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I-3 - Taxation Act
Section 85.7
Disposition versions
85.7. Where a taxpayer has made a valid election under subsection 1 of section 10.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), the following rules apply in respect of the taxation years to which the election applies for the purposes of that Act (each such taxation year being referred to in this section as a “particular taxation year”):
(a) where the taxpayer is a financial institution, within the meaning of section 851.22.1, in the particular taxation year, each eligible derivative held by the taxpayer in the particular year is, for the purposes of this Act and with the necessary modifications, deemed to be mark-to-market property, within the meaning of section 851.22.1, of the taxpayer for the particular year; and
(b) in any other case, the taxpayer is deemed
i. to have disposed, immediately before the end of the particular taxation year, of each eligible derivative held by the taxpayer at the end of that year and received proceeds of disposition or paid an amount, as the case may be, equal to the fair market value of the eligible derivative at the time of disposition, and
ii. to have reacquired, or reissued or renewed, at the end of the taxation year, each of the eligible derivatives referred to in subparagraph i at an amount equal to the proceeds of disposition or the amount paid, as the case may be, referred to in subparagraph i, in respect of the eligible derivative.
For the purposes of the first paragraph, where a taxpayer revokes, under subsection 2 of section 10.1 of the Income Tax Act and for the purposes of that Act, an election made under subsection 1 of that section 10.1, a taxation year in relation to which the revocation applies for the purposes of that Act is not a particular taxation year.
Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 10.1 of the Income Tax Act or an application for revocation made under subsection 2 of that section 10.1.
