I-3 - Taxation Act

Section 140.2 Disposition versions

2006-03-01

140.2. A taxpayer who is an insurer or whose ordinary business includes the lending of money may deduct in computing the taxpayer’s income for a taxation year, as a reserve in respect of credit risks under guarantees, indemnities, letters of credit or other credit facilities, bankers’ acceptances, interest rate or currency swaps, foreign exchange or other future or option contracts, interest rate protection agreements, risk participations and other similar instruments or commitments issued, made or assumed by the taxpayer in the ordinary course of the taxpayer’s business of insurance or the lending of money in favour of persons with whom the taxpayer deals at arm’s length, an amount not exceeding the lesser of

(a)  a reasonable amount as a reserve for credit risk losses of the taxpayer expected to arise after the end of the year in respect of those instruments or commitments, and

(b)  90% of the reserve for credit risk losses referred to in paragraph a determined for the year in accordance with generally accepted accounting principles.

1990, c. 59, s. 83; 2001, c. 7, s. 24.