Income Tax Act — I-3.3 20
iness-income tax, and (iv) where the taxpayer is a corporation, is not an amount that can reasonably be regarded as having been paid in respect of income from a share of the capital stock of a foreign affiliate of the taxpayer, and (b) the portion of the taxpayer’s income for the year from the business that is attributable to the property for the period or to a related transaction (as defined in subsection 126(7)). Deductions under Subdivision I (13) In computing the income for a taxation year of a taxpayer resident in Canada, there may be deducted such amounts as are provided by Subdivision I. Accrued bond interest (14) Where, by virtue of an assignment or other transfer of a debt obligation, other than an income bond or an income debenture, the transferee has become entitled to an amount of interest that accrued on the debt obligation for a period commencing before the time of transfer and ending at that time that is not payable until after that time, that amount (a) shall be included as interest in computing the transferor’s income for the transferor’s taxation year in which the transfer occurred, except to the extent that it was otherwise included in computing the transferor’s income for the year or a preceding taxation year; and (b) may be deducted in computing the transferee’s income for a taxation year to the extent that the amount was included as interest in computing the transferee’s income for the year. Interest on debt obligation (14.1) Where a person who has issued a debt obligation, other than an income bond or an income debenture, is obligated to pay an amount that is stipulated to be interest on that debt obligation in respect of a period before its issue (in this subsection referred to as the “unearned interest amount”) and it is reasonable to consider that the person to whom the debt obligation was issued paid to the issuer consideration for the debt obligation that included an amount in respect of the unearned interest amount, (a) for the purposes of subsection 20(14) and section 12, the issue of the debt obligation shall be deemed to be an assignment of the debt obligation from the issuer, as transferor, to the person to whom the obligation was issued, as transferee, and an amount equal to the unearned interest amount shall be deemed to be interest that accrued on the obligation for a period commencing before the issue and ending at the time of issue; and (b) notwithstanding paragraph 20(14.1)(a) or any other provision of this Act, no amount that can reasonably be considered to be an amount in respect of the unearned interest amount shall be deducted or included in computing the income of the issuer. Sales of linked notes (14.2) For the purposes of subsection (14), the amount determined by the following formula is deemed to be interest that accrued on an assigned or otherwise transferred debt obligation — that is, at any time, described in paragraph 7000(1)(d) of the Income Tax Regulations — to which the transferee has become entitled to for a period commencing before the time of the transfer and ending at that particular time that is not payable until after that particular time: A − B where A is the price for which the debt obligation was assigned or otherwise transferred at the particular time; and B is the amount by which the price (converted to Canadian currency using the exchange rate prevailing at the particular time, if the debt obligation is denominated in a foreign currency) for which the debt obligation was issued exceeds the portion, if any, of the principal amount of the debt obligation (converted to Canadian currency using the exchange rate prevailing at the particular time, if the debt obligation is denominated in a foreign currency) that was repaid by the issuer on or before the particular time. (15) [Repealed, 2003, c. 28, s. 3] Terminal loss (16) Notwithstanding paragraphs 18(1)(a), 18(1)(b) and 18(1)(h), where at the end of a taxation year, (a) the total of all amounts used to determine A t