Income Tax Act

Marginal note:Definitions

• 142.2 (1) In this section and sections 142.3 to 142.7,

  financial institution

  institution financière

  financial institution at any time means

  • (a) a corporation that is, at that time,

    • (i) a corporation referred to in any of paragraphs (a) to (e.1) of the definition restricted financial institution in subsection 248(1),

    • (ii) an investment dealer, or

    • (iii) a corporation controlled by one or more persons or partnerships each of which is a financial institution at that time, other than a corporation the control of which was acquired by reason of the default of a debtor where it is reasonable to consider that control is being retained solely for the purpose of minimizing any losses in respect of the debtor’s default, and

  • (b) a trust or partnership more than 50% of the fair market value of all interests in which are held at that time by one or more financial institutions,

  but does not include

  • (c) a corporation that is, at that time,

    • (i) an investment corporation,

    • (ii) a mortgage investment corporation,

    • (iii) a mutual fund corporation, or

    • (iv) a deposit insurance corporation (as defined in subsection 137.1(5)),

  • (d) a trust that is a mutual fund trust at that time, nor

  • (e) a prescribed person or partnership; (institution financière)

  investment dealer

  courtier en valeurs mobilières

  investment dealer at any time means a corporation that is, at that time, a registered securities dealer; (courtier en valeurs mobilières)

  mark-to-market property

  bien évalué à la valeur du marché

  mark-to-market property of a taxpayer for a taxation year means property held by the taxpayer in the year that is

  • (a) a share,

  • (b) where the taxpayer is not an investment dealer, a specified debt obligation that

    • (i) was carried at fair market value in the taxpayer’s financial statements

      • (A) for the year, where the taxpayer held the obligation at the end of the year, and

      • (B) for each preceding taxation year that ended after the taxpayer acquired the obligation, or

    • (ii) was acquired and disposed of in the year, where it is reasonable to expect that the obligation would have been carried in the taxpayer’s financial statements for the year at fair market value if the taxpayer had not disposed of the obligation,

    other than a specified debt obligation of the taxpayer that was (or would have been) carried at fair market value

    • (iii) solely because its fair market value was less than its cost to the taxpayer, or

    • (iv) because of a default of the debtor, and

  • (c) where the taxpayer is an investment dealer, a specified debt obligation,

  but does not include

  • (d) a share of a corporation in which the taxpayer has a significant interest at any time in the year, nor

  • (e) a prescribed property; (bien évalué à la valeur du marché)

  specified debt obligation

  titre de créance déterminé

  specified debt obligation of a taxpayer means the interest held by the taxpayer in

  • (a) a loan, bond, debenture, mortgage, hypothecary claim, note, agreement of sale or any other similar indebtedness, or

  • (b) a debt obligation, where the taxpayer purchased the interest,

  other than an interest in

  • (c) an income bond, an income debenture, a small business development bond, a small business bond or a prescribed property, or

  • (d) an instrument issued by or made with a person to whom the taxpayer is related or with whom the taxpayer does not otherwise deal at arm’s length, or in which the taxpayer has a significant interest. (titre de créance déterminé)

• Marginal note:Significant interest

  (2) For the purpose of subsection 142.2(5) and the definition mark-to-market property in subsection 142.2(1), a taxpayer has a significant interest in a corporation at any time if

  • (a) the taxpayer is related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the corporation at that time; or

  • (b) the taxpayer holds, at that time,

    • (i) shares of the corporation that give the taxpayer 10% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation, and

    • (ii) shares of the corporation having a fair market value of 10% or more of the fair market value of all the issued shares of the corporation.

• Marginal note:Rules re significant interest

  (3) For the purpose of determining under subsection 142.2(2) whether a taxpayer has a significant interest in a corporation at any time,

  • (a) the taxpayer shall be deemed to hold each share that is held at that time by a person or partnership to whom the taxpayer is related (otherwise than because of a right referred to in paragraph 251(5)(b));

  • (b) a share of the corporation acquired by the taxpayer by reason of the default of a debtor shall be disregarded where it is reasonable to consider that the share is being retained for the purpose of minimizing any losses in respect of the debtor’s default; and

  • (c) a share of the corporation that is prescribed in respect of the taxpayer shall be disregarded.

• Extension of meaning of related

  (4) For the purposes of this subsection and subsections 142.2(2) and (3), a person or partnership shall be deemed to be related to a person or partnership where they would be related if, for the purpose of section 251,

  • (a) every partnership and trust were considered to be a corporation;

  • (b) subject to paragraph 142.2(4)(c), all decisions relating to the conduct of a trust were made by majority vote of the beneficiaries of the trust, with each beneficiary having, at any time, a number of votes equal to the number determined by the formula

    100 × A/B

    where

    A

    is the fair market value at that time of the beneficiary’s beneficial interest in the trust, and

    B

    is the total of all amounts each of which is the fair market value at that time of a beneficial interest in the trust; and

  • (c) where the amount that would be determined for B in paragraph 142.2(4)(b) in respect of a trust is nil, the trust were considered not to be controlled by any person, partnership or group each member of which is a person or partnership.

• Marginal note:Significant interest — transition

  (5) For the purpose of the definition mark-to-market property in subsection 142.2(1), where

  • (a) on October 31, 1994, a taxpayer whose 1994 taxation year ends after October 30, 1994 held a share of a corporation in which the taxpayer did not have a significant interest at any time in the year, and

  • (b) at any time after the end of the year and before May 1995, the taxpayer has a significant interest in the corporation,

  the taxpayer has a significant interest in the corporation in the year and in any subsequent taxation year ending before the earliest time referred to in paragraph 142.2(5)(b).