Income Tax Act — I-3.3 12.5
Definitions 12.5 (1) The definitions in this section apply for the purposes of this section and section 20.4. base year of an insurer means the insurer’s taxation year that immediately precedes its transition year. ( année de base ) insurance business of an insurer, is an insurance business carried on by the insurer, other than a life insurance business. ( entreprise d’assurance ) reserve transition amount of an insurer, in respect of an insurance business carried on by it in Canada in its transition year, is the positive or negative amount determined by the formula A – B where A is the maximum amount that the insurer would be permitted to claim under paragraph 20(7)(c) (and that would be prescribed by section 1400 of the Regulations for the purpose of paragraph 20(7)(c)) as a policy reserve for its base year in respect of its insurance policies if (a) the generally accepted accounting principles that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and (b) section 1400 of the Regulations were read in respect of the insurer’s base year as it reads in respect of its transition year; and B is the maximum amount that the insurer is permitted to claim under paragraph 20(7)(c) as a policy reserve for its base year. ( montant transitoire ) transition year of an insurer means the insurer’s first taxation year that begins after September 2006. ( année transitoire ) Transition year income inclusion (2) There shall be included in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada in the transition year, the positive amount, if any, of the insurer’s reserve transition amount in respect of that insurance business. Transition year income deduction reversal (3) If an amount has been deducted under subsection 20.4(2) in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada, there shall be included in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula A × B/1825 where A is the amount deducted under subsection 20.4(2) in computing the insurer’s income for the transition year from that insurance business; and B is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year. Winding-up (4) If an insurer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent carries on an insurance business, in applying subsections (3) and 20.4(3) in computing the incomes of the insurer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the insurer were distributed to the parent on the winding-up, (a) the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the insurer in respect of (i) any amount included under subsection (2) or deducted under subsection 20.4(2) in computing the insurer’s income from an insurance business for its transition year, (ii) any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the insurer’s income from an insurance business for a taxation year of the insurer that begins before the start day, and (iii) any amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the start day or a subsequent day and on which the parent carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the insurer’s income from an insurance business; and (b) the ins