I-3 - Taxation Act

Section 485.21 Disposition versions

2009-05-15

485.21. Where there is a winding-up of a subsidiary to which sections 556 to 564.1 and 565 apply and a debt or other obligation, in this section referred to as the “subsidiary’s obligation”, of the subsidiary to pay an amount to the parent, or a debt or other obligation, in this section referred to as the “parent’s obligation”, of the parent to pay an amount to the subsidiary is, as a consequence of the winding-up, settled at a particular time without any payment of an amount or by the payment of an amount that is less than the principal amount of the subsidiary’s obligation or the parent’s obligation, as the case may be,

(a)  if that payment is less than the amount that would be the cost amount to the subsidiary or parent of the subsidiary’s obligation or the parent’s obligation immediately before the particular time if the definition of “cost amount” in section 1 were read without reference to its paragraph e, and the parent makes a valid election under paragraph c of subsection 4 of section 80.01 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the subsidiary’s obligation or the parent’s obligation, the amount paid at that time in satisfaction of the principal amount of the subsidiary’s obligation or the parent’s obligation is deemed to be equal to the amount that would be the cost amount to the subsidiary or the parent, as the case may be, of the subsidiary’s obligation or the parent’s obligation immediately before that time if that definition of “cost amount” were read without reference to its paragraph e, and if that cost amount included amounts added in computing the subsidiary’s income or the parent’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the subsidiary or the parent has not deducted any amount as bad debts in respect of that unpaid interest; and

(b)  for the purpose of applying sections 485 to 485.18 to the subsidiary’s obligation, where property is distributed at any time in circumstances to which the first paragraph of section 557 or section 558 applies and the subsidiary’s obligation is settled as a consequence of the distribution, the subsidiary’s obligation is deemed to have been settled immediately before the time that is immediately before the time of the distribution and not at any later time.

Chapter V.2 of Title II of Book I applies in relation to an election made under paragraph c of subsection 4 of section 80.01 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1996, c. 39, s. 142; 1997, c. 3, s. 71; 1997, c. 31, s. 50; 2009, c. 5, s. 169.

2006-03-01

485.21. Where there is a winding-up of a subsidiary to which sections 556 to 564.1 and 565 apply and a debt or other obligation, in this section referred to as the “subsidiary’s obligation”, of the subsidiary to pay an amount to the parent, or a debt or other obligation, in this section referred to as the “parent’s obligation”, of the parent to pay an amount to the subsidiary is, as a consequence of the winding-up, settled at a particular time without any payment of an amount or by the payment of an amount that is less than the principal amount of the subsidiary’s obligation or the parent’s obligation, as the case may be,

(a)  where that payment is less than the amount that would be the cost amount to the subsidiary or parent of the subsidiary’s obligation or the parent’s obligation immediately before the particular time if the definition of “cost amount” in section 1 were read without reference to paragraph e of that definition, and the parent so elects in a prescribed form on or before the parent’s filing-due date for the taxation year that includes the particular time, the amount paid at that time in satisfaction of the principal amount of the subsidiary’s obligation or the parent’s obligation is deemed to be equal to the amount that would be the cost amount to the subsidiary or the parent, as the case may be, of the subsidiary’s obligation or the parent’s obligation immediately before the particular time if the definition of “cost amount” were read without reference to paragraph e of that definition, and if that cost amount included amounts added in computing the subsidiary’s income or the parent’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the subsidiary or the parent has not deducted any amounts as bad debts in respect of that unpaid interest; and

(b)  for the purpose of applying sections 485 to 485.18 to the subsidiary’s obligation, where property is distributed at any time in circumstances to which the first paragraph of section 557 or section 558 applies and the subsidiary’s obligation is settled as a consequence of the distribution, the subsidiary’s obligation is deemed to have been settled immediately before the time that is immediately before the time of the distribution and not at any later time.

1996, c. 39, s. 142; 1997, c. 3, s. 71; 1997, c. 31, s. 50.