Income Tax Act — I-3.3 261
r’s elected functional currency, to Canadian currency using the relevant spot rate for the day on which those amounts are due; (e) if a particular amount that is determined in the taxpayer’s elected functional currency is deemed to be paid at any time on account of an amount payable by the taxpayer under this Act for the particular taxation year, the particular amount is to be converted to Canadian currency using the relevant spot rate for the day that includes that time; (f) the following amounts are to be determined in the taxpayer’s elected functional currency and converted to Canadian currency using the relevant spot rate for the taxpayer’s balance-due day for the particular taxation year: (i) amounts described in paragraph 163(1)(a) in respect of the particular taxation year, and (ii) the amount of the taxpayer’s taxable capital employed in Canada, for the purpose of applying section 235; and (g) for greater certainty, all amounts payable by the taxpayer under this Act in respect of the particular taxation year are to be paid in Canadian currency. Application of subsections (7) and (8) to reversionary years (12) In applying this Act to a reversionary year of a taxpayer, subsections (7) and (8) are to be read as if the references in those subsections to (a) “Canadian currency” were references to “the taxpayer’s elected functional currency”; (b) “Canadian currency year” were references to “functional currency year”; (c) “functional currency year” were references to “reversionary year”; (d) “first functional currency year” were references to “first reversionary year”; (e) “last Canadian currency year” were references to “last functional currency year”; (f) “pre-transition debt” were references to “pre-reversion debt”; and (g) “the taxpayer’s elected functional currency” were references to “Canadian currency”. Pre-reversion debts (13) A pre-reversion debt of a taxpayer that is denominated in a currency other than Canadian currency is deemed to have been issued immediately before the taxpayer’s first reversionary year for the purposes of (a) determining the amount of the taxpayer’s income, gain or loss, for a reversionary year of the taxpayer (other than an amount that subsection (14) deems to arise), that is attributable to a fluctuation in the value of a currency; and (b) applying paragraph 80(2)(k) in respect of a reversionary year of the taxpayer. Deferred amounts relating to pre-reversion debts (14) If a taxpayer has, at any time in a reversionary year of the taxpayer, made a particular payment on account of the principal amount of a pre-reversion debt of the taxpayer: (a) where the taxpayer would have made a gain — or, if the pre-reversion debt was not on account of capital, would have had income — (referred to in this paragraph as the “hypothetical gain or income”) 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 currency in which the pre-reversion debt is denominated, which currency is referred to in this subsection as the “debt currency”) at that time, the taxpayer is deemed to make a gain or to have income, as the case may be, for the reversionary year equal to the amount determined by the formula A × B/C where A is the amount of the hypothetical gain or income converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last functional currency year, B is the amount of the particular payment (expressed in the debt currency), and C is the principal amount of the pre-reversion debt at the beginning of the taxpayer’s first reversionary year (expressed in the debt currency); and (b) where 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