Income Tax Act — I-3.3 18
e year if no amount had been paid before the end of the year in satisfaction of the obligation to pay interest on the debt obligation in respect of the year and if the amount outstanding at each particular time in the year that is after 1991 on account of the principal amount of the debt obligation were the amount, if any, by which (i) the amount outstanding at the particular time on account of the principal amount of the debt obligation exceeds the total of (ii) all amounts each of which is an amount paid before the particular time in satisfaction, in whole or in part, of the obligation to pay interest on the debt obligation in respect of a period or part thereof that is after 1991, after the beginning of the year, and after the time the amount was so paid (other than a period or part thereof that is in the year where no such amount was paid before the particular time in respect of a period, or part of a period, that is after the end of the year), and (iii) the amount, if any, by which (A) the total of all amounts of interest payable on the debt obligation (determined without reference to this subsection) by the borrower in respect of taxation years ending after 1991 and before the year (to the extent that the interest does not exceed a reasonable amount) exceeds (B) the total of all amounts of interest deemed by this subsection to have been payable on the debt obligation by the borrower in respect of taxation years ending before the year, and (b) the amount, if any, by which (i) the total of all amounts of interest payable on the debt obligation (determined without reference to this subsection) by the borrower in respect of the year or taxation years ending after 1991 and before the year (to the extent that the interest does not exceed a reasonable amount) exceeds (ii) the total of all amounts of interest deemed by this subsection to have been payable on the debt obligation by the borrower in respect of taxation years ending before the year. Interest on debt obligations (9.3) Where at any time in a taxation year of a borrower a debt obligation of the borrower is settled or extinguished or the holder of the obligation acquires or reacquires property of the borrower in circumstances in which section 79 applies in respect of the debt obligation and the total of (a) all amounts each of which is an amount paid at or before that time in satisfaction, in whole or in part, of the obligation to pay interest on the debt obligation in respect of a period or part of a period that is after that time, and (b) all amounts of interest payable on the debt obligation (determined without reference to subsection 18(9.2)) by the borrower in respect of taxation years ending after 1991 and before that time, or in respect of periods, or parts of periods, that are in such years and before that time (to the extent that the interest does not exceed a reasonable amount), exceeds the total of (c) all amounts of interest deemed by subsection 18(9.2) to have been payable on the debt obligation by the borrower in respect of taxation years ending before that time, and (d) the amount of interest that would be deemed by subsection 18(9.2) to have been payable on the debt obligation by the borrower in respect of the year if the year had ended immediately before that time, (which excess is in this subsection referred to as the “excess amount”), the following rules apply: (e) for the purpose of applying section 79 in respect of the borrower, the principal amount at that time of the debt obligation shall be deemed to be equal to the amount, if any, by which (i) the principal amount at that time of the debt obligation exceeds (ii) the excess amount, and (f) the excess amount shall be deducted at that time in computing the forgiven amount in respect of the obligation (within the meaning assigned by subsection 80(1)). Idem (9.4) Where an amount is paid at any time by a person or partnership in respect of a debt obligation of a borrower (a) as, on account of, in lieu