I-3 - Taxation Act

Section 485 Disposition versions

2017-02-08

485. In this division,

“commercial debt obligation” means a debt obligation issued by a debtor and, where interest was paid or payable by the debtor in respect of it pursuant to a legal obligation, or if interest had been paid or payable by the debtor in respect of it pursuant to a legal obligation, in respect of which an amount in respect of the interest was or would have been deductible in computing the debtor’s income, taxable income or taxable income earned in Canada, as the case may be, if this Part were read without reference to sections 119.4, 119.17, 135.4, 164, 166, 169 and 180 to 182;

“commercial obligation” issued by a debtor means a commercial debt obligation issued by the debtor, or a distress preferred share issued by the debtor;

“debtor” includes any corporation that has issued a distress preferred share and any partnership;

“directed person” at any time in respect of a debtor means

(a)  a taxable Canadian corporation or an eligible Canadian partnership by which the debtor is controlled at that time; or

(b)  a taxable Canadian corporation or an eligible Canadian partnership that is controlled at that time by

i.  the debtor,

ii.  the debtor and one or more persons related to the debtor, or

iii.  a person or group of persons by which the debtor is controlled at that time;

“distress preferred share” at any time means a share issued after 21 February 1994, other than a share issued pursuant to an agreement in writing entered into on or before that date, by a corporation that is a share described in section 21.6.1 that would, but for paragraphs c and e of section 21.6, be a term preferred share at that time;

“eligible Canadian partnership” at any time means a Canadian partnership none of the members of which is, at that time,

(a)  an investment corporation owned by persons not resident in Canada;

(b)  a person exempt, pursuant to Book VIII, from tax under this Part on all or part of the person’s taxable income;

(c)  a partnership, other than an eligible Canadian partnership; or

(d)  a trust, other than a trust in which no person not resident in Canada and no person described in any of paragraphs a to c is beneficially interested;

“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 b of section 20, at that time to the debtor;

“excluded obligation” means an obligation issued by a debtor where

(a)  the amount for which the obligation was issued

i.  were included in computing the debtor’s income or, but for the expression “, other than a prescribed amount,” in paragraph w of section 87, would have been so included,

ii.  were deducted in computing, for the purposes of this Part, any balance of undeducted outlays, expenses or other amounts, or

iii.  were deducted in computing the capital cost or cost amount to the debtor of any property of the debtor;

(b)  an amount paid by the debtor in satisfaction of the entire principal amount of the obligation is included in the amount determined under subparagraph a of the third paragraph of section 194 or section 198 in respect of the debtor;

(c)  sections 481 to 483.1 apply to the obligation;

(d)  the principal amount of the obligation would, if this Act were read without reference to sections 484 to 485.18 and the obligation were settled without any amount being paid in satisfaction of its principal amount, be included in computing the debtor’s income because of the settlement of the obligation; or

(e)  remittance of the principal amount of the obligation is made in accordance with the first paragraph of section 39 of the residential renovation incentive program implemented by the Société d’habitation du Québec pursuant to Order in Council 153-94 dated 19 January 1994;

“excluded property” means property of a debtor who is not resident in Canada that is tax-agreement-protected property or that is not taxable Canadian property;

“excluded security” issued by a corporation to a person as consideration for the settlement of a debt means

(a)  a distress preferred share issued by the corporation to the person; or

(b)  a share issued by the corporation to the person under the terms of the debt, where the debt was a bond, debenture or note listed on a designated stock exchange located in Canada and the terms for its conversion to a share were not established or substantially modified after the later of 22 February 1994 and the time that the bond, debenture or note was issued;

“forgiven amount” at any time in respect of a commercial obligation issued by a debtor is the amount by which the lesser of the amount for which the obligation was issued and the principal amount of the obligation exceeds the aggregate of

(a)  the amount paid at that time in satisfaction of the principal amount of the obligation;

(b)  the amount included under section 37 or 111 in computing the income of any person because of the settlement of the obligation at that time;

(c)  the amount deducted at that time under subparagraph b of the first paragraph of section 175.1.3 in computing the forgiven amount in respect of the obligation;

(d)  the capital gain of the debtor resulting from the application of section 263 to the purchase at that time of the obligation by the debtor;

(e)  such portion of the principal amount of the obligation as relates to an amount renounced under section 381, 406, 417 or 418.13, as it read in respect of the renunciation, by the debtor;

(f)  any portion of the principal amount of the obligation that is included in the amount determined in any of subparagraphs a to d of the second paragraph of section 484.2 in respect of the debtor for the taxation year of the debtor that includes that time or for a preceding taxation year;

(g)  the aggregate of all amounts each of which is a forgiven amount at a previous time that the obligation was deemed by section 485.25 or 485.26 to have been settled;

(h)  such portion of the principal amount of the obligation as can reasonably be considered to have been included under sections 487.1 to 487.5.4 in computing the debtor’s income for his taxation year that includes that time or for a preceding taxation year;

(i)  where the debtor is a bankrupt at that time, the principal amount of the obligation;

(j)  such portion of the principal amount of the obligation as represents the principal amount of an excluded obligation;

(k)  where the debtor is a partnership and the obligation was, since the later of the creation of the partnership or the issue of the obligation, always payable to a member of the partnership actively engaged, on a regular, continuous and substantial basis, in the activities of the partnership that are other than the financing of the partnership business, the principal amount of the obligation; and

(l)  the amount given at or before that time by the debtor to another person as consideration for the assumption by the other person of the obligation;

“person” includes a partnership;

“relevant loss balance” at a particular time for a commercial obligation and in respect of a debtor’s non-capital loss, farm loss, restricted farm loss or net capital loss, as the case may be, for a taxation year means, subject to section 485.2, the amount of such loss that would be deductible in computing the debtor’s taxable income or taxable income earned in Canada, as the case may be, for the taxation year that includes that time if

(a)  the debtor had sufficient incomes and sufficient taxable capital gains for such purposes;

(b)  sections 485.4 and 485.5 did not apply to reduce such loss at or after the particular time; and

(c)  subparagraph a of the first paragraph of section 736 and sections 736.0.1 and 736.0.1.1 did not apply to the debtor;

“specified cost” of a debt owing to a person at any time means

(a)  where the debt is capital property of the person at that time, the adjusted cost base to the person of the debt at that time; and

(b)  in any other case, the indicated cost amount to the person;

“successor pool” at any time for a commercial obligation and in respect of an amount determined in relation to a debtor means, subject to section 485.1, such portion of that amount as would be deductible under section 418.17, 418.17.3, 418.18, 418.19 or 418.21 in computing the debtor’s income for the taxation year that includes that time, if

(a)  the debtor had sufficient incomes for such purposes;

(b)  section 485.8 did not apply to reduce the particular amount so determined at that time;

(c)  the taxation year ended immediately after that time; and

(d)  the second paragraph of section 418.17.3 and the first paragraph of section 418.20 were read without reference to “30% of” wherever it appears and the second paragraph of section 418.21 were read without reference to “10% of”;

“unrecognized loss” at a particular time, in respect of an obligation issued by a debtor, from the disposition of a property means the amount that would, but for section 240, be a capital loss from the disposition by the debtor at or before the particular time of a debt or other right to receive an amount, except that where the debtor is a taxpayer that was subject to a loss restriction event before the particular time and after the time of the disposition, the unrecognized loss at the particular time in respect of the obligation is deemed to be nil unless

(a)  the obligation was issued by the debtor before, and not in contemplation of, the loss restriction event; or

(b)  all or substantially all of the amount for which the obligation was issued was used to satisfy the principal amount of another obligation to which paragraph a or this paragraph would apply if the other obligation were still outstanding.

1972, c. 23, s. 385; 1973, c. 17, s. 55; 1985, c. 25, s. 92; 1986, c. 19, s. 109; 1989, c. 77, s. 55; 1995, c. 1, s. 43; 1996, c. 39, s. 140; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 104; 2001, c. 7, s. 49; 2001, c. 53, s. 73; 2004, c. 8, s. 101; 2010, c. 5, s. 47; 2017, c. 1, s. 120.

2010-04-20

485. In this division,

“commercial debt obligation” means a debt obligation issued by a debtor and, where interest was paid or payable by the debtor in respect of it pursuant to a legal obligation, or if interest had been paid or payable by the debtor in respect of it pursuant to a legal obligation, in respect of which an amount in respect of the interest was or would have been deductible in computing the debtor’s income, taxable income or taxable income earned in Canada, as the case may be, if this Part were read without reference to sections 119.4, 119.17, 135.4, 164, 166, 169 and 180 to 182;

“commercial obligation” issued by a debtor means a commercial debt obligation issued by the debtor, or a distress preferred share issued by the debtor;

“debtor” includes any corporation that has issued a distress preferred share and any partnership;

“directed person” at any time in respect of a debtor means

(a)  a taxable Canadian corporation or an eligible Canadian partnership by which the debtor is controlled at that time; or

(b)  a taxable Canadian corporation or an eligible Canadian partnership that is controlled at that time by

i.  the debtor,

ii.  the debtor and one or more persons related to the debtor, or

iii.  a person or group of persons by which the debtor is controlled at that time;

“distress preferred share” at any time means a share issued after 21 February 1994, other than a share issued pursuant to an agreement in writing entered into on or before that date, by a corporation that is a share described in section 21.6.1 that would, but for paragraphs c and e of section 21.6, be a term preferred share at that time;

“eligible Canadian partnership” at any time means a Canadian partnership none of the members of which is, at that time,

(a)  an investment corporation owned by persons not resident in Canada;

(b)  a person exempt, pursuant to Book VIII, from tax under this Part on all or part of the person’s taxable income;

(c)  a partnership, other than an eligible Canadian partnership; or

(d)  a trust, other than a trust in which no person not resident in Canada and no person described in any of paragraphs a to c is beneficially interested;

“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 b of section 20, at that time to the debtor;

“excluded obligation” means an obligation issued by a debtor where

(a)  the amount for which the obligation was issued

i.  were included in computing the debtor’s income or, but for the expression “, other than a prescribed amount,” in paragraph w of section 87, would have been so included,

ii.  were deducted in computing, for the purposes of this Part, any balance of undeducted outlays, expenses or other amounts, or

iii.  were deducted in computing the capital cost or cost amount to the debtor of any property of the debtor;

(b)  an amount paid by the debtor in satisfaction of the entire principal amount of the obligation is included in the amount determined under subparagraph a of the third paragraph of section 194 or section 198 in respect of the debtor;

(c)  sections 481 to 483.1 apply to the obligation;

(d)  the principal amount of the obligation would, if this Act were read without reference to sections 484 to 485.18 and the obligation were settled without any amount being paid in satisfaction of its principal amount, be included in computing the debtor’s income because of the settlement of the obligation; or

(e)  remittance of the principal amount of the obligation is made in accordance with the first paragraph of section 39 of the residential renovation incentive program implemented by the Société d’habitation du Québec pursuant to Order in Council 153-94 dated 19 January 1994;

“excluded property” means property of a debtor who is not resident in Canada that is tax-agreement-protected property or that is not taxable Canadian property;

“excluded security” issued by a corporation to a person as consideration for the settlement of a debt means

(a)  a distress preferred share issued by the corporation to the person; or

(b)  a share issued by the corporation to the person under the terms of the debt, where the debt was a bond, debenture or note listed on a designated stock exchange located in Canada and the terms for its conversion to a share were not established or substantially modified after the later of 22 February 1994 and the time that the bond, debenture or note was issued;

“forgiven amount” at any time in respect of a commercial obligation issued by a debtor is the amount by which the lesser of the amount for which the obligation was issued and the principal amount of the obligation exceeds the aggregate of

(a)  the amount paid at that time in satisfaction of the principal amount of the obligation;

(b)  the amount included under section 37 or 111 in computing the income of any person because of the settlement of the obligation at that time;

(c)  the amount deducted at that time under subparagraph b of the first paragraph of section 175.1.3 in computing the forgiven amount in respect of the obligation;

(d)  the capital gain of the debtor resulting from the application of section 263 to the purchase at that time of the obligation by the debtor;

(e)  such portion of the principal amount of the obligation as relates to an amount renounced under section 381, 406, 417 or 418.13, as it read in respect of the renunciation, by the debtor;

(f)  any portion of the principal amount of the obligation that is included in the amount determined in any of subparagraphs a to d of the second paragraph of section 484.2 in respect of the debtor for the taxation year of the debtor that includes that time or for a preceding taxation year;

(g)  the aggregate of all amounts each of which is a forgiven amount at a previous time that the obligation was deemed by section 485.25 or 485.26 to have been settled;

(h)  such portion of the principal amount of the obligation as can reasonably be considered to have been included under sections 487.1 to 487.5.4 in computing the debtor’s income for his taxation year that includes that time or for a preceding taxation year;

(i)  where the debtor is a bankrupt at that time, the principal amount of the obligation;

(j)  such portion of the principal amount of the obligation as represents the principal amount of an excluded obligation;

(k)  where the debtor is a partnership and the obligation was, since the later of the creation of the partnership or the issue of the obligation, always payable to a member of the partnership actively engaged, on a regular, continuous and substantial basis, in the activities of the partnership that are other than the financing of the partnership business, the principal amount of the obligation; and

(l)  the amount given at or before that time by the debtor to another person as consideration for the assumption by the other person of the obligation;

“person” includes a partnership;

“relevant loss balance” at a particular time for a commercial obligation and in respect of a debtor’s non-capital loss, farm loss, restricted farm loss or net capital loss, as the case may be, for a taxation year means, subject to section 485.2, the amount of such loss that would be deductible in computing the debtor’s taxable income or taxable income earned in Canada, as the case may be, for the taxation year that includes that time if

(a)  the debtor had sufficient incomes and sufficient taxable capital gains for such purposes;

(b)  sections 485.4 and 485.5 did not apply to reduce such loss at or after the particular time; and

(c)  subparagraph a of the first paragraph of section 736 and sections 736.0.1 and 736.0.1.1 did not apply to the debtor;

“specified cost” of a debt owing to a person at any time means

(a)  where the debt is capital property of the person at that time, the adjusted cost base to the person of the debt at that time; and

(b)  in any other case, the indicated cost amount to the person;

“successor pool” at any time for a commercial obligation and in respect of an amount determined in relation to a debtor means, subject to section 485.1, such portion of that amount as would be deductible under section 418.17, 418.17.3, 418.18, 418.19 or 418.21 in computing the debtor’s income for the taxation year that includes that time, if

(a)  the debtor had sufficient incomes for such purposes;

(b)  section 485.8 did not apply to reduce the particular amount so determined at that time;

(c)  the taxation year ended immediately after that time; and

(d)  the second paragraph of section 418.17.3 and the first paragraph of section 418.20 were read without reference to “30% of” wherever it appears and the second paragraph of section 418.21 were read without reference to “10% of”;

“unrecognized loss” at a particular time, in respect of an obligation issued by a debtor, from the disposition of a property means the amount that would, but for section 240, be a capital loss from the disposition by the debtor at or before the particular time of a debt or other right to receive an amount, except that where the debtor is a corporation the control of which was acquired before the particular time and after the time of the disposition by a person or group of persons, the unrecognized loss at the particular time in respect of the obligation is deemed to be nil unless

(a)  the obligation was issued by the debtor before, and not in contemplation of, the acquisition of control, or

(b)  all or substantially all of the amount for which the obligation was issued was used to satisfy the principal amount of another obligation to which paragraph a or this paragraph would apply if the other obligation were still outstanding.

1972, c. 23, s. 385; 1973, c. 17, s. 55; 1985, c. 25, s. 92; 1986, c. 19, s. 109; 1989, c. 77, s. 55; 1995, c. 1, s. 43; 1996, c. 39, s. 140; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 104; 2001, c. 7, s. 49; 2001, c. 53, s. 73; 2004, c. 8, s. 101; 2010, c. 5, s. 47.

2006-03-01

485. In this division,

“commercial debt obligation” means a debt obligation issued by a debtor and, where interest was paid or payable by the debtor in respect of it pursuant to a legal obligation, or if interest had been paid or payable by the debtor in respect of it pursuant to a legal obligation, in respect of which an amount in respect of the interest was or would have been deductible in computing the debtor’s income, taxable income or taxable income earned in Canada, as the case may be, if this Part were read without reference to sections 119.4, 119.17, 135.4, 164, 166, 169 and 180 to 182;

“commercial obligation” issued by a debtor means a commercial debt obligation issued by the debtor, or a distress preferred share issued by the debtor;

“debtor” includes any corporation that has issued a distress preferred share and any partnership;

“directed person” at any time in respect of a debtor means

(a)  a taxable Canadian corporation or an eligible Canadian partnership by which the debtor is controlled at that time; or

(b)  a taxable Canadian corporation or an eligible Canadian partnership that is controlled at that time by

i.  the debtor,

ii.  the debtor and one or more persons related to the debtor, or

iii.  a person or group of persons by which the debtor is controlled at that time;

“distress preferred share” at any time means a share issued after 21 February 1994, other than a share issued pursuant to an agreement in writing entered into on or before that date, by a corporation that is a share described in section 21.6.1 that would, but for paragraphs c and e of section 21.6, be a term preferred share at that time;

“eligible Canadian partnership” at any time means a Canadian partnership none of the members of which is, at that time,

(a)  an investment corporation owned by persons not resident in Canada;

(b)  a person exempt, pursuant to Book VIII, from tax under this Part on all or part of the person’s taxable income;

(c)  a partnership, other than an eligible Canadian partnership; or

(d)  a trust, other than a trust in which no person not resident in Canada and no person described in any of paragraphs a to c is beneficially interested;

“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 b of section 20, at that time to the debtor;

“excluded obligation” means an obligation issued by a debtor where

(a)  the amount for which the obligation was issued

i.  were included in computing the debtor’s income or, but for the expression “, other than a prescribed amount,” in paragraph w of section 87, would have been so included,

ii.  were deducted in computing, for the purposes of this Part, any balance of undeducted outlays, expenses or other amounts, or

iii.  were deducted in computing the capital cost or cost amount to the debtor of any property of the debtor;

(b)  an amount paid by the debtor in satisfaction of the entire principal amount of the obligation is included in the amount determined under subparagraph a of the third paragraph of section 194 or section 198 in respect of the debtor;

(c)  sections 481 to 483.1 apply to the obligation;

(d)  the principal amount of the obligation would, if this Act were read without reference to sections 484 to 485.18 and the obligation were settled without any amount being paid in satisfaction of its principal amount, be included in computing the debtor’s income because of the settlement of the obligation; or

(e)  remittance of the principal amount of the obligation is made in accordance with the first paragraph of section 39 of the residential renovation incentive program implemented by the Société d’habitation du Québec pursuant to Order in Council 153-94 dated 19 January 1994;

“excluded property” means property of a debtor who is not resident in Canada that is tax-agreement-protected property or that is not taxable Canadian property;

“excluded security” issued by a corporation to a person as consideration for the settlement of a debt means

(a)  a distress preferred share issued by the corporation to the person; or

(b)  a share issued by the corporation to the person under the terms of the debt, where the debt was a bond, debenture or note listed on a Canadian stock exchange and the terms for its conversion to a share were not established or substantially modified after the later of 22 February 1994 and the time that the bond, debenture or note was issued;

“forgiven amount” at any time in respect of a commercial obligation issued by a debtor is the amount by which the lesser of the amount for which the obligation was issued and the principal amount of the obligation exceeds the aggregate of

(a)  the amount paid at that time in satisfaction of the principal amount of the obligation;

(b)  the amount included under section 37 or 111 in computing the income of any person because of the settlement of the obligation at that time;

(c)  the amount deducted at that time under subparagraph b of the first paragraph of section 175.1.3 in computing the forgiven amount in respect of the obligation;

(d)  the capital gain of the debtor resulting from the application of section 263 to the purchase at that time of the obligation by the debtor;

(e)  such portion of the principal amount of the obligation as relates to an amount renounced under section 381, 406, 417 or 418.13, as it read in respect of the renunciation, by the debtor;

(f)  any portion of the principal amount of the obligation that is included in the amount determined in any of subparagraphs a to d of the second paragraph of section 484.2 in respect of the debtor for the taxation year of the debtor that includes that time or for a preceding taxation year;

(g)  the aggregate of all amounts each of which is a forgiven amount at a previous time that the obligation was deemed by section 485.25 or 485.26 to have been settled;

(h)  such portion of the principal amount of the obligation as can reasonably be considered to have been included under sections 487.1 to 487.5.4 in computing the debtor’s income for his taxation year that includes that time or for a preceding taxation year;

(i)  where the debtor is a bankrupt at that time, the principal amount of the obligation;

(j)  such portion of the principal amount of the obligation as represents the principal amount of an excluded obligation;

(k)  where the debtor is a partnership and the obligation was, since the later of the creation of the partnership or the issue of the obligation, always payable to a member of the partnership actively engaged, on a regular, continuous and substantial basis, in the activities of the partnership that are other than the financing of the partnership business, the principal amount of the obligation; and

(l)  the amount given at or before that time by the debtor to another person as consideration for the assumption by the other person of the obligation;

“person” includes a partnership;

“relevant loss balance” at a particular time for a commercial obligation and in respect of a debtor’s non-capital loss, farm loss, restricted farm loss or net capital loss, as the case may be, for a taxation year means, subject to section 485.2, the amount of such loss that would be deductible in computing the debtor’s taxable income or taxable income earned in Canada, as the case may be, for the taxation year that includes that time if

(a)  the debtor had sufficient incomes and sufficient taxable capital gains for such purposes;

(b)  sections 485.4 and 485.5 did not apply to reduce such loss at or after the particular time; and

(c)  subparagraph a of the first paragraph of section 736 and sections 736.0.1 and 736.0.1.1 did not apply to the debtor;

“specified cost” of a debt owing to a person at any time means

(a)  where the debt is capital property of the person at that time, the adjusted cost base to the person of the debt at that time; and

(b)  in any other case, the indicated cost amount to the person;

“successor pool” at any time for a commercial obligation and in respect of an amount determined in relation to a debtor means, subject to section 485.1, such portion of that amount as would be deductible under section 418.17, 418.17.3, 418.18, 418.19 or 418.21 in computing the debtor’s income for the taxation year that includes that time, if

(a)  the debtor had sufficient incomes for such purposes;

(b)  section 485.8 did not apply to reduce the particular amount so determined at that time;

(c)  the taxation year ended immediately after that time; and

(d)  the second paragraph of section 418.17.3 and the first paragraph of section 418.20 were read without reference to “30% of” wherever it appears and the second paragraph of section 418.21 were read without reference to “10% of”;

“unrecognized loss” at a particular time, in respect of an obligation issued by a debtor, from the disposition of a property means the amount that would, but for section 240, be a capital loss from the disposition by the debtor at or before the particular time of a debt or other right to receive an amount, except that where the debtor is a corporation the control of which was acquired before the particular time and after the time of the disposition by a person or group of persons, the unrecognized loss at the particular time in respect of the obligation is deemed to be nil unless

(a)  the obligation was issued by the debtor before, and not in contemplation of, the acquisition of control, or

(b)  all or substantially all of the amount for which the obligation was issued was used to satisfy the principal amount of another obligation to which paragraph a or this paragraph would apply if the other obligation were still outstanding.

1972, c. 23, s. 385; 1973, c. 17, s. 55; 1985, c. 25, s. 92; 1986, c. 19, s. 109; 1989, c. 77, s. 55; 1995, c. 1, s. 43; 1996, c. 39, s. 140; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 104; 2001, c. 7, s. 49; 2001, c. 53, s. 73; 2004, c. 8, s. 101.