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Income Tax Regulations (C.R.C., c. 945)

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Regulations are current to 2022-09-22 and last amended on 2022-06-23. Previous Versions

PART XCFinancial Institutions — Prescribed Entities and Properties

Prescribed Person not a Financial Institution

 For the purposes of paragraph (e) of the definition financial institution in subsection 142.2(1) of the Act, the following are prescribed persons:

  • (a) the Business Development Bank of Canada;

  • (b) BDC Capital Inc.; and

  • (c) a trust, at any particular time, if at that particular time

    • (i) the trust is a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a) of the Act),

    • (ii) the trust is deemed, under paragraph 138.1(1)(a) of the Act, to have been created at a time that is not more than two years before that particular time, and

    • (iii) the cost of the trustee’s interest (as determined by paragraph 138.1(1)(c) and (d) of the Act) in the trust does not exceed $5,000,000.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2009, c. 2, s. 118
  • 2014, c. 20, s. 37

Prescribed Property not Mark-to-Market Property

  •  (1) In this section, qualified small business corporation, at any time, means a corporation in respect of which the following conditions are satisfied at that time:

    • (a) the corporation is a Canadian-controlled private corporation;

    • (b) the corporation either is an eligible corporation (as defined in subsection 5100(1)) or would be an eligible corporation if the definition eligible corporation in subsection 5100(1) were read without reference to its paragraph (e);

    • (c) the carrying value of the total assets of the corporation and all corporations related to it (determined in accordance with generally accepted accounting principles on a consolidated or combined basis, where applicable) does not exceed $50,000,000; and

    • (d) the number of employees of the corporation and all corporations related to it does not exceed 500.

  • (2) For the purpose of paragraph (e) of the definition excluded property in subsection 142.2(1) of the Act, a share of the capital stock of a corporation is a prescribed property of a taxpayer if

    • (a) immediately after the time at which the taxpayer acquired the share, the corporation was a qualified small business corporation, and

      • (i) the corporation continued to be a qualified small business corporation for one year after that time, or

      • (ii) the taxpayer could not reasonably expect at that time that the corporation would cease to be a qualified small business corporation within one year after that time; or

    • (b) the share was issued to the taxpayer in exchange for one or more shares of the capital stock of the corporation that were, at the time of the exchange, prescribed property of the taxpayer under this subsection.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2009, c. 2, s. 118

Prescribed Property not Mark-to-Market Property

  •  (1) For the purposes of paragraph (e) of the definition excluded property in subsection 142.2(1) of the Act, and of subparagraph 142.6(4)(a)(ii) of the Act, a debt obligation held by a bank is a prescribed property of the bank if the obligation is

    • (a) an exposure to a designated country (within the meaning assigned by section 8006);

    • (b) a United Mexican States Collateralized Par Bond due 2019; or

    • (c) a United Mexican States Collateralized Discount Bond due 2019.

  • (2) For the purpose of paragraph (e) of the definition excluded property in subsection 142.2(1) of the Act, a share is a prescribed property of a taxpayer for a taxation year if

    • (a) the share is a lending asset of the taxpayer in the year; or

    • (b) the share was, immediately after its issuance, a share described in paragraph (e) of the definition term preferred share in subsection 248(1) of the Act, and the share would, at any time in the year, be a term preferred share if

      • (i) that definition were read without ref- erence to the portion following paragraph (b), and

      • (ii) where the share was issued or acquired on or before June 28, 1982, it were issued or acquired after that day.

  • (3) For the purpose of paragraph (e) of the definition excluded property in subsection 142.2(1) of the Act, a share of the capital stock of a corporation that is held by a credit union is a prescribed property of the credit union for a taxation year if, throughout the period (referred to in this subsection as the “holding period”) in that taxation year during which the credit union holds the share

    • (a) the corporation is a credit union; or

    • (b) the following conditions are satisfied:

      • (i) credit unions hold shares of the corporation that

        • (A) give those credit unions at least 50% of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation, and

        • (B) have a fair market value of at least 50% of the fair market value of all the issued shares of the corporation,

      • (ii) the corporation is not controlled, directly or indirectly in any manner whatever, by any person that is not a credit union, and

      • (iii) the corporation would not be controlled by a person that is not a credit union if each share of the corporation that is not owned at any time in the holding period by a credit union were owned, at that time, by the person.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2009, c. 2, s. 118

Prescribed Payment Card Corporation Share not Mark-to-Market Property

 For the purpose of paragraph (b) of the definition excluded property in subsection 142.2(1) of the Act, a prescribed payment card corporation share of a taxpayer at any time means a share of the capital stock of a particular corporation if, at that time,

  • (a) the particular corporation is any one of the following

    • (i) MasterCard International Incorporated,

    • (ii) MasterCard Incorporated, or

    • (iii) Visa Inc.; and

  • (b) the share

    • (i) is of a class of shares that is not listed on a stock exchange,

    • (ii) is not convertible into or exchangeable for a share of the class of the capital stock of a corporation that is listed on a stock exchange, and

    • (iii) was issued by the particular corporation to the taxpayer or to a person related to the taxpayer.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2009, c. 2, s. 118

 [Repealed, 2009, c. 2, s. 118]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2009, c. 2, s. 118

Significant Interest in a Corporation

 For the purpose of paragraph 142.2(3)(c) of the Act, a share described in paragraph 9002(2)(b) is prescribed in respect of all taxpayers.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2009, c. 2, s. 118

Financing Arrangement not a Specified Debt Obligation

 For the purpose of paragraph (c) of the definition specified debt obligation in subsection 142.2(1) of the Act, a property is a prescribed property throughout a taxation year if

  • (a) the property is a direct financing lease, or any other financing arrangement, of a taxpayer that is reported as a loan in the taxpayer’s financial statements for the year prepared in accordance with generally accepted accounting principles; and

  • (b) in computing the taxpayer’s income for the year, an amount is deductible under paragraph 20(1)(a) of the Act in respect of the property that is the subject of the arrangement.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/99-91, s. 8
  • 2009, c. 2, s. 118

Prescribed Non-reporting Financial Institution

 For the purposes of the definition non-reporting financial institution in subsection 270(1) of the Act, the following entities are prescribed:

  • (a) a labour-sponsored venture capital corporation as prescribed in section 6701;

  • (b) a registered retirement savings plan;

  • (c) a registered retirement income fund;

  • (d) a pooled registered pension plan;

  • (e) a deferred profit sharing plan;

  • (f) a registered disability savings plan;

  • (g) a registered education savings plan;

  • (h) a registered pension plan;

  • (i) a trust governed by a registered pension plan;

  • (j) a trust described in paragraph 149(1)(o.4) of the Act, if all of the interests in the trust as a beneficiary are held by one or more registered pension plans;

  • (k) a corporation described in clause 149(1)(o.1)(i)(A) or subparagraph 149(1)(o.1)(ii) or (o.2)(i) of the Act;

  • (l) a corporation described in any of subparagraphs 149(1)(o.2)(ii) to (iii) of the Act, if all of the shares of the corporation are held by

    • (i) one or more registered pension plans or trusts governed by registered pension plans,

    • (ii) one or more trusts described in paragraph (j), or

    • (iii) one or more corporations described in this paragraph or paragraph (k);

  • (m) a trust, if all of the interests in the trust as a beneficiary are held by one or more plans, trusts or corporations described in paragraph (i), (k) or (l);

  • (n) a central cooperative credit society, as defined in section 2 of the Cooperative Credit Associations Act and whose accounts are maintained for member financial institutions; and

  • (o) a TFSA.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2016, c. 12, s. 83

Prescribed Excluded Accounts

 For the purposes of the definition excluded account in subsection 270(1) of the Act, the following accounts are prescribed:

  • (a) a registered retirement savings plan;

  • (b) a registered retirement income fund;

  • (c) a pooled registered pension plans;

  • (d) a registered pension plan;

  • (e) a registered disability savings plan;

  • (f) a registered education savings plan;

  • (g) a deferred profit sharing plan;

  • (h) a net income stabilization account, including a NISA Fund No. 2;

  • (i) an eligible funeral arrangement;

  • (j) a dormant account if the balance or value of the account does not exceed 1,000 USD; and

  • (k) a TFSA.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2016, c. 12, s. 83

PART XCIFinancial Institutions — Income from Specified Debt Obligations

Interpretation

Marginal note:Definitions

 The following definitions apply in this Part.

fixed payment obligation

fixed payment obligation, of a taxpayer, means a specified debt obligation under which

  • (a) the amount and timing of each payment (other than a fee or similar payment or an amount payable because of a default by the debtor) to be made by the debtor were fixed when the taxpayer acquired the obligation and have not been changed; and

  • (b) all payments are to be made in the same currency. (titre à paiements fixes)

primary currency

primary currency, of a specified debt obligation, means

  • (a) the currency with which the obligation is primarily connected; and

  • (b) if there is no such currency, Canadian currency. (monnaie principale)

tax basis

tax basis, of a specified debt obligation at any time to a taxpayer, has the meaning assigned by subsection 142.4(1) of the Act. (montant de base)

total return

total return, of a taxpayer from a fixed payment obligation, means the amount, measured in the primary currency of the obligation, by which

  • (a) the total of all amounts each of which is the amount of a payment (other than a fee or similar payment) required to be made by the debtor under the obligation after its acquisition by the taxpayer

exceeds

  • (b) the cost to the taxpayer of the obligation. (rendement total)

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2009-222, s. 7

Prescribed Inclusions and Deductions

Marginal note:Inclusion

  •  (1) For the purpose of paragraph 142.3(1)(a) of the Act, where a taxpayer holds a specified debt obligation at any time in a taxation year, the amount prescribed in respect of the obligation for the year is the total of

    • (a) the taxpayer’s accrued return from the obligation for the year,

    • (b) if the taxpayer’s accrual adjustment determined under section 9102 in respect of the obligation for the year is greater than nil, the amount of the adjustment, and

    • (c) if a foreign exchange adjustment is determined under section 9104 in respect of the obligation for the year and is greater than nil, the amount of the adjustment.

  • Marginal note:Deduction

    (2) For the purpose of paragraph 142.3(1)(b) of the Act, where a taxpayer holds a specified debt obligation at any time in a taxation year, the amount prescribed in respect of the obligation is the total of

    • (a) if the taxpayer’s accrual adjustment determined under section 9102 in respect of the obligation for the year is less than nil, the absolute value of the amount of the adjustment, and

    • (b) if a foreign exchange adjustment is determined under section 9104 in respect of the obligation for the year and is less than nil, the absolute value of the amount of the adjustment.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2009-222, s. 7

General Accrual Rules

Marginal note:Fixed payment obligation not in default

  •  (1) For the purpose of paragraph 9101(1)(a), a taxpayer’s accrued return for a taxation year from a fixed payment obligation, under which each payment required to be made before the end of the year was made by the debtor when it was required to be made, shall be determined in accordance with the following rules:

    • (a) determine, in the primary currency of the obligation, the portion of the taxpayer’s total return from the obligation that is allocated to each day in the year using

      • (i) the level-yield method described in subsection (2), or

      • (ii) any other reasonable method that is substantially similar to the level-yield method;

    • (b) if the primary currency of the obligation is not Canadian currency, translate to Canadian currency the amount allocated to each day in the year, using a reasonable method of translation; and

    • (c) determine the total of all amounts each of which is the Canadian currency amount allocated to a day, in the year, at the beginning of which the taxpayer holds the obligation.

  • Marginal note:Level-yield method

    (2) For the purpose of subsection (1), the level-yield method for allocating a taxpayer’s total return from a fixed payment obligation is the method that allocates, to each particular day in the period that begins on the day following the day on which the taxpayer acquired the obligation and that ends on the day on which the obligation matures, the amount determined by the formula

    (A + B - C) × D

    where

    A
    is the cost of the obligation to the taxpayer (expressed in the primary currency of the obligation);
    B
    is the total of all amounts each of which is the portion of the taxpayer’s total return from the obligation that is allocated to a day before the particular day;
    C
    is the total of all payments required to be made under the obligation after it was acquired by the taxpayer and before the particular day; and
    D
    is the rate of interest per day that, if used in computing the present value (as of the end of the day on which the taxpayer acquired the obligation and based on daily compounding) of all payments to be made under the obligation after it was acquired by the taxpayer, produces a present value equal to the cost to the taxpayer of the obligation (expressed in the primary currency of the obligation).
  • Marginal note:Other specified debt obligations

    (3) For the purpose of paragraph 9101(1)(a), a taxpayer’s accrued return for a taxation year from a specified debt obligation, other than an obligation to which subsection (1) applies, shall be determined

    • (a) using a reasonable method that,

      • (i) taking into account the extent to which the obligation differs from fixed payment obligations, is consistent with the principles implicit in the methods that can be used under subsection (1) for fixed payment obligations, and

      • (ii) is in accordance with generally accepted accounting practice for the measurement of profit from debt obligations; and

    • (b) on the basis of reasonable assumptions with respect to the timing and amount of any payments to be made by the debtor under the obligation that are not fixed in their timing or amount (expressed in the primary currency of the obligation).

  • Marginal note:Accrual adjustment nil

    (4) For the purposes of paragraphs 9101(1)(b) and (2)(a), if subsection 142.3(1) of the Act applies to a taxpayer for a particular taxation year in respect of a specified debt obligation and either the subsection did not apply in respect of the obligation for the taxpayer’s immediately preceding taxation year or the taxpayer did not own the obligation at the end of that immediately preceding taxation year, the taxpayer’s accrual adjustment in respect of the obligation for the particular taxation year is nil.

  • Marginal note:Accrual adjustment

    (5) For the purposes of paragraphs 9101(1)(b) and (2)(a), if subsection (4) does not apply to determine a taxpayer’s accrual adjustment in respect of a specified debt obligation for a particular taxation year, the taxpayer’s accrual adjustment is the positive or negative amount determined by the formula

    A - B

    where

    A
    is the total of all amounts each of which is the amount that would be the taxpayer’s accrued return from the obligation for a taxation year, before the particular taxation year, for which subsection 142.3(1) of the Act applied to the taxpayer in respect of the obligation if the accrued return were redetermined on the basis of
    • (a) the information available at the end of the particular taxation year, and

    • (b) the assumptions, if any, with respect to the timing and amount of payments to be made under the obligation after the particular taxation year that were used for the purpose of determining the taxpayer’s accrued return from the obligation for the particular taxation year; and

    B
    is the total of
    • (a) the amount included under paragraph 9101(1)(a) as the taxpayer’s accrued return from the obligation for the taxation year immediately preceding the particular taxation year, and

    • (b) if the taxpayer’s accrual adjustment in respect of the obligation for that immediately preceding taxation year was determined under this subsection, the value of A for the purpose of determining that accrual adjustment.

  • Marginal note:Special cases and transition

    (6) The rules in this section for determining accrued returns and accrual adjustments are subject to section 9103.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2009-222, s. 7
 
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