (10) to the maximum extent
permitted in respect of the settlement, the
amount, if any, by which
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(i) the total of all amounts each of
which is an unrecognized loss at that
time, in respect of the obligation, from
the disposition of a property
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(ii) 4/3 of the total of all amounts each
of which is an amount by which the
amount determined before that time
under this subsection in respect of a
settlement of an obligation issued by
the debtor has been reduced because of
an amount determined under this
paragraph, and
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(b) in any other case, nil, and
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E is
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(a) where the debtor is a partnership, 1,
and
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(b) in any other case, 0.75.
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| Residual
balance
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(14) For the purpose of subsection (13), the
residual balance at any time in a taxation year
in respect of the settlement of a particular
commercial obligation issued by a debtor is
the amount, if any, by which the total of
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(a) all amounts each of which is an amount
that would be applied under any of
subsections (3) to (10) and (12) in respect of
the settlements of separate commercial
obligations issued by directed persons at
that time in respect of the debtor if
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(i) those obligations were issued at that
time by those directed persons and were
settled immediately after that time,
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(ii) an amount equal to the forgiven
amount at that time in respect of the
particular obligation were the forgiven
amount immediately after that time in
respect of each of those obligations,
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(iii) amounts were designated under
subsections (5), (7), (8), (9) and (10) by
those directed persons to the maximum
extent permitted in respect of the
settlement of each of those obligations,
and
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(iv) no amounts were designated under
subsection (11) by any of those directed
persons in respect of the settlement of
any of those obligations, and
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(b) where the debtor is a partnership, all
amounts each of which is 1/4 of an amount
deducted because of paragraph (c) or (d) in
computing the residual balance at that time
in respect of the settlement of the particular
obligation,
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exceeds the total of
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(c) all amounts each of which is 4/3 of the
amount that would be included under
subsection (13) in computing the debtor's
income for the year in respect of the
settlement at or before that time of a
commercial obligation issued by the debtor
if the amounts determined for B and D in
subsection (13) were nil,
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(d) all amounts each of which is 4/3 of an
amount that would, if the amount
determined for D in subsection (13) were
nil, be included under subsection (13) in
computing the income of any of those
directed persons in respect of the settlement
of an obligation that is deemed by
paragraph 80.04(4)(e) to have been issued
by the directed person because of the filing
of an agreement under section 80.04 in
respect of the settlement at or before that
time and in the year of a commercial
obligation issued by the debtor,
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(e) all amounts each of which is an amount
specified in an agreement (other than an
agreement with any of those directed
persons) filed under section 80.04 in respect
of the settlement at or before that time and
in the year of a commercial obligation
issued by the debtor, and
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(f) all amounts each of which is the lesser of
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(i) the total of all amounts designated
under subsection (11) in respect of the
settlement before that time and in the
year of another commercial obligation
issued by the debtor, and
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(ii) the residual balance of the debtor at
that previous time.
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| Members of
partnerships
|
(15) Where a commercial debt obligation
issued by a partnership (in this subsection
referred to as the ``partnership obligation'') is
settled at any time in a fiscal period of the
partnership that ends in a taxation year of a
member of the partnership,
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(a) the member may deduct, in computing
the member's income for the year, such
amount as the member claims not
exceeding the relevant limit in respect of
the partnership obligation;
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(b) for the purpose of paragraph (a), the
relevant limit in respect of the partnership
obligation is the amount that would be
included in computing the member's
income for the year as a consequence of the
application of subsection (13) and section
96 to the settlement of the partnership
obligation if the partnership had designated
amounts under subsections (5), (7), (8), (9)
and (10) to the maximum extent permitted
in respect of each obligation settled in that
fiscal period and if income arising from the
application of subsection (13) were from a
source of income separate from any other
sources of partnership income; and
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(c) for the purposes of this section and
section 80.04,
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(i) the member shall be deemed to have
issued a commercial debt obligation that
was settled at the end of that fiscal period,
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(ii) the amount deducted under paragraph
(a) in respect of the partnership
obligation in computing the member's
income shall be treated as if it were the
forgiven amount at the end of that fiscal
period in respect of the obligation
referred to in subparagraph (i),
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(iii) subject to subparagraph (iv), the
obligation referred to in subparagraph (i)
shall be deemed to have been issued at
the same time at which, and in the same
circumstances in which, the partnership
obligation was issued,
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(iv) where the member is a corporation
the control of which was acquired at a
particular time that is before the end of
that fiscal period and before the
corporation became a member of the
partnership and the partnership
obligation was issued before the
particular time,
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(A) subject to the application of this
subparagraph to an acquisition of
control of the corporation after the
particular time and before the end of
that fiscal period, the obligation
referred to in subparagraph (i) shall be
deemed to have been issued by the
member after the particular time, and
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(B) paragraph (e) of the definition
``relevant loss balance'' in subsection
(1), paragraph (f) of the definition
``successor pool'' in that subsection
and paragraph (b) of the definition
``unrecognized loss'' in that
subsection do not apply in respect of
that acquisition of control, and
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(v) the source in connection with which
the obligation referred to in subparagraph
(i) was issued shall be deemed to be the
source in connection with which the
partnership obligation was issued.
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| Designations
by Minister
|
(16) Where a commercial obligation issued
by a debtor is settled at any time in a taxation
year and, as a consequence of the settlement
an amount would, but for this subsection, be
deducted under section 61.2 or 61.3 in
computing the debtor's income for the year
and the debtor has not designated amounts
under subsections (5) to (11) to the maximum
extent possible in respect of the settlement,
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(a) the Minister may designate amounts
under subsections (5) to (11) to the extent
that the debtor would have been permitted
to designate those amounts; and
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(b) the amounts designated by the Minister
shall, except for the purpose of this
subsection, be deemed to have been
designated by the debtor as required by
subsections (5) to (11).
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| Income
inclusion
where residual
balance a
positive
amount
|
(17) Where a commercial obligation issued
by a corporation is settled at any time in a
taxation year and, as a consequence of the
settlement an amount is deducted under
section 61.3 in computing the corporation's
income for the year, unless the corporation has
commenced to wind up on or before the day
that is 12 months after the end of the year there
shall be added in computing the corporation's
income for the year from the source in
connection with which the obligation was
issued 50% of the lesser of
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(a) the total of all amounts designated under
subsection (11) by the corporation in
respect of the settlement of the obligation at
that time, and
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(b) the amount, if any, by which the lesser
of
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(i) the residual balance (within the
meaning assigned by subsection (14)) of
the corporation at that time in respect of
the settlement of the obligation, and
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(ii) the amount, if any, by which the
amount deducted under section 61.3 in
computing the corporation's income for
the year exceeds the amount, if any,
deducted because of paragraph 37(1)(f.1)
in determining the balance determined
under subsection 37(1) in respect of the
corporation after the year because of an
amount deducted under section 61.3 in
computing the corporation's income for
the year
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exceeds the total of all amounts included
because of this subsection in computing the
corporation's income for the year in respect
of a settlement before that time of a
commercial obligation issued by the
corporation.
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| Partnership
designations
|
(18) Where a commercial obligation issued
by a partnership is settled at any time after
December 20, 1994, the amount designated
under subsection (9), (10) or (11) in respect of
the settlement by the partnership to reduce the
adjusted cost base of a capital property
acquired shall not exceed the amount, if any,
by which the adjusted cost base at that time to
the partnership of the property exceeds the fair
market value at that time of the property.
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| Definitions
|
80.01 (1) In this section,
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``commercial
debt
obligation''
« créance
commerciale »
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``commercial debt obligation'' has the
meaning assigned by subsection 80(1);
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``commercial
obligation''
« dette
commerciale »
|
``commercial obligation'' has the meaning
assigned by subsection 80(1);
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``debtor''
« débiteur »
|
``debtor'' has the meaning assigned by
subsection 80(1);
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``distress
preferred
share''
« action
privilégiée de
renflouement
»
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``distress preferred share'' has the meaning
assigned by subsection 80(1);
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``forgiven
amount''
« montant
remis »
|
``forgiven amount'' has the meaning assigned
by subsection 80(1) except that, where an
amount would be included in computing a
person's income under paragraph 6(1)(a) or
subsection 15(1) as a consequence of the
settlement of an obligation if the obligation
were settled without any payment being
made in satisfaction of its principal amount,
``forgiven amount'' in respect of that
obligation has the meaning assigned by
subsection 6(15.1) or 15(1.21), as the case
may be;
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``person''
« personne »
|
``person'' has the meaning assigned by
subsection 80(1);
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``specified
cost''
« coût
déterminé »
|
``specified cost'' at any time to a person of an
obligation means,
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(a) where the obligation is capital
property of the person at that time, the
adjusted cost base at that time to the
person of the obligation, and
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(b) in any other case, the cost amount to
the person of the obligation.
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