Income Tax Act — I-3.3 80.02
Definitions 80.02 (1) In this section, commercial debt obligation , commercial obligation , distress preferred share and person have the meanings assigned by subsection 80(1). General rules for distress preferred shares (2) For the purpose of applying the provisions of this Act to an issuer of a distress preferred share, (a) the principal amount, at any time, of the share shall be deemed to be the amount (determined at that time) for which the share was issued; (b) the amount for which the share was issued shall, at any time, be deemed to be the amount, if any, by which the total of (i) the amount for which the share was issued, determined without reference to this paragraph, and (ii) all amounts by which the paid-up capital in respect of the share increased after the share was issued and before that time exceeds (iii) the total of all amounts each of which is an amount paid before that time on a reduction of the paid-up capital in respect of the share, except to the extent that the amount is deemed by section 84 to have been paid as a dividend; (c) the share shall be deemed to be settled at such time as it is redeemed, acquired or cancelled by the issuer; and (d) a payment in satisfaction of the principal amount of the share is any payment made on a reduction of the paid-up capital in respect of the share to the extent that the payment would be proceeds of disposition of the share within the meaning that would be assigned by the definition proceeds of disposition in section 54 if that definition were read without reference to paragraph (j). Substitution of distress preferred share for debt (3) Where any part of the consideration given by a corporation to another person for the settlement or extinguishment at any time of a commercial debt obligation that was issued by the corporation and owned immediately before that time by the other person consists of a distress preferred share issued by the corporation to the other person, (a) for the purposes of section 80, the amount paid at that time in satisfaction of the principal amount of the obligation because of the issue of that share shall be deemed to be equal to the lesser of (i) the principal amount of the obligation, and (ii) the amount by which the paid-up capital in respect of the class of shares that include that share increases because of the issue of that share; and (b) for the purpose of subparagraph (2)(b)(i), the amount for which the share was issued shall be deemed to be equal to the amount deemed by paragraph (a) to have been paid at that time. Substitution of commercial debt obligation for distress preferred share (4) Where any part of the consideration given by a corporation to another person for the settlement at any time of a distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of a commercial debt obligation issued by the corporation to the other person, for the purposes of section 80 (a) the amount paid at that time in satisfaction of the principal amount of the share because of the issue of that obligation shall be deemed to be equal to the principal amount of the obligation; and (b) the amount for which the obligation was issued shall be deemed to be equal to its principal amount. Substitution of distress preferred share for other distress preferred share (5) Where any part of the consideration given by a corporation to another person for the settlement at any time of a particular distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of another distress preferred share issued by the corporation to the other person, for the purposes of section 80 (a) the amount paid at that time in satisfaction of the principal amount of the particular share because of the issue of the other share shall be deemed to be equal to the amount by which the paid-up capital in respect of the class of shares that includes the other share