I-3 - Taxation Act

Section 485.22.1 Disposition versions

2010-10-27

485.22.1. If a trust that is a SIFT wind-up entity is the only beneficiary under another trust (in this section referred to as the “subsidiary trust”), and a capital property that is a debt or other obligation (in this section referred to as the “subsidiary trust’s obligation”) of the subsidiary trust to pay an amount to the SIFT wind-up entity is, as a consequence of a distribution by the subsidiary trust that is a SIFT trust wind-up event, settled at a particular time without any payment or by the payment of an amount that is less than the principal amount of the subsidiary trust’s obligation, the following rules apply:

(a)  if the payment is less than the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time, and the SIFT wind-up entity makes a valid election under subparagraph ii of paragraph a of subsection 5.1 of section 80.01 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) in relation to the subsidiary trust’s obligation, the amount paid at the particular time in satisfaction of the principal amount of the subsidiary trust’s obligation is deemed to be equal to the amount that would be the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time if that adjusted cost base included amounts added in computing the SIFT wind-up entity’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the SIFT wind-up entity has not deducted any amounts as bad debts in respect of that unpaid interest; and

(b)  for the purpose of applying sections 485 to 485.18 to the subsidiary trust’s obligation, the subsidiary trust’s obligation is deemed to have been settled immediately before the time that is immediately before the distribution.

Chapter V.2 of Title II of Book I applies in relation to an election made under subparagraph ii of paragraph a of subsection 5.1 of section 80.01 of the Income Tax Act.

2010, c. 25, s. 32.