I-3 - Taxation Act

Section 175.12 Disposition versions

2020-09-24

175.12. Subject to section 175.13, the rule set out in the second paragraph applies in respect of the disposition of a particular position by a person or partnership (in this section and sections 175.13 and 175.15 referred to as the “transferor”), if

(a)  the disposition is not a deemed disposition under any of Divisions I to III of Chapter III of Title VII, section 653, Chapter I of Title I.1 of Book VI or section 832.1 or 999.1;

(b)  the transferor is not a financial institution (within the meaning of section 851.22.1), a mutual fund corporation or a mutual fund trust; and

(c)  the particular position was, immediately before its disposition, not a capital property, or an obligation or liability on account of capital, of the transferor.

Where the conditions of the first paragraph are met in respect of the disposition of a particular position by a transferor, the portion of the transferor’s loss, if any, from the disposition of the particular position that is deductible in computing the transferor’s income for a particular taxation year is equal to the amount determined by the formula

A + B − C.

In the formula in the second paragraph,

(a)  A is

i.  if the particular taxation year is the taxation year in which the disposition occurs, the amount of the loss determined with reference to section 175.9 but without reference to this section, and

ii.  in any other taxation year, nil;

(b)  B is

i.  if the disposition occurred in a taxation year preceding the particular taxation year, the amount determined under subparagraph c in respect of the disposition for the taxation year preceding the particular taxation year, and

ii.  in any other case, nil; and

(c)  C is the lesser of

i.  the amount determined under subparagraph a for the taxation year in which the disposition occurs, and

ii.  the amount determined by the formula

D − (E + F).

In the formula in subparagraph ii of subparagraph c of the third paragraph,

(a)  D is the aggregate of all amounts each of which is equal to the amount of unrecognized profit at the end of the particular taxation year in respect of

i.  the particular position,

ii.  positions that are offsetting positions in respect of the particular position or those that would be such offsetting positions, to the extent that there is no successor position in respect of the particular position, if the particular position continued to be held by the transferor,

iii.  successor positions in respect of the particular position, and

iv.  positions that are offsetting positions in respect of any successor position referred to in subparagraph iii or those that would be such offsetting positions if any such successor position continued to be held by the transferor;

(b)  E is the aggregate of all amounts each of which is equal to the amount of unrecognized loss at the end of the particular taxation year in respect of positions referred to in subparagraphs i to iv of subparagraph a; and

(c)  F is the aggregate of all amounts each of which is equal to the amount determined by the formula

G − H.

In the formula in subparagraph c of the fourth paragraph,

(a)  G is the amount determined under subparagraph a of the third paragraph for the taxation year in which the disposition occurs in respect of another position that was disposed of prior to the disposition of the particular position, if

i.  the particular position was a successor position in respect of the other position, and

ii.  the other position was

(1)  an offsetting position in respect of the particular position,

(2)  an offsetting position in respect of a position in respect of which the particular position was a successor position, or

(3)  the particular position; and

(b)  H is the aggregate of all amounts each of which is, in respect of another position described in subparagraph a, an amount determined under the second paragraph for the particular taxation year or a preceding taxation year.

For the purposes of subparagraph iii of subparagraph a of the fourth paragraph, subparagraph i of subparagraph a of the fifth paragraph and subparagraph 2 of subparagraph ii of that subparagraph a, a successor position in respect of a position includes a successor position that is in respect of a successor position in respect of the position.

2020, c. 16, s. 46.