I-3 - Taxation Act

Section 484.2 Disposition versions

2006-03-01

484.2. Where a particular property is surrendered at any time by a person, in this section referred to as the “debtor”, to a creditor of the debtor, the debtor’s proceeds of disposition of the particular property is deemed to be the amount determined by the formula

(A + B + C + D + E − F) × G / H.

For the purposes of the formula in the first paragraph,

(a)  A is the aggregate of all specified amounts of debts of the debtor that are in respect of properties surrendered at that time by the debtor to the creditor and that are owing immediately before that time to the creditor;

(b)  B is the aggregate of all amounts each of which is a specified amount of a debt that is owed by the debtor immediately before that time to a person, other than the creditor, to the extent that the amount ceases to be owing by the debtor as a consequence of properties being surrendered at that time by the debtor to the creditor;

(c)  C is the aggregate of all amounts each of which is a specified amount of a particular debt that is owed by the debtor immediately before that time to a person, other than a specified amount included in the amount determined under subparagraph a or b as a consequence of properties being surrendered at that time by the debtor to the creditor, where

i.  any property surrendered at that time by the debtor to the creditor was security for

(1)  the particular debt, and

(2)  another debt that is owed by the debtor immediately before that time to the creditor, and

ii.  the other debt is subordinate to the particular debt in respect of the property referred to in subparagraph i;

(d)  D is

i.  where a specified amount of a debt owed by the debtor immediately before that time to a person, other than the creditor, ceases, as a consequence of the surrender at that time of properties by the debtor to the creditor, to be secured by all properties owned by the debtor immediately before that time, the lesser of

(1)  the amount by which the aggregate of all amounts each of which is such a specified amount exceeds the portion of that aggregate included in any amount determined under subparagraph b or c as a consequence of properties being surrendered at that time by the debtor to the creditor, and

(2)  the amount by which the total cost amount to the debtor of all properties surrendered at that time by the debtor to the creditor exceeds the amount that would, but for this subparagraph and subparagraph f, be determined under this section as a consequence of the surrender, and

ii.  in any other case, nil;

(e)  E is

i.  where the property is surrendered at that time by the debtor in circumstances in which paragraph c of section 422 would, but for this section, apply and the fair market value of all properties surrendered at that time by the debtor to the creditor exceeds the amount that would, but for this subparagraph and subparagraph f, be determined under this section as a consequence of the surrender, that excess, and

ii.  in any other case, nil;

(f)  F is the aggregate of all amounts each of which is the lesser of

i.  the portion of a particular specified amount of a particular debt included in the amount determined under any of subparagraphs a to d in computing the debtor’s proceeds of disposition of the particular property, and

ii.  the aggregate of

(1)  all amounts included under section 37 or 111 in computing the income of any person because the particular debt was settled, or deemed by section 485.25 to have been settled, at or before the end of the taxation year that includes that time,

(2)  all amounts renounced under section 381, 406, 417 or 418.13, as it read in respect of the renunciation, by the debtor in respect of the particular debt,

(3)  all amounts each of which is a forgiven amount, within the meaning assigned by section 485, in respect of the debt at a previous time that the particular debt was deemed by section 485.25 to have been settled,

(4)  where the particular debt is an excluded obligation, within the meaning assigned by section 485, the particular specified amount, and

(5)  the amount described in the third paragraph;

(g)  G is the fair market value at that time of the particular property; and

(h)  H is the fair market value at that time of all properties surrendered by the debtor to the creditor at that time.

The amount to which subparagraph 5 of subparagraph ii of subparagraph f of the second paragraph refers is the lesser of

(a)  the unpaid interest accrued to that time on the particular debt; and

(b)  the aggregate of

i.  the amount by which the aggregate of all amounts included because of sections 487.1 to 487.5.4 in computing the debtor’s income for the taxation year that includes that time or for a preceding taxation year in respect of interest on the particular debt exceeds the aggregate of all amounts paid before that time on account of interest on the particular debt, and

ii.  such portion of that unpaid interest as would, if it were paid, be included in the amount determined under subparagraph a of the third paragraph of section 194 in respect of the debtor.

1996, c. 39, s. 139; 1998, c. 16, s. 251.