Definitions	80.03 (1) In this section,
	(a) ``commercial debt obligation'', ``commercial obligation'', ``distress preferred share'', ``forgiven amount'' and ``person'' have the meanings assigned by subsection 80(1); and
	(b) ``taxable dividend'' does not include any capital gains dividends (within the meaning assigned by subsection 131(1)).
Deferred recognition of debtor's gain on settlement of debt	(2) Where at any time in a taxation year a person (in this subsection referred to as the ``transferor'') surrenders a particular capital property (other than a distress preferred share) that is a share, a capital interest in a trust or an interest in a partnership, the person shall be deemed to have a capital gain from the disposition at that time of another capital property (or, where the particular property is a taxable Canadian property, another taxable Canadian property) equal to the amount, if any, by which
	(a) the total of all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the transferor of the particular property immediately before that time
	exceeds the total of
	(b) the amount that would be the transferor's capital gain for the year from the disposition of the particular property if this Act were read without reference to subsection 100(2), and
	(c) where, at the end of the year, the transferor is resident in Canada or is a non-resident person who carries on business in Canada through a fixed place of business, the amount designated under subsection (7) by the transferor in respect of the disposition, at that time or immediately after that time, of the particular property.
Surrender of capital property	(3) For the purpose of subsection (2), a person shall be considered to have surrendered a property at any time only where
	(a) in the case of a share of the capital stock of a particular corporation,
	(i) the person is a corporation that disposed of the share at that time and the proceeds of disposition of the share are determined under paragraph 88(1)(b), or
	(ii) the person is a corporation that owned the share at that time and, immediately after that time, amalgamates or merges with the particular corporation;
	(b) in the case of a capital interest in a trust, the person disposed of the interest at that time and the proceeds of disposition are determined under paragraph 107(2)(c); and
	(c) in the case of an interest in a partnership, the person disposed of the interest at that time and the proceeds of disposition are determined under paragraph 98(3)(a) or (5)(a).
Dispositions by corporations	(4) Where at any time in a taxation year a corporation (in this subsection referred to as the ``vendor'') disposes of a particular capital property that is a share, an interest in a partnership or a capital interest in a trust, otherwise than by way of a disposition to which subsection (2) or 53(6) applies, a disposition to another corporation in circumstances to which subsection 53(5) applies, or a disposition the proceeds from which are determined under subsection 47(1), section 86 or any of the provisions (other than subsection 97(2)) referred to in subsection 53(4), the vendor shall be deemed to have a capital gain from the disposition at that time of another capital property (or where the particular property is a taxable Canadian property, another taxable Canadian property) equal to the amount, if any, by which the lesser of
	(a) all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the vendor of the particular property immediately before that time, and
	(b) where the particular property
	(i) is a share, the total of all amounts each of which is
	(A) a taxable dividend on the share that was received in the specified period relating to the disposition of the share, to the extent that the dividend is deductible in computing taxable income of a holder of the share or a beneficiary under a trust that held the share, or
	(B) a capital dividend on the share that was received in the specified period relating to the disposition of the share,
	(ii) is an interest in a partnership, the total of all amounts each of which is
	(A) the share of a taxable dividend relating to the interest that was received after July 12, 1994 and in a fiscal period of the partnership that ended in the specified period relating to the disposition of the interest, to the extent that such share is deductible in computing taxable income of a person holding the interest in the partnership or a beneficiary under a trust that held the interest in the partnership, or
	(B) the share of a capital dividend relating to the interest that was received after July 12, 1994 and in a fiscal period of the partnership that ended in the specified period relating to the disposition of the interest, or
	(iii) is a capital interest in a trust, the total of all amounts each of which is such portion of a taxable dividend that was received by the trust in the specified period relating to the disposition of the capital interest and that was deemed by subsection 104(19) to have been received in respect of the capital interest, to the extent that such portion was deductible in computing taxable income of a person holding the capital interest
	exceeds the total of
	(c) the amount that would be the vendor's capital gain for the year from the disposition of the particular property if this Act were read without reference to subparagraph 40(1)(a)(iii) and subsection 100(2), and
	(d) where the vendor is resident in Canada at the end of the year or is a non-resident person who carries on business in Canada through a fixed place of business at the end of the year, the amount designated under subsection (7) by the vendor in respect of the disposition of the particular property.
Specified period	(5) For the purpose of subsection (4), the specified period relating to a disposition at a particular time of a property by a person is the period
	(a) that began at or on the later of July 12, 1994 and the last time before the particular time that the person acquired the property, and
	(b) that ended at the particular time.
When property acquired	(6) For the purposes of this subsection and subsection (5), where, as a consequence of the disposition at a particular time of a property to a person, an amount is deducted under paragraph 53(2)(g.1) in computing the adjusted cost base of the property after the particular time, the person shall be deemed not to have acquired the property at the particular time and to have acquired the property at the time it was last acquired before the particular time.
Alternative treatment	(7) Where at any time in a taxation year a person disposes of a property, for the purposes of subsections (2) and (4) and section 80
	(a) the person may designate an amount in a prescribed form filed with the person's return of income under this Part for the year; and
	(b) where an amount is designated by the person under paragraph (a) in respect of the disposition,
	(i) the person shall be deemed to have issued a commercial debt obligation at that time that is settled immediately after that time,
	(ii) the lesser of the amount so designated and the amount that would, but for this subsection, be a capital gain determined in respect of the disposition because of subsection (2) or (4) shall be treated as if it were the forgiven amount at the time of the settlement in respect of the obligation referred to in subparagraph (i),
	(iii) the source in connection with which the obligation referred to in subparagraph (i) was issued shall be deemed to be the business, if any, carried on by the person at the end of the year, and
	(iv) where the person does not carry on a business at the end of the year, the person shall be deemed to carry on an active business at the end of the year and the source in connection with which the obligation referred to in subparagraph (i) was issued shall be deemed to be the business deemed by this subparagraph to be carried on.
Lifetime capital gains exemption	(8) Where, as a consequence of the disposition at any time by an individual of a property that is a qualified farm property of the individual or a qualified small business corporation share of the individual (within the meanings assigned by subsection 110.6(1)), the individual is deemed by subsection (2) to have a capital gain at that time from the disposition of another property, for the purposes of sections 3, 74.3 and 111, as they apply for the purpose of section 110.6, the other property shall be deemed to be a qualified farm property of the individual or a qualified small business corporation share of the individual, as the case may be.
Definitions	80.04 (1) In this section, ``commercial debt obligation'', ``commercial obligation'', ``debtor'', ``directed person'', ``eligible Canadian partnership'', ``forgiven amount'' and ``person'' have the meanings assigned by subsection 80(1).
Eligible transferee	(2) For the purpose of this section, an ``eligible transferee'' of a debtor at any time is a directed person at that time in respect of the debtor or a taxable Canadian corporation or eligible Canadian partnership related (otherwise than because of a right referred to in paragraph 251(5)(b)) at that time to the debtor.
Application	(3) Paragraphs 80(2)(a), (b), (j), (l) and (n) apply for the purpose of this section.
Agreement respecting transfer of forgiven amount	(4) Where
	(a) a particular commercial obligation (other than an obligation deemed by paragraph (e) to have been issued) issued by a debtor is settled at a particular time,
	(b) amounts have been designated by the debtor under subsections 80(5) to (10) to the maximum extent permitted in respect of the settlement of the particular obligation at the particular time,
	(c) the debtor and an eligible transferee of the debtor at the particular time file under this section an agreement between them in respect of that settlement, and
	(d) an amount is specified in that agreement
	the following rules apply:
	(e) except for the purposes of subsection 80(11), the transferee shall be deemed to have issued a commercial debt obligation that was settled at the particular time,
	(f) the specified amount shall be deemed to be the forgiven amount at the particular time in respect of the obligation referred to in paragraph (e),
	(g) subject to paragraph (h), the obligation referred to in paragraph (e) shall be deemed to have been issued at the same time (in paragraph (h) referred to as the ``time of issue'') at which, and in the same circumstances in which, the particular obligation was issued,
	(h) where the transferee is a corporation the control of which was acquired by a person or group of persons after the time of issue and the transferee and the debtor were not related to each other immediately before that acquisition of control,
	(i) the obligation referred to in paragraph (e) shall be deemed to have been issued after that acquisition of control, and
	(ii) paragraph (e) of the definition ``relevant loss balance'' in subsection 80(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,
	(i) the source in connection with which the obligation referred to in paragraph (e) was issued shall be deemed to be the source in connection with which the particular obligation was issued, and
	(j) for the purposes of sections 61.3 and 61.4, the amount included under subsection 80(13) in computing the income of the eligible transferee in respect of the settlement of the obligation referred to in paragraph (e) or deducted under paragraph 80(15)(a) in respect of such income shall be deemed to be nil.
Consideration for agreement	(5) For the purposes of this Part, where property is acquired at any time by an eligible transferee as consideration for entering into an agreement with a debtor that is filed under this section
	(a) where the property was owned by the debtor immediately before that time,
	(i) the debtor shall be deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, and
	(ii) no amount may be deducted in computing the debtor's income as a consequence of the transfer of the property, except any amount arising as a consequence of the application of subparagraph (i);
	(b) the cost at which the property was acquired by the eligible transferee at that time shall be deemed to be equal to the fair market value of the property at that time;
	(c) the eligible transferee shall not be required to add an amount in computing income solely because of the acquisition at that time of the property; and
	(d) no benefit shall be considered to have been conferred on the debtor as a consequence of the debtor entering into an agreement filed under this section.
Manner of filing agreement	(6) Subject to subsection (7), a particular agreement between a debtor and an eligible transferee in respect of an obligation issued by the debtor that was settled at any time shall be deemed not to have been filed under this section
	(a) where it is not filed with the Minister in a prescribed form
	(i) on or before the later of
	(A) the day on or before which the debtor's return of income under this Part is required to be filed for the taxation year or fiscal period, as the case may be, that includes that time (or would be required to be filed if tax under this Part were payable by the debtor for the year), and
	(B) the day on or before which the transferee's return of income under this Part is required to be filed for the taxation year or fiscal period, as the case may be, that includes that time, or
	(ii) within the period within which the debtor or the transferee may serve a notice of objection to an assessment of tax payable under this Part for a taxation year or fiscal period, as the case may be, described in clause (i)(A) or (B), as the case may be;
	(b) where it is not accompanied by,
	(i) where the debtor is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made,
	(ii) where the debtor is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made,
	(iii) where the transferee is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, and
	(iv) where the transferee is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made; or
	(c) if an agreement amending the particular agreement has been filed in accordance with this section, except where subsection (8) applies to the particular agreement.
Filing by partnership	(7) For the purpose of subsection (6), where an obligation is settled at any time in a fiscal period of a partnership, it shall be assumed that
	(a) the partnership is required to file a return of income under this Part for the fiscal period on or before the latest day on or before which any member of the partnership during the fiscal period is required to file a return of income under this Part for the taxation year in which that fiscal period ends (or would be required to file such a return of income if tax under this Part were payable by the member for that year); and
	(b) the partnership may serve a notice of objection described in subparagraph (6)(a)(ii) within each period within which any member of the partnership during the fiscal period may serve a notice of objection to tax payable under this Part for a taxation year in which that fiscal period ends.
Related corporations	(8) Where at any time a corporation becomes related to another corporation and it can reasonably be considered that the main purpose of the corporation becoming related to the other corporation is to enable the corporations to file an agreement under this section, the amount specified in the agreement shall be deemed to be nil for the purpose of the description of C in subsection 80(13).
Assessment of taxpayers in respect of agreement	(9) The Minister shall, notwithstanding subsections 152(4) to (5), assess or reassess the tax, interest and penalties payable under this Act by any taxpayer in order to take into account an agreement filed under this section.
Liability of debtor	(10) Without affecting the liability of any person under any other provision of this Act, where a debtor and an eligible transferee file an agreement between them under this section in respect of an obligation issued by the debtor that was settled at any time, the debtor is, to the extent of 30% of the amount specified in the agreement, liable to pay
	(a) where the transferee is a corporation, all taxes payable under this Act by it for taxation years that end in the period that begins at that time and ends 10 calendar years after that time;