Income Tax Act — I-3.3 20
ber resource property, of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm’s length, and the proceeds of disposition include an agreement for the sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm’s length, there may be deducted in computing the income of the taxpayer for the subsequent year an amount equal to the lesser of (a) the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim, and (b) the amount determined under paragraph 20(5)(a) less the amount, if any, by which the proceeds of disposition of the depreciable property exceed the capital cost to the taxpayer of that property. Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of disposition (5.1) Where a timber resource property of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm’s length, and the proceeds of disposition include an agreement for sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm’s length, there may be deducted in computing the income of the taxpayer for the subsequent year the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim. Special reserves (6) Where an amount is deductible in computing income for a taxation year under paragraph 20(1)(m) as a reserve in respect of (a) articles of food or drink that it is reasonably anticipated will have to be delivered after the end of the year, or (b) transportation that it is reasonably anticipated will have to be provided after the end of the year, there shall be substituted for the amount determined under that paragraph an amount not exceeding the total of amounts included in computing the taxpayer’s income from the business for the year that were received or receivable (depending on the method regularly followed by the taxpayer in computing the taxpayer’s profit) in the year in respect of (c) articles of food or drink not delivered before the end of the year, or (d) transportation not provided before the end of the year, as the case may be. Where para. (1)(m) does not apply (7) Paragraph 20(1)(m) does not apply to allow a deduction (a) as a reserve in respect of guarantees, indemnities or warranties; (b) in computing the income of a taxpayer for a taxation year from a business in any case where the taxpayer’s income for the year from that business is computed in accordance with the method authorized by subsection 28(1); (c) as a reserve in respect of insurance, except that in computing an insurer’s income for a taxation year from an insurance business, other than a life insurance business, carried on by it, there may be deducted as a policy reserve any amount that the insurer claims not exceeding the amount prescribed in respect of the insurer for the year; or (d) as a reserve in respect of a reclamation obligation. No deduction in respect of property in certain circumstances (8) Paragraph 20(1)(n) does not apply to allow a deduction in computing the income of a taxpayer for a taxation year from a business in respect of a property sold in the course of the business if (a) the taxpayer, at the end of the year or at any time in the immediately following taxation year, (i) was exempt from tax under any provision of this Part, or (ii) was not resident in Canada and did not carry on the business in Canada; (b) the sale occurred more than