Income Tax Act — I-3.3 80.01
es 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 (ii) the SIFT wind-up entity elects, in prescribed form on or before the SIFT wind-up entity’s filing-due date for the taxation year that includes the particular time, to have paragraph (b) apply; (b) if this paragraph applies, the amount paid at the particular time in satisfaction of the principal amount of the subsidiary trust’s obligation is deemed to be equal to the amount that would be the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time if that adjusted cost base included amounts added in computing the SIFT wind-up entity’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the SIFT wind-up entity has not deducted any amounts as bad debts in respect of that unpaid interest; and (c) for the purposes of applying section 80 to the subsidiary trust’s obligation, the subsidiary trust’s obligation is deemed to have been settled immediately before the time that is immediately before the distribution. Specified obligation in relation to debt parking (6) For the purpose of subsection (7), an obligation issued by a debtor is, at a particular time, a specified obligation of the debtor where (a) at any previous time (other than a time before the last time, if any, the obligation became a parked obligation before the particular time), (i) a person who owned the obligation (A) dealt at arm’s length with the debtor, and (B) where the debtor is a corporation, did not have a significant interest in the debtor, or (ii) the obligation was acquired by the holder of the obligation from another person who was, at the time of that acquisition, not related to the holder or related to the holder only because of paragraph 251(5)(b); or (b) the obligation is deemed by subsection 50(1) to be reacquired at the particular time. Parked obligation (7) For the purposes of this subsection and subsections (6), (8) and (10), (a) an obligation issued by a debtor is a “parked obligation” at any time where at that time (i) the obligation is a specified obligation of the debtor, and (ii) the holder of the obligation (A) does not deal at arm’s length with the debtor, or (B) where the debtor is a corporation and the holder acquired the obligation after July 12, 1994 (otherwise than pursuant to an agreement in writing entered into on or before July 12, 1994), has a significant interest in the debtor; and (b) an obligation that is, at any time, acquired or reacquired in circumstances to which subparagraph (6)(a)(ii) or paragraph (6)(b) applies shall, if the obligation is a parked obligation immediately after that time, be deemed to have become a parked obligation at that time. Deemed settlement after debt parking (8) Where at any particular time after February 21, 1994 a commercial debt obligation that was issued by a debtor becomes a parked obligation (otherwise than pursuant to an agreement in writing entered into before February 22, 1994) and the specified cost at the particular time to the holder of the obligation is less than 80% of the principal amount of the obligation, for the purpose of applying the provisions of this Act to the debtor (a) the obligation shall be deemed to have been settled at the particular time; and (b) the forgiven amount at the particular time in respect of the obligation shall be determined as if the debtor had paid an amount at the particular time in satisfaction of the principal amount of the obligation equal to that specified cost. Statute-barred debt (9) Where at any particular time after February 21, 1994 a commercial debt obligation issued by a debtor that is payable to a person (other than a person with whom the debtor is related at the particular time) becomes unenforceable in a court of competent jurisdiction