Income Tax Act — I-3.3 80.04
Definitions 80.04 (1) In this section, commercial debt obligation , commercial obligation , debtor , directed person , eligible Canadian partnership , forgiven amount and person have the meanings assigned by subsection 80(1). Eligible transferee (2) For the purpose of this section, an eligible transferee of a debtor at any time is a directed person at that time in respect of the debtor or a taxable Canadian corporation or eligible Canadian partnership related (otherwise than because of a right referred to in paragraph 251(5)(b)) at that time to the debtor. Application (3) Paragraphs 80(2)(a), 80(2)(b), 80(2)(j), 80(2)(l) and 80(2)(n) apply for the purpose of this section. Agreement respecting transfer of forgiven amount (4) Where (a) a particular commercial obligation (other than an obligation deemed by paragraph (e) to have been issued) issued by a debtor is settled at a particular time, (b) amounts have been designated by the debtor under subsections 80(5) to 80(10) to the maximum extent permitted in respect of the settlement of the particular obligation at the particular time, (c) the debtor and an eligible transferee of the debtor at the particular time file under this section an agreement between them in respect of that settlement, and (d) an amount is specified in that agreement the following rules apply: (e) except for the purposes of subsection 80(11), the transferee shall be deemed to have issued a commercial debt obligation that was settled at the particular time, (f) the specified amount shall be deemed to be the forgiven amount at the particular time in respect of the obligation referred to in paragraph (e), (g) subject to paragraph (h), the obligation referred to in paragraph (e) shall be deemed to have been issued at the same time (in paragraph (h) referred to as the “time of issue”) at which, and in the same circumstances in which, the particular obligation was issued, (h) if the transferee is a taxpayer that is subject to a loss restriction event after the time of issue and the transferee and the debtor were, if the transferee is a corporation, not related to each other  —  or, if the transferee is a trust, not affiliated with each other  —  immediately before the loss restriction event, (i) the obligation referred to in paragraph (e) is deemed to have been issued after the loss restriction event, and (ii) subparagraph (b)(ii) of the definition relevant loss balance in subsection 80(1), paragraph (f) of the definition successor pool in that subsection and paragraph (b) of the definition unrecognized loss in that subsection do not apply in respect of the loss restriction event, (i) the source in connection with which the obligation referred to in paragraph (e) was issued shall be deemed to be the source in connection with which the particular obligation was issued, and (j) for the purposes of sections 61.3 and 61.4, the amount included under subsection 80(13) in computing the income of the eligible transferee in respect of the settlement of the obligation referred to in paragraph (e) or deducted under paragraph 80(15)(a) in respect of such income shall be deemed to be nil. Consideration for agreement (5) For the purposes of this Part, where property is acquired at any time by an eligible transferee as consideration for entering into an agreement with a debtor that is filed under this section (a) where the property was owned by the debtor immediately before that time, (i) the debtor shall be deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, and (ii) no amount may be deducted in computing the debtor’s income as a consequence of the transfer of the property, except any amount arising as a consequence of the application of subparagraph (i); (b) the cost at which the property was acquired by the eligible transferee at that time shall be deemed to be equal to the fair market value of the property at that time; and (c) the eligible transferee