Income Tax Act — I-3.3 80.01
y’s obligation or the parent’s obligation, as the case may be, (c) where that payment is less than the amount that would have been the cost amount to the parent or subsidiary of the subsidiary’s obligation or the parent’s obligation immediately before the particular time if the definition cost amount in subsection 248(1) were read without reference to paragraph (e) of that definition and the parent so elects in a prescribed form on or before the day on or before which the parent is required to file a return of income pursuant to section 150 for the taxation year that includes the particular time, the amount paid at that time in satisfaction of the principal amount of the subsidiary’s obligation or the parent’s obligation shall be deemed to be equal to the amount that would be the cost amount to the parent or the subsidiary, as the case may be, of the subsidiary’s obligation or the parent’s obligation immediately before the particular time if (i) the definition cost amount in subsection 248(1) were read without reference to paragraph (e) of that definition, and (ii) that cost amount included amounts added in computing the parent’s income or the subsidiary’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the parent or the subsidiary has not deducted any amounts as bad debts in respect of that unpaid interest, and (d) for the purposes of applying section 80 to the subsidiary’s obligation, where property is distributed at any time in circumstances to which paragraph 88(1)(a) or 88(1)(b) applies and the subsidiary’s obligation is settled as a consequence of the distribution, the subsidiary’s obligation shall be deemed to have been settled immediately before the time that is immediately before the time of the distribution and not at any later time. Deemed settlement on winding-up (5) Where there is a winding-up of a subsidiary to which the rules in subsection 88(1) apply and, as a consequence of the winding-up, a distress preferred share issued by the subsidiary and owned by the parent (or a distress preferred share issued by the parent and owned by the subsidiary) is settled at any time without any payment of an amount or by the payment of an amount that is less than the principal amount of the share, (a) where the payment was less than the adjusted cost base of the share to the parent or the subsidiary, as the case may be, immediately before that time, for the purposes of applying the provisions of this Act to the issuer of the share, the amount paid at that time in satisfaction of the principal amount of the share shall be deemed to be equal to its adjusted cost base to the parent or to the subsidiary, as the case may be; and (b) for the purposes of applying section 80 to the share, where property is distributed at any time in circumstances to which paragraph 88(1)(a) or 88(1)(b) applies and the share is settled as a consequence of the distribution, the share shall be deemed to have been settled immediately before the time that is immediately before the time of the distribution and not at any later time. Deemed settlement on SIFT trust wind-up event (5.1) If a trust that is a SIFT wind-up entity is the only beneficiary under another trust (in this subsection referred to as the “subsidiary trust”), and a capital property that is a debt or other obligation (in this subsection referred to as the “subsidiary trust’s obligation”) of the subsidiary trust to pay an amount to the SIFT wind-up entity is, as a consequence of a distribution from the subsidiary trust that is a SIFT trust wind-up event, settled at a particular time without any payment of an amount or by the payment of an amount that is less than the principal amount of the subsidiary trust’s obligation (a) paragraph (b) applies if (i) the payment is less than the amount that would have been the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time, and (i