Income Tax Act — I-3.3 261
the taxpayer would have sustained a loss — or, if the pre-reversion debt was not on account of capital, would have had a loss — (referred to in this paragraph as the “hypothetical loss”) attributable to a fluctuation in the value of a currency if the pre-reversion debt had been settled by the taxpayer’s having paid, immediately before the end of its last functional currency year, an amount equal to the principal amount (expressed in the debt currency) at that time, the taxpayer is deemed to sustain or to have a loss in respect of the particular payment for the reversionary year equal to the amount that would be determined by the formula in paragraph (a) if the reference in the description of A in that paragraph to “hypothetical gain or income” were read as a reference to “hypothetical loss”. Debt parking — foreign exchange (14.1) For the purposes of determining a taxpayer’s gain under subsection (14), if at a particular time a pre-reversion debt of the taxpayer (referred to in this subsection as the debtor ) that is denominated in a currency other than the taxpayer’s elected functional currency becomes a parked obligation (within the meaning assigned by subsection 39(2.02)), the debtor is deemed to have made, at that time, a particular payment on account of the principal amount of the debt equal to (a) if the debt has become a parked obligation at that particular time as a result of its acquisition by the holder of the debt, the portion of the amount paid by the holder to acquire the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time; and (b) in any other case, the portion of the fair market value of the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time. Amounts carried back (15) For the purposes of determining the amount that may be deducted, in respect of a particular amount that arises in a taxation year (referred to in this subsection as the “later year”) of a taxpayer, under section 111 or subsection 126(2), 127(5), 181.1(4) or 190.1(3) in computing the taxpayer’s Canadian tax results for a taxation year (referred to in this subsection as the “current year”) that ended before the later year, and for the purposes of determining the amount by which the amount included under subsection 91(1) for the current year is reduced because of a reduction referred to in paragraph 152(6.1)(b) in respect of the later year, (a) if the later year is a functional currency year of the taxpayer and the current year is a Canadian currency year of the taxpayer, the following amounts (expressed in the taxpayer’s elected functional currency) are to be converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year: (i) the particular amount, and (ii) any amount so deducted in computing the taxpayer’s Canadian tax results for another functional currency year of the taxpayer; (b) if the later year is a reversionary year of the taxpayer and the current year is a functional currency year of the taxpayer, (i) the following amounts (expressed in Canadian currency) are to be converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last functional currency year: (A) the particular amount, and (B) any amount so deducted in computing the taxpayer’s Canadian tax results for another reversionary year of the taxpayer, and (ii) any amount (expressed in Canadian currency) so deducted in computing the taxpayer’s Canadian tax results for a Canadian currency year of the taxpayer is to be converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year; (c) if the later year is a reversionary year of the taxpayer and the current year is a Canadian currency year of the taxpayer, the following amounts (expressed in the taxpayer’s elected functional cur