I-3 - Taxation Act

Section 485.12 Disposition versions

2019-06-19

485.12. Where a commercial obligation issued by a debtor (other than a partnership) is settled at any time in a taxation year and amounts have been designated by the debtor under sections 485.6, 485.8 and 485.9 to the maximum extent permitted in respect of the settlement of the obligation, the following rules apply:

(a)  the debtor is deemed to have a capital gain for the year from the disposition of capital property or, where the debtor is an individual not resident in Canada at the end of the year, of taxable Canadian property, equal to the lesser of

i.  the remaining unapplied portion of the forgiven amount at that time in respect of the obligation, and

ii.  the amount by which the aggregate of the debtor’s capital losses from the dispositions of properties, other than precious property and excluded properties, and, subject to the second paragraph, twice the amount that would, because of sections 564.2 to 564.4 and 564.4.4, be deductible under section 729 in computing the debtor’s taxable income for the year, if the debtor had sufficient incomes and taxable capital gains for the year for such purposes, exceeds the aggregate of the debtor’s capital gains for the year from the dispositions of such properties, determined without reference to this section, and the aggregate of the amounts each of which is an amount deemed by this section to be a capital gain of the debtor for the year as a consequence of the application of this section to another commercial obligation settled before that time; and

(b)  the forgiven amount at that time in respect of the obligation shall be considered to have been applied under this section to the extent of the amount deemed by this section to be a capital gain of the debtor for the year as a consequence of the application of this section to the settlement of the obligation at that time.

However, where the taxation year of the debtor includes 28 February 2000 or 17 October 2000, or begins after 28 February 2000 and ends before 17 October 2000, the reference to “twice” in subparagraph ii of subparagraph a of the first paragraph shall be read, with the necessary modifications, as a reference to the fraction that is the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies to the debtor for the year.

1996, c. 39, s. 142; 1997, c. 3, s. 71; 2003, c. 2, s. 130; 2019, c. 14, s. 140.

2006-03-01

485.12. Where a commercial obligation issued by a debtor, other than a partnership, is settled at any time in a taxation year and amounts have been designated by the debtor under sections 485.6 to 485.9 to the maximum extent permitted in respect of the settlement of the obligation,

(a)  the debtor is deemed to have a capital gain for the year from the disposition of capital property or, where the debtor is an individual not resident in Canada at the end of the year, of taxable Canadian property, equal to the lesser of

i.  the remaining unapplied portion of the forgiven amount at that time in respect of the obligation, and

ii.  the amount by which the aggregate of the debtor’s capital losses from the dispositions of properties, other than precious property and excluded properties, and, subject to the second paragraph, twice the amount that would, because of sections 564.2 to 564.4 and 564.4.4, be deductible under section 729 in computing the debtor’s taxable income for the year, if the debtor had sufficient incomes and taxable capital gains for the year for such purposes, exceeds the aggregate of the debtor’s capital gains for the year from the dispositions of such properties, determined without reference to this section, and the aggregate of the amounts each of which is an amount deemed by this section to be a capital gain of the debtor for the year as a consequence of the application of this section to another commercial obligation settled before that time; and

(b)  the forgiven amount at that time in respect of the obligation shall be considered to have been applied under this section to the extent of the amount deemed by this section to be a capital gain of the debtor for the year as a consequence of the application of this section to the settlement of the obligation at that time.

However, where the taxation year of the debtor includes 28 February 2000 or 17 October 2000, or begins after 28 February 2000 and ends before 17 October 2000, the reference to “twice” in subparagraph ii of subparagraph a of the first paragraph shall be read, with the necessary modifications, as a reference to the fraction that is the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies to the debtor for the year.

1996, c. 39, s. 142; 1997, c. 3, s. 71; 2003, c. 2, s. 130.