I-3 - Taxation Act

Section 346.4 Disposition versions

2006-03-01

346.4. There may be deducted as a reserve in computing the income for a taxation year of a taxpayer that is a corporation or trust resident in Canada throughout the year or a person not resident in Canada who carried on business through a fixed place of business in Canada at the end of the year such amount as the taxpayer claims not exceeding the least of

(a)  the amount determined by the formula

A − B;

(b)  the aggregate of

i.  4/5 of the amount that would be determined under subparagraph a of the second paragraph in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for any preceding taxation year,

ii.  3/5 of the amount that would be determined under subparagraph a of the second paragraph in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for the year or any preceding taxation year other than the last preceding taxation year,

iii.  2/5 of the amount that would be determined under subparagraph a of the second paragraph in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for the year or any preceding taxation year, other than the second last preceding taxation year, and

iv.  1/5 of the amount that would be determined under subparagraph a of the second paragraph in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for the year or any preceding taxation year, other than the third last preceding taxation year; and

(c)  where the taxpayer is a corporation that commences to wind up in the year, otherwise than in circumstances to which the rules in sections 556 to 564.1 and 565 apply, zero.

For the purposes of the formula in subparagraph a of the first paragraph,

(a)  A is the amount by which the aggregate of all amounts each of which is an amount that, because of the application of sections 485 to 485.18 to a commercial obligation, within the meaning assigned by section 485, issued by the taxpayer, or a partnership of which the taxpayer was a member, was included under section 485.13 in computing the income of the taxpayer for the year or a preceding taxation year or of the partnership for a fiscal period that ends in that year or preceding year, to the extent that, where the amount was included in computing income of a partnership, it relates to the taxpayer’s share of that income, exceeds the aggregate of

i.  all amounts deducted under paragraph a of section 485.15 in computing the taxpayer’s income for the year or a preceding taxation year, and

ii.  all amounts deducted under section 346.2 in computing the taxpayer’s income for the year or a preceding taxation year; and

(b)  B is the amount by which the amount determined under subparagraph a in respect of the taxpayer for the year exceeds the aggregate of

i.  the amount that would be determined under subparagraph a in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for any preceding taxation year, and

ii.  the amount included under section 313.8 in computing the taxpayer’s income for the year.

1996, c. 39, s. 106; 1997, c. 3, s. 71.