I-3 - Taxation Act

Section 175.1.2 Disposition versions

2006-03-01

175.1.2. For the purposes of this Part, the amount of interest payable on borrowed money or on an amount payable for property, in this section and sections 175.1.3 to 175.1.8 referred to as the “debt obligation”, by a corporation, partnership or trust, in this section and sections 175.1.3 to 175.1.7 referred to as the “borrower”, in respect of a taxation year is, notwithstanding subparagraph i of paragraph b of section 175.1.1, deemed to be an amount equal to the lesser of

(a)  the amount of interest, not in excess of a reasonable amount, that would have been payable on the debt obligation by the borrower in respect of the year if no amount had been paid before the end of the year in satisfaction of the obligation to pay interest on the debt obligation in respect of the year and if the amount outstanding at each particular time in the year that is after 31 December 1991 on account of the principal amount of the debt obligation were the amount by which the amount outstanding at the particular time on account of the principal amount of the debt obligation exceeds the total of

i.  the aggregate of all amounts each of which is an amount paid before the particular time in satisfaction, in whole or in part, of the obligation to pay interest on the debt obligation in respect of a period or part thereof that is after 31 December 1991, after the beginning of the year, and after the time the amount was so paid, other than a period or part thereof that is in the year where no such amount has been paid before the particular time in respect of a period or part thereof that is after the end of the year, and

ii.  the amount by which

(1)  the aggregate of all amounts each of which is the amount of interest payable on the debt obligation, determined without reference to this section, by the borrower in respect of a taxation year ending after 31 December 1991 and before the year, to the extent that such interest does not exceed a reasonable amount, exceeds

(2)  the aggregate of all amounts each of which is the amount of interest deemed by this section to have been payable on the debt obligation by the borrower in respect of a taxation year ending before the year; and

(b)  the amount by which

i.  the aggregate of all amounts each of which is an amount of interest payable on the debt obligation, determined without reference to this section, by the borrower in respect of the year or a taxation year ending after 31 December 1991 and before the year, to the extent that such interest does not exceed a reasonable amount, exceeds

ii.  the aggregate of all amounts each of which is the amount of interest deemed by this section to be payable on the debt obligation by the borrower in respect of a taxation year ending before the year.

1994, c. 22, s. 112; 1997, c. 3, s. 71.