I-3 - Taxation Act

Section 113.5 Disposition versions

2020-09-24

113.5. Where section 113.4 has applied, before a particular time, in respect of a shareholder debt to deem one or more loans to have been received by an intended borrower from a particular ultimate funder and, at that time, any of the conditions of the second paragraph is met, the intended borrower is, for the purposes of this division and sections 177 and 487.1 to 487.5.4, deemed to repay at that time, in whole or in part, one or more of the deemed loans, and the total amount of the deemed repayments is determined by the formula

A − B − (C × D / E).

The conditions to which the first paragraph refers are as follows:

(a)  an amount owing in respect of the shareholder debt is repaid in whole or in part;

(b)  an amount owing as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt is repaid in whole or in part; and

(c)  either

i.  there is a decrease in the fair market value of a property in respect of which a specified right was granted by the particular ultimate funder to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, or

ii.  a right described in subparagraph i is extinguished.

In the formula in the first paragraph,

(a)  A is the aggregate of all amounts each of which is the amount of a loan deemed, under section 113.4, to have been received, at any time before the particular time, by an intended borrower from the particular ultimate funder in respect of the shareholder debt;

(b)  B is the aggregate of all amounts deemed under this section to have been repaid, at any time before the particular time, by the intended borrower in respect of a loan referred to in subparagraph a;

(c)  C is the lesser of

i.  the amount owing as or on account of the shareholder debt, immediately after the particular time, and

ii.  the aggregate of all amounts each of which is, immediately after the particular time,

(1)  an amount owing as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to an ultimate funder under a funding arrangement in respect of the shareholder debt, or

(2)  the fair market value of a particular property in respect of which an ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt;

(d)  D is the aggregate of all amounts each of which is, immediately after the particular time,

i.  an amount owing as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt, or

ii.  the fair market value of a particular property in respect of which the particular ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt; and

(e)  E is the aggregate determined under subparagraph ii of subparagraph c.

2020, c. 16, s. 36.