Income Tax Act — I-3.3 90
ginal debtor”) owes an amount in respect of a loan or indebtedness (referred to in this subsection and subsection (6.11) as the “pre-transaction loan”) to another person or partnership (referred to in this subsection and subsection (6.11) as the “original creditor”); (b) the pre-transaction loan was, at the time it was made or entered into, a loan or indebtedness that is described in subsection (6); and (c) in the course of an amalgamation, a merger, a winding-up or a liquidation and dissolution, (i) the amount owing in respect of the pre-transaction loan becomes owing at that time by another person or partnership (the amount owing after that time and the other person or partnership are referred to in subsection (6.11) as the “post-transaction loan payable” and the “new debtor”, respectively), (ii) the amount owing in respect of the pre-transaction loan becomes owing at that time to another person or partnership (the amount owing after that time and the other person or partnership are referred to in subsection (6.11) as the “post-transaction loan receivable” and the “new creditor”, respectively), or (iii) the taxpayer in respect of which the original debtor was a specified debtor at the time referred to in paragraph (b) (A) ceases to exist, or (B) merges with one or more corporations to form one corporate entity (referred to in subsection (6.11) as the “new corporation”). Upstream loan continuity — reorganizations (6.11) If this subsection applies at any time, for the purposes of subsections (6) and (7) to (15) and 39(2.1) and (2.2) and paragraph 95(2)(g.04), (a) if the condition in subparagraph (6.1)(c)(i) is met, (i) the post-transaction loan payable is deemed to be the same loan or indebtedness as the pre-transaction loan, and (ii) the new debtor is deemed to be same debtor as, and a continuation of, the original debtor; (b) if the condition in subparagraph (6.1)(c)(ii) is met, (i) the post-transaction loan receivable is deemed to be the same loan or indebtedness as the pre-transaction loan, and (ii) the new creditor is deemed to be same creditor as, and a continuation of, the original creditor; (c) if the condition in clause (6.1)(c)(iii)(A) is met, (i) subject to subparagraph (ii), each entity that held an equity interest in the taxpayer immediately before the winding-up (referred to in this paragraph as a “successor entity”) is deemed to be the same entity as, and a continuation of, the taxpayer, and (ii) for the purposes of applying subsection (13) and the description of A in subsection (14), an amount is deemed, in respect of a loan or indebtedness, to have been included under subsection (6) in computing the income of each successor entity equal to (A) if the taxpayer is a partnership, the amount that may reasonably be considered to be the successor entity’s share (determined in a manner consistent with the determination of the successor entity’s share of the income of the partnership under subsection 96(1) for the taxpayer’s final fiscal period) of the specified amount that was required to be included in computing the income of the taxpayer under subsection (6) in respect of the loan or indebtedness, and (B) in any other case, the proportion of the specified amount included in computing the taxpayer’s income under subsection (6), in respect of the loan or indebtedness, that the fair market value of the successor entity’s equity interest in the taxpayer, immediately before the distribution of the taxpayer’s assets on the winding-up, is of the total fair market value of all equity interests in the taxpayer at that time; and (d) if the condition in clause (6.1)(c)(iii)(B) is met, the new corporation is deemed to be the same corporation as, and a continuation of, the taxpayer. Back-to-back loans (7) For the purposes of this subsection and subsections (6), (8) to (15) and 39(2.1) and (2.2) and paragraph 95(2)(g.04), if at any time a person or partnership (referred to in this subsection as the “intermediate lender”) makes a