I-3 - Taxation Act

Section 167.1 Disposition versions

2006-03-01

167.1. Where a person who has issued a debt obligation, other than an income bond, an income debenture, a small business development bond or a small business bond, is obligated to pay an amount that is stipulated to be interest on that debt obligation in respect of a period before its issue and it is reasonable to consider that the consideration paid to the issuer by the person to whom the debt obligation was issued includes that interest, the following rules apply:

(a)  for the purposes of sections 87, 87.2, 89 to 92.7 and 167, the issue of the debt obligation is deemed to be a disposition of the debt obligation from the issuer, as transferor, to the person to whom the obligation is issued, as transferee, and that interest is deemed to be interest that accrued on the debt obligation for a period ending at the time of the disposition; and

(b)  notwithstanding paragraph a or any other provision of this Act, the issuer shall not deduct or include that interest in computing his income.

1985, c. 25, s. 34; 1991, c. 25, s. 54.