I-3, r. 1 - Regulation respecting the Taxation Act

Section 140.1r4 Disposition versions

2012-09-01

140.1R4. For the purposes of subparagraph ii of subparagraph a of the first paragraph of section 140.1R2, the rules in the second paragraph apply where a loan or lending asset of a person related to a taxpayer, referred to in this section as the “holder”,

(a)  was reported by the taxpayer for the year to the Superintendent of Financial Institutions of Canada, pursuant to the guidelines established by the Superintendent, as an exposure to a designated country;

(b)  was acquired by the holder, or by another person related to the taxpayer, after 16 August 1990, as part of a series of transactions or events in which the taxpayer or a person related to the taxpayer disposed of a loan or lending asset that

i.  is, for the taxation year immediately preceding the year during which it was disposed of, a loan or lending asset that the taxpayer reported to the Superintendent of Financial Institutions of Canada, pursuant to the guidelines established by the Superintendent, as an exposure to a designated country, and

ii.  is a loan or lending asset in respect of which the loss that would result from the disposition thereof would be a loss in respect of which the taxpayer or a person related to the taxpayer could claim a deduction under Part I of the Act; and

(c)  had an amortized cost to the holder, immediately after the time of its acquisition by the holder, of less than 55% of its principal amount.

The rules referred to in the first paragraph are the following:

(a)  the loan or lending asset is deemed

i.  to be a loan or lending asset of the taxpayer at the end of the year,

ii.  to be a loan or lending asset of the taxpayer acquired by the taxpayer at the time of its acquisition by the holder, and

iii.  to have an amortized cost to the taxpayer, at any time, equal to its amortized cost to the holder at that time; and

(b)  the amounts deducted in respect of the loan or lending asset under section 141 of the Act or included under paragraph i of section 87 of the Act in computing the income of the holder for a particular year are deemed to have been so deducted or included, as the case may be, in computing the taxpayer’s income for the year during which the particular year ends.

s. 140.1R4; O.C. 366-94, s. 17; O.C. 1466-98, s. 126; O.C. 134-2009, s. 1.