Income Tax Act

Marginal note:Definitions

• 80.04 (1) In this section, commercial debt obligation, commercial obligation, debtor, directed person, eligible Canadian partnership, forgiven amount and person have the meanings assigned by subsection 80(1).

• Marginal note:Eligible transferee

  (2) For the purpose of this section, an eligible transferee of a debtor at any time is a directed person at that time in respect of the debtor or a taxable Canadian corporation or eligible Canadian partnership related (otherwise than because of a right referred to in paragraph 251(5)(b)) at that time to the debtor.

• Marginal note:Application

  (3) Paragraphs 80(2)(a), 80(2)(b), 80(2)(j), 80(2)(l) and 80(2)(n) apply for the purpose of this section.

• Marginal note:Agreement respecting transfer of forgiven amount

  (4) Where

  • (a) a particular commercial obligation (other than an obligation deemed by paragraph (e) to have been issued) issued by a debtor is settled at a particular time,

  • (b) amounts have been designated by the debtor under subsections 80(5) to 80(10) to the maximum extent permitted in respect of the settlement of the particular obligation at the particular time,

  • (c) the debtor and an eligible transferee of the debtor at the particular time file under this section an agreement between them in respect of that settlement, and

  • (d) an amount is specified in that agreement

  the following rules apply:

  • (e) except for the purposes of subsection 80(11), the transferee shall be deemed to have issued a commercial debt obligation that was settled at the particular time,

  • (f) the specified amount shall be deemed to be the forgiven amount at the particular time in respect of the obligation referred to in paragraph (e),

  • (g) subject to paragraph (h), the obligation referred to in paragraph (e) shall be deemed to have been issued at the same time (in paragraph (h) referred to as the “time of issue”) at which, and in the same circumstances in which, the particular obligation was issued,

  • (h) if the transferee is a taxpayer that is subject to a loss restriction event after the time of issue and the transferee and the debtor were, if the transferee is a corporation, not related to each other  —  or, if the transferee is a trust, not affiliated with each other  —  immediately before the loss restriction event,

    • (i) the obligation referred to in paragraph (e) is deemed to have been issued after the loss restriction event, and

    • (ii) subparagraph (b)(ii) of the definition relevant loss balance in subsection 80(1), paragraph (f) of the definition successor pool in that subsection and paragraph (b) of the definition unrecognized loss in that subsection do not apply in respect of the loss restriction event,

  • (i) the source in connection with which the obligation referred to in paragraph (e) was issued shall be deemed to be the source in connection with which the particular obligation was issued, and

  • (j) for the purposes of sections 61.3 and 61.4, the amount included under subsection 80(13) in computing the income of the eligible transferee in respect of the settlement of the obligation referred to in paragraph (e) or deducted under paragraph 80(15)(a) in respect of such income shall be deemed to be nil.

• Marginal note:Consideration for agreement

  (5) For the purposes of this Part, where property is acquired at any time by an eligible transferee as consideration for entering into an agreement with a debtor that is filed under this section

  • (a) where the property was owned by the debtor immediately before that time,

    • (i) the debtor shall be deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, and

    • (ii) no amount may be deducted in computing the debtor’s income as a consequence of the transfer of the property, except any amount arising as a consequence of the application of subparagraph (i);

  • (b) the cost at which the property was acquired by the eligible transferee at that time shall be deemed to be equal to the fair market value of the property at that time; and

  • (c) the eligible transferee shall not be required to add an amount in computing income solely because of the acquisition at that time of the property;

  • (d) [Repealed, 1998, c. 19, s. 113(1)]

• Marginal note:No benefit conferred

  (5.1) For the purposes of this Part, where a debtor and an eligible transferee enter into an agreement that is filed under this section, no benefit shall be considered to have been conferred on the debtor as a consequence of the agreement.

• Marginal note:Manner of filing agreement

  (6) Subject to subsection (7), a particular agreement between a debtor and an eligible transferee in respect of an obligation issued by the debtor that was settled at any time shall be deemed not to have been filed under this section

  • (a) where it is not filed with the Minister in a prescribed form

    • (i) on or before the later of

      • (A) the day on or before which the debtor’s return of income under this Part is required to be filed for the taxation year or fiscal period, as the case may be, that includes that time (or would be required to be filed if tax under this Part were payable by the debtor for the year), and

      • (B) the day on or before which the transferee’s return of income under this Part is required to be filed for the taxation year or fiscal period, as the case may be, that includes that time, or

    • (ii) on or before the later of

      • (A) the expiry of the 90-day period commencing on the day of mailing of an assessment of tax payable under this Part or a notification that no tax is payable under this Part, as the case may be, for a taxation year or fiscal period described in clause (i)(A) or (B), as the case may be, and

      • (B) if the debtor is an individual (other than a trust) or a testamentary trust, the day that is one year after the taxpayer’s filing-due date for the year;

  • (b) where it is not accompanied by,

    • (i) where the debtor is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made,

    • (ii) where the debtor is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made,

    • (iii) where the transferee is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, and

    • (iv) where the transferee is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made; or

  • (c) if an agreement amending the particular agreement has been filed in accordance with this section, except where subsection (8) applies to the particular agreement.

• Marginal note:Filing by partnership

  (7) For the purpose of subsection (6), where an obligation is settled at any time in a fiscal period of a partnership, it shall be assumed that

  • (a) the partnership is required to file a return of income under this Part for the fiscal period on or before the latest day on or before which any member of the partnership during the fiscal period is required to file a return of income under this Part for the taxation year in which that fiscal period ends (or would be required to file such a return of income if tax under this Part were payable by the member for that year); and

  • (b) the partnership may serve a notice of objection described in subparagraph (6)(a)(ii) within each period within which any member of the partnership during the fiscal period may serve a notice of objection to tax payable under this Part for a taxation year in which that fiscal period ends.

• Marginal note:Related corporations

  (8) Where at any time a corporation becomes related to another corporation and it can reasonably be considered that the main purpose of the corporation becoming related to the other corporation is to enable the corporations to file an agreement under this section, the amount specified in the agreement shall be deemed to be nil for the purpose of the description of C in subsection 80(13).

• Marginal note:Assessment of taxpayers in respect of agreement

  (9) The Minister shall, notwithstanding subsections 152(4) to 152(5), assess or reassess the tax, interest and penalties payable under this Act by any taxpayer in order to take into account an agreement filed under this section.

• Marginal note:Liability of debtor

  (10) Without affecting the liability of any person under any other provision of this Act, where a debtor and an eligible transferee file an agreement between them under this section in respect of an obligation issued by the debtor that was settled at any time, the debtor is, to the extent of 30% of the amount specified in the agreement, liable to pay

  • (a) where the transferee is a corporation, all taxes payable under this Act by it for taxation years that end in the period that begins at that time and ends 4 calendar years after that time;

  • (b) where the transferee is a partnership, the total of all amounts each of which is the tax payable under this Act by a person for a taxation year

    • (i) that begins or ends in that period, and

    • (ii) that includes the end of a fiscal period of the partnership during which the person was a member of the partnership; and

  • (c) interest and penalties in respect of such taxes.

• Marginal note:Joint and several, or solidary, liability

  (11) If taxes, interest and penalties are payable under this Act by a person for a taxation year and those taxes, interest and penalties are payable by a debtor because of subsection (10), the debtor and the person are jointly and severally, or solidarily, liable to pay those amounts.

• Marginal note:Assessments in respect of liability

  (12) Where a debtor and an eligible transferee file an agreement between them under this section in respect of an obligation issued by the debtor that was settled at a particular time,

  • (a) where the debtor is an individual or a corporation, the Minister may at any subsequent time assess the debtor in respect of taxes, interest and penalties for which the debtor is liable because of subsection (10); and

  • (b) where the debtor is a partnership, the Minister may at any subsequent time assess any person who has been a member of the partnership in respect of taxes, interest and penalties for which the partnership is liable because of subsection (10), to the extent that those amounts relate to taxation years of the transferee (or, where the transferee is another partnership, members of the other partnership) that end at or after

    • (i) where the person was not a member of the partnership at the particular time, the first subsequent time the person becomes a member of the partnership, and

    • (ii) in any other case, the particular time.

• Marginal note:Application of Division I

  (13) The provisions of Division I apply to an assessment under subsection (12) as though it had been made under section 152.

• Marginal note:Partnership members

  (14) For the purposes of paragraphs (10)(b) and (12)(b) and this subsection, where at any time a member of a particular partnership is another partnership, each member of the other partnership shall be deemed to be a member of the particular partnership at that time.