I-3 - Taxation Act

Section 85.9 Disposition versions

2020-09-24

85.9. Where a taxpayer holds an eligible derivative at the beginning of its first taxation year in respect of which an election provided for in section 85.7 applies (in this section referred to as the “election year”) and, in the taxation year immediately preceding the election year, the taxpayer did not compute its profit or loss in respect of that eligible derivative in accordance with a method of profit computation that produces a substantially similar effect to that provided for in subparagraph b of the first paragraph of section 85.7, the following rules apply:

(a)  the taxpayer is deemed

i.  to have disposed of the eligible derivative immediately before the beginning of the election 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 that time, and

ii.  to have reacquired, or reissued or renewed, the eligible derivative at the beginning of the election year at an amount equal to the proceeds of disposition or the amount paid, as the case may be, referred to in subparagraph i;

(b)  the profit or loss that would arise, but for this paragraph, on the deemed disposition under subparagraph i of paragraph a

i.  is deemed not to arise in the taxation year immediately preceding the election year, and

ii.  is deemed to arise in the taxation year in which the taxpayer disposes of the eligible derivative (otherwise than under subparagraph i of subparagraph b of the first paragraph of section 85.7 or paragraph a of section 851.22.15); and

(c)  for the purposes of section 175.9, in respect of the disposition of the eligible derivative referred to in subparagraph ii of paragraph b, the profit or loss deemed to arise because of the application of that subparagraph is included in determining the amount of the transferor’s loss, if any, from the disposition.

2020, c. 16, s. 32.