Income Tax Act — I-3.3 79.1
ty immediately before the previous time. Cost of seized properties for creditor (6) Where a particular property is seized at any time in a taxation year by a creditor in respect of one or more debts, the cost to the creditor of the particular property shall be deemed to be the amount, if any, by which the total of (a) that proportion of the total specified costs immediately before that time to the creditor of those debts that (i) the fair market value of the particular property immediately before that time is of (ii) the fair market value of all properties immediately before that time that were seized by the creditor at that time in respect of those debts, and (b) all amounts each of which is an outlay or expense made or incurred, or a specified amount at that time of a debt that is assumed, by the creditor at or before that time to protect the creditor’s interest, or for civil law the creditor’s right, in the particular property, except to the extent the outlay or expense (i) was included in the cost to the creditor of property other than the particular property, (ii) was included before that time in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts of the creditor, or (iii) was deductible in computing the creditor’s income for the year or a preceding taxation year exceeds (c) the amount, if any, claimed or deducted under paragraph 20(1)(n) or subparagraph 40(1)(a)(iii) or 44(1)(e)(iii), as the case may be, in respect of the particular property in computing the creditor’s income or capital gain for the preceding taxation year or the amount by which the proceeds of disposition of the creditor of the particular property are reduced because of subsection 79.1(5) in respect of a disposition of the particular property by the creditor occurring before that time and in the year. Treatment of debt (7) Where a property is seized at any time in a taxation year by a creditor in respect of a particular debt, (a) the creditor shall be deemed to have disposed of the particular debt at that time; (b) the amount received on account of the particular debt as a consequence of the seizure shall be deemed (i) to be received at that time, and (ii) to be equal to (A) where the particular debt is capital property, the adjusted cost base to the creditor of the particular debt, and (B) in any other case, the cost amount to the creditor of the particular debt; (c) where any portion of the particular debt is outstanding immediately after that time, the creditor shall be deemed to have reacquired that portion immediately after that time at a cost equal to (i) where the particular debt is capital property, nil, and (ii) in any other case, the amount, if any, by which (A) the cost amount to the creditor of the particular debt exceeds (B) the specified cost to the creditor of the particular debt; and (d) where no portion of the particular debt is outstanding immediately after that time and the particular debt is not capital property, the creditor may deduct as a bad debt in computing the creditor’s income for the year the amount described in subparagraph 79.1(7)(c)(ii) in respect of the seizure. Claims for debts (8) Where a property is seized at any time in a taxation year by a creditor in respect of a debt, no amount in respect of the debt (a) is deductible in computing the creditor’s income for the year or a subsequent taxation year as a bad, doubtful or impaired debt; or (b) shall be included after that time in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts of the creditor as a bad, doubtful or impaired debt. [NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 26; 1998, c. 19, s. 110; 2001, c. 17, s. 57; 2013, c. 34, s. 117