Income Tax Act — I-3.3 39
, if section 3 were read in the manner described in paragraph (1)(a), be included in computing the taxpayer’s income for the year or any other taxation year), if any, is deemed to be a capital gain of the taxpayer for the year from the disposition of currency other than Canadian currency; and (b) the amount of the loss (to the extent of the amount of that loss that would not, if section 3 were read in the manner described in paragraph (1)(a), be deductible in computing the taxpayer’s income for the year or any other taxation year), if any, is deemed to be a capital loss of the taxpayer for the year from the disposition of currency other than Canadian currency. Deemed gain — parked obligation (2.01) For the purposes of subsection (2), if a debt obligation owing by a taxpayer (referred to in this subsection and subsections (2.02) and (2.03) as the debtor ) is denominated in a foreign currency and the debt obligation has become a parked obligation at a particular time, the debtor is deemed at that time to have made the gain, if any, that the debtor otherwise would have made if it had paid an amount at the particular time in satisfaction of the debt obligation equal to (a) if the debt obligation has become a parked obligation at the particular time as a result of its acquisition by the holder of the debt obligation, the amount paid by the holder to acquire the debt obligation; and (b) in any other case, the fair market value of the debt obligation at the particular time. Parked obligation (2.02) For the purposes of subsection (2.01), a debt obligation owing by a debtor is a parked obligation at a particular time if (a) both (i) at that time, the holder of the debt obligation does not deal at arm’s length with the debtor or, if the debtor is a corporation, has a significant interest in the debtor, and (ii) at any previous time, a person who held the debt obligation dealt at arm’s length with the debtor and, where the debtor is a corporation, did not have a significant interest in the debtor; and (b) it can reasonably be considered that one of the main purposes of the transaction or event or series of transactions or events that resulted in the debt obligation meeting the condition in subparagraph (a)(i) is to avoid the application of subsection (2). Interpretation (2.03) For the purposes of subsections (2.01) and (2.02), (a) paragraph 80(2)(j) applies for the purpose of determining whether two persons are related to each other or whether any person is controlled by any other person; and (b) paragraph 80.01(2)(b) applies for the purpose of determining whether a person has a significant interest in a corporation. Upstream loan — transitional set-off (2.1) If at any time a corporation resident in Canada or a partnership of which such a corporation is a member (such corporation or partnership referred to in this subsection and subsections (2.2) and (2.3) as the “borrowing party”) has received a loan from, or become indebted to, a creditor that is a foreign affiliate (referred to in this subsection and subsections (2.2) and (2.3) as a “creditor affiliate”) of a qualifying entity, or that is a partnership (referred to in this subsection and subsection (2.3) as a “creditor partnership”) of which such an affiliate is a member, and the loan or indebtedness is at a later time repaid, in whole or in part, then the amount of the borrowing party’s capital gain or capital loss determined, in the absence of this subsection, under subsection (2) in respect of the repayment, is to be reduced (a) in the case of a capital gain (i) if the creditor is a creditor affiliate, by an amount, not exceeding that capital gain, that is equal to twice the amount that would — in the absence of subparagraph 40(2)(g)(ii) and paragraph 95(2)(g.04) and on the assumption that the creditor affiliate’s capital loss in respect of the repayment of the loan or indebtedness were a capital gain of the creditor affiliate, the creditor affiliate had no other income, loss, capi