Income Tax Act — I-3.3 80
 a commercial obligation issued by a debtor is settled at any time, the forgiven amount at that time in respect of the obligation shall be applied to reduce at that time, in the following order, (a) the debtor’s non-capital loss for each taxation year that ended before that time to the extent that the amount so applied (i) does not exceed the amount (in subsection 80(4) referred to as the debtor’s “ordinary non-capital loss at that time for the year”) that would be the relevant loss balance at that time for the obligation and in respect of the debtor’s non-capital loss for the year if the description of E in the definition non-capital loss in subsection 111(8) were read without reference to the expression “the taxpayer’s allowable business investment loss for the year”, and (ii) does not, because of this subsection, reduce the debtor’s non-capital loss for a preceding taxation year; (b) the debtor’s farm loss for each taxation year that ended before that time, to the extent that the amount so applied (i) does not exceed the amount that is the relevant loss balance at that time for the obligation and in respect of the debtor’s farm loss for the year, and (ii) does not, because of this subsection, reduce the debtor’s farm loss for a preceding taxation year; and (c) the debtor’s restricted farm loss for each taxation year that ended before that time, to the extent that the amount so applied (i) does not exceed the amount that is the relevant loss balance at that time for the obligation and in respect of the debtor’s restricted farm loss for the year, and (ii) does not, because of this subsection, reduce the debtor’s restricted farm loss for a preceding taxation year. Reductions of capital losses (4) Where a commercial obligation issued by a debtor is settled at any time, the applicable fraction of the remaining unapplied portion of a forgiven amount at that time in respect of the obligation shall be applied to reduce at that time, in the following order, (a) the debtor’s non-capital loss for each taxation year that ended before that time to the extent that the amount so applied (i) does not exceed the amount, if any, by which (A) the relevant loss balance at that time for the obligation and in respect of the debtor’s non-capital loss for the year exceeds (B) the debtor’s ordinary non-capital loss (within the meaning assigned by subparagraph 80(3)(a)(i)) at that time for the year, and (ii) does not, because of this subsection, reduce the debtor’s non-capital loss for a preceding taxation year; and (b) the debtor’s net capital loss for each taxation year that ended before that time, to the extent that the amount so applied (i) does not exceed the relevant loss balance at that time for the obligation and in respect of the debtor’s net capital loss for the year, and (ii) does not, because of this subsection, reduce the debtor’s net capital loss for a preceding taxation year. Reductions with respect to depreciable property (5) Where a commercial obligation issued by a debtor is settled at any time, the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied, in such manner as is designated by the debtor in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time, to reduce immediately after that time the following amounts: (a) the capital cost to the debtor of a depreciable property that is owned by the debtor immediately after that time; and (b) the undepreciated capital cost to the debtor of depreciable property of a prescribed class immediately after that time. Restriction with respect to depreciable property (6) Where a commercial obligation issued by a debtor is settled at any time, (a) an amount may be applied under subsection 80(5) to reduce, immediately after that time, the capital cost to the debtor of a depreciable property of a prescribed class only to the extent that (i) the undepreciated capital cost to th