Income Tax Act — I-3.3 80.01
l debt obligation issued by a debtor that is payable to a person (other than a person with whom the debtor is related at the particular time) becomes unenforceable in a court of competent jurisdiction because of a statutory limitation period and the obligation would, but for this subsection, not have been settled or extinguished at the particular time, for the purpose of applying the provisions of this Act to the debtor, the obligation shall be deemed to have been settled at the particular time. Subsequent payments in satisfaction of debt (10) Where a commercial debt obligation issued by a debtor is first deemed by subsection (8) or (9) to have been settled at a particular time, at a subsequent time a payment is made by the debtor of an amount in satisfaction of the principal amount of the obligation and it cannot reasonably be considered that one of the reasons the obligation became a parked obligation or became unenforceable, as the case may be, before the subsequent time was to have this subsection apply to the payment, in computing the debtor’s income for the taxation year (in this subsection referred to as the “subsequent year”) that includes the subsequent time from the source in connection with which the obligation was issued, there may be deducted the amount determined by the formula 0.5(A - B) - C where A is the amount of the payment, B is the amount, if any, by which (a) the principal amount of the obligation exceeds the total of (b) all amounts each of which is a forgiven amount at any time (i) in the period that began at the particular time and ended immediately before the subsequent time, and (ii) at which a particular portion of the obligation is deemed by subsection (8) or (9) to be settled in respect of the particular portion, and (c) all amounts paid in satisfaction of the principal amount of the obligation in the period that began at the particular time and ended immediately before the subsequent time, and C is the amount, if any, by which the total of (a) all amounts deducted under section 61.3 in computing the debtor’s income for the subsequent year or a preceding taxation year, (b) all amounts added because of subsection 80(13) in computing the debtor’s income for the subsequent year or a preceding taxation year in respect of a settlement under subsection (8) or (9) in a period during which the debtor was exempt from tax under this Part on its taxable income, and (c) all amounts added because of subsection 80(13) in computing the debtor’s income for the subsequent year or a preceding taxation year in respect of a settlement under subsection (8) or (9) in a period during which the debtor was non-resident (other than any of those amounts added in computing the debtor’s taxable income or taxable income earned in Canada) exceeds the total of (d) the amount, if any, deducted because of paragraph 37(1)(f.1) in determining the balance determined under subsection 37(1) in respect of the debtor immediately after the subsequent year, and (e) all amounts by which the amount deductible under this subsection in respect of a payment made by the debtor before the subsequent time in computing the debtor’s income for the subsequent year or a preceding year has been reduced because of this description. Foreign currency gains and losses (11) Where an obligation issued by a debtor is denominated in a currency (other than the Canadian currency) and the obligation is deemed by subsection (8) or (9) to have been settled, those subsections do not apply for the purpose of determining any gain or loss of the debtor on the settlement that is attributable to a fluctuation in the value of the currency relative to the value of Canadian currency. [NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 27; 2001, c. 17, s. 59; 2009, c. 2, s. 17