,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,debtor's ,ga9 on ,settle;t ( ,debt
,numb]3 ,,it-#bic;,r
,date3 ,july #af1 #aigi
,ref];e3 ,sec;n #hj 7al sec;ns #i & #gh
  & subsec;n #bf7#a.a7 (! ,9come ,tax
  ,applic,n ,rules1 #aiga 7,,itar77

  ,? bullet9 replaces & c.els ,9t]pret,n
,bullet9 ,,it-#bic dat$ ,febru>y #bc1
#aigf4 ,*anges & a4i;ns >e 9dicat$ 0a
v]tical l9e4

#a4 ,": a debt or o!r oblig,n is settl$
  af #aiga o!rwise ?an 0pay;t 9 full (!
  pr9cipal am.t 0! debtor1 ! debtor's
  ga9 is subject 6! rules set \ 9 sec;n
  #hj un.s ! exclu.ns li/$ 9 #ae 2l

                                      #a
              ,,it-#bic;,r           a#a
  apply4 ,"u ^! rules ! ga9 is appli$
  6reduce1 9 ! foll[+ ord]1 ! debtor's
  7a7 non-capital losses1
  7b7 applica# 6#aihc & subsequ5t tax,n
    ye>s1 f>m losses1
  7c7 net capital losses1 &
  7d7 re/rict$ f>m losses1
  
  (! ye>s prec$+ ! ye> ( settle;t1 6!
  ext5t t ^! losses wd o!rwise 2
  deducti# 9 -put+ ! debtor's taxa#
  9come =! ye> ( settle;t or a subsequ5t
  ye>4 ,any rema9+ por;n (! ga9 is
  appli$1 9 ! mann] prescrib$ 9 "p ,,liv
  (! ,regul,ns1 6! capital co/ (
  deprecia# prop]ty &! adju/$ co/ base (
  capital prop]ty4 ,s9ce x is nei a
  deprecia# prop]ty nor a capital
  prop]ty1 an eligi# capital prop]ty is
  n a6ect$ 0! applic,n (! provi.ns (
  sec;n #hj4
#b4 ,": ! debt or oblig,n 0 \t/&+ at
  ,janu>y #a1 #aigb1 ! provi.ns (!
  ,,itar #bf7#a.a7 e6ectively         #b
              ,,it-#bic;,r           b#a
  exclude ! applic,n (! rules describ$ 9
  #a abv 6! am.t 0: ! debt or oblig,n _h
  dim9i%$ 9 value 2f #aigb4
#c4 ,if any "p (! ga9 rema9s af !
  proc$ure describ$ 9 #a abv is foll[$1
  "! >e no provi.ns 9 ! ,act : d1l
  specific,y ) x4 ,h["e1 dep5d+ on !
  circum/.es1 x is possi# t subsec;n
  #bde7#b7 79direct pay;ts or transf]s7
  mi<t apply 6! rema9+ unappli$ "p (!
  ga9 if n negat$ 0subsec;n #bde7#c74
#d4 ,sec;n #hj may apply 6any type (
  debt or oblig,n1 9clud+ a trade debt4
--------------------------------------#b
     ,"t ( ,applic,n 7p>agraph #e7
    
#e4 ,any adju/;t requir$ "u sec;n #hj is
  made at ! "t dur+ ! tax,n ye> :5 !
  debt or oblig,n is settl$ or ext+ui%$4
  ,ev5 :5 a settle;t is e6ect$ at ! 5d
  (a tax,n ye>1 any result+ adju/;ts
  6losses ( prec$+ ye>s >e 3sid]$ 6take
  place 2f any am.t 9 respect ( ^?
                                      #c
              ,,it-#bic;,r           a#b
  losses is appli$ 6reduce taxa# 9come
  (! tax,n ye>4

       ,"t ( ,settle;t 7p>agraphs
                 #f-i7
    
#f4 ,=a debt or oblig,n 6be 8settl$ or
  ext+ui%$0 all liabil;y = pay;t m/ 2
  t]m9at$4 ,pay;t1 c.ell,n1 set-(f1
  sub/itu;n ( debtors & rel1se >e
  examples ( "s possi# m1ns ( settle;t4
  ,a debt or oblig,n is n settl$ ": a
  cr$itor ab&ons 8 "r 65=ce pay;t or
  2comes /atute-b>r$ f 5=c+ 8 "r 6pay;t4
  ,h["e1 a settle;t does o3urs ":1
  0/atute1 ! debtor's actual liabil;y
  6pay is ext+ui%$ af a specifi$ p]iod (
  "t has elaps$4
#g4 ,": ! t]ms (! debt require ! debtor
  6make "p pay;ts ( specifi$ am.ts at
  specifi$ "ts1 sec;n #hj may apply ev5
  ?\< ! am.t settl$ or ext+ui%$
  repres5ts only "p (! total debt4 ,=
  example1 a taxpay] assumes a        #d
              ,,it-#bic;,r           b#b
  mortgage = 4#bj1jjj 9 #aigc on : he is
  6pay 4#ajj mon?ly 9/al;ts ( pr9cipal4
  ,9 #aigc & #aigd ! taxpay] makes all !
  requir$ 4#ajj mon?ly pay;ts4 ,= #aige1
  2c (! taxpay]'s f9ancial di6iculties1
  ! mortgagee agrees 6=give 4#ej mon?ly
  7i4e4 he c.els ! 4#ajj debt on receipt
  ( 4#ej mon?ly74 ,s9ce ea* oblig,n 6pay
  4#ajj has be5 fully settl$ = 4#ej 9
  #aige1 ! taxpay] is subject 6sec;n #hj
  9 t ye>4
#h4 ,": 9/al;t pay;ts >e n requir$ "u !
  t]ms (! debt agree;t1 ! provi.ns (
  sec;n #hj >e appli$ only :5 a f9al
  settle;t is a3ept$ 0! cr$itor4 ,:5 an
  >range;t =! settle;t ( s* a debt is
  5t]$ 9to1 f9al settle;t does n usu,y
  take place until ! debtor has -pletely
  4*>g$ 8 -mit;t "u ! >range;t4 ,=
  example1 a taxpay] 9curs a debt (
  4#djj1jjj 9 #aigb on : no 9/al;t
  pay;ts >e requir$1 b : is 6be pd 9
  full 2f #aigf4 ,9 #aigc ! "pies agree
  6an >range;t ":by ! debtor makes    #e
              ,,it-#bic;,r           c#b
  a pay;t ( 4#bjj1jjj immly & "utakes
  6make a fur!r pay;t ( 4#ajj1jjj 9
  #aige at : "t ! 4#djj1jjj debt w 2
  ext+ui%$4 ,applic,n (! rules describ$
  9 #a abv does n o3ur 9 #aigc1 b 9
  #aige :5 ! debtor fulfills 8 oblig,n
  6pay 4#ajj1jjj4 ,? view is n applica#
  if a r1sona# evalu,n (! "picul> facts
  9dicate t a cr$itor a3ept$ z full
  settle;t a "pial pay;t &a new oblig,n
  f ! debtor4 ,if1 9 ! =ego+ example1 !
  >range;t requir$ an imm pay;t (
  4#bii1jjj 9 #aigc & an "utak+ 0!
  debtor 6pay 4#a1jjj 9 #aiii1 ! rules
  describ$ 9 #a abv wd 2 appli$ 9 #aigc4
--------------------------------------#c
#i4 ,": s"eal debts >e \t/&+ &! =give;s
  relates 6specific debts1 ! -;ts 9 #g &
  #h abv >e applica# 9 respect ( ea*
  debt4 ,h["e1 ": ! am.t [+ 3si/s (
  s"eal debts &! =give;s is n relat$ 6!
  "picul> sep>ate debts 7e4g4 ! "pial
  =give;s (a curr5t a3.t paya#71 any sum
  pd 0! debtor on 8 a3.t subsequ5t    #f
              ,,it-#bic;,r           a#c
  6! =give;s is 3sid]$ 6be a pay;t on !
  bal.e (! a3.t rema9+ at ! "t (! "pial
  =give;s4

,example

         ,/ate;t ( ,a3.t ,paya#
            6,a4,b4,c4 ,ltd4
    
,transcrib]'s note3
  7,! foll[+ 0 set-up 9 five columns
  ,column #a3 ,date
  ,column #b3 ,descrip;n
  ,column #c3 ,decr1se
  ,column #d3 ,9cr1se
  ,column #e3 ,bal.e7
  
,date3 #aigc ,janu>y #a
  ,descrip;n3 ,bal.e =w>d
  ,bal.e3 4#ajj1jjj
,date3 #b
  ,descrip;n3 ,=give;s grant$
  ,decr1se3 4#bj1jjj
  ,bal.e3 4#hj1jjj                    #g
              ,,it-#bic;,r           b#c
,date3 #ca
  ,descrip;n3 ,pay;t
  ,decr1se3 4#bj1jjj
  ,bal.e3 4#fj1jjj
,date3 ,may #ca
  ,descrip;n3 ,pay;t
  ,decr1se3 4#bj1jjj
  ,bal.e3 4#dj1jjj
,date3 ,june #cj
  ,descrip;n3 ,m]*&ise pur*as$
  ,9cr1se3 4#dj1jjj
  ,bal.e3 4#hj1jjj
,date3 ,septemb] #cj
  ,descrip;n3 ,pay;t
  ,decr1se3 4#bj1jjj
  ,bal.e3 4#fj1jjj
  
,date3 #aigd ,janu>y #ae
  ,descrip;n3 ,m]*&ise pur*as$
  ,9cr1se3 4#bj1jjj
  ,bal.e3 4#hj1jjj
  

                                      #h
              ,,it-#bic;,r           c#c
,date3 #ca
  ,descrip;n3 ,pay;t
  ,decr1se3 4#bj1jjj
  ,bal.e3 4#fj1jjj
,date3 ,may #ca
  ,descrip;n3 ,pay;t
  ,decr1se3 4#bj1jjj
  ,bal.e3 4#dj1jjj
  
  ,9 a3ord.e )! =ego+ posi;n1 ! provi.ns
  ( sec;n #hj >e appli$ on ,janu>y #ca1
  #aigd 9 respect (! =give;s record$ on
  ,janu>y #b1 #aigc4

         ,m1n+ ( 8,pay;t 0,hm0
           7p>agraphs #aj-ad7
    
#aj4 ,! applic,n ( sec;n #hj is n
  re/rict$ 6=giv5 debts or oblig,ns1 b
  ext5ds to
  7a7 debts or oblig,ns t >e settl$ or
    ext+ui%$ 0any m1ns o!r ?an 0pay;t1 &
  
                                      #i
              ,,it-#bic;,r           d#c
  7b7 debts or oblig,ns t >e settl$
    0pay;t made 0p]sons o!r ?an !
    debtor4
--------------------------------------#d
#aa4 ,! ^w 8pay;t0 is giv5 xs usual m1n+
  & acly 9cludes pay;t 9 k9d4 ,": a
  debtor corpor,n issues xs [n %>es 6a
  cr$itor 9 settle;t (a debt1 ! provi.ns
  ( sec;n #hj d n apply if ! fair m>ket
  value (! %>es at t "t is n less ?an !
  pr9cipal am.t (! debt4 ,h["e1 !
  transf] ( an am.t [+ 6a %>ehold] 6a
  3tribut$ surplus a3.t does n 3/itute a
  pay;t & sec;n #hj may h applic,n4
#ab4 ,=! purposes ( sec;n #hj ! ,de"p;t
  3sid]s set-(f 63/itute pay;t if x is
  r1sona# 9 ! circum/.es 63sid] t !
  cr$itor rcvd value equal 6or exce$+ !
  pr9cipal am.t (! debt or oblig,n4 ,?
  practice applies 6settle;t ( debts (a
  corpor,n 6xs %>ehold]s ^u w9d+-up 7see
  ,,it-#adb;,r7 &a debt 2qu1!d 6! debtor
  7see ,,it-#chb74
                                     #aj
              ,,it-#bic;,r           a#d
#ac4 ,al? ! assump;n (a debt or oblig,n
  (a taxpay] 0a ?ird "py may n 3/itute
  pay;t 0! taxpay] 9 a /rict s5se1 !
  rules describ$ 9 #a abv >e n appli$ if
  ! ?ird "py rcvs 3sid],n f ! taxpay] at
  l1/ equival5t 6! pr9cipal am.t (! debt
  or oblig,n assum$4
#ad4 ,! pay;t (a debt or oblig,n 0a
  gu>antor or 9sur] makes ! debtor
  subject 6! applic,n ( sec;n #hj s9ce
  pay;t is n made 0! debtor4 ,h["e1 ":
  pay;t is made 0a gu>antor 5titl$ 6use
  all ! rem$ies t 7 availa# 6! cr$itor 9
  5=c+ pay;t 0! debtor1 ! rules describ$
  9 #a abv >e n appli$1 un.s1 ( c\rse1 !
  gu>antor =gives all or any por;n (!
  debtor's oblig,n 69demnify hm4
  ,,it-#dcj 4cusses ! ,de"p;t's posi;n )
  respect 6settle;t (a debt or oblig,n f
  proce$s (a life 9sur.e policy >is+ on
  d1?4


                                     #aa
          ,prescrib$ ,exclu.ns       b#d
             7p>agraph #ae7
    
#ae4 ,9 a3ord.e ) p>agraphs #hj7c7 to
  7f71 ! rules describ$ 9 #a abv d n
  apply ":
  7a7 ! debtor is a bankrupt at ! "t (
    settle;t 7see #af 2l71
  7b7 ! debt 0 s* t1 if 9t]e/ _h be5 pd
    on x1 ! 9t]e/ wd n 2 deducti# 9
    -put+ 9come 7see #ag & #ah 2l71
  7c7 ! provi.ns cov]+ mortgage
    =eclosures & 3di;nal sales
    reposses.ns 7sec;n #gi7 apply 6!
    debt1 or
  7d7 ! ga9 is o!rwise requir$ 6be
    7;i7 9clud$ 9 -put+ ! debtor's 9come
      =! ye> 7see #ai 2l71 or
    7;ii7 deduct$ 9 -put+ ! debtor's
      capital co/ ( any deprecia#
      prop]ty or 8 adju/$ co/ base ( any
      capital prop]ty 7see #bj 2l74
    

                                     #ab
        ,bankrupt 7p>agraph #af7      #e
    
#af4 ,sec;n #b (! ,bankruptcy ,act
  def9es a 8,bankrupt0 z 8a p]son :o has
  made an assign;t or ag/ :om a rcvg
  ord] has be5 made or ! legal /atus (
  s* a p]son'4 ,:5 a bankrupt 7! debtor7
  makes a proposal "u ,"p ,,iii (!
  ,bankruptcy ,act & ? proposal is
  approv$ 0! c\rt1 ! bankruptcy is r5d]$
  void2 ?us s* a debtor does n -e )9 !
  exclu.n 9 #ae7a7 abv1 &! provi.ns 9 #a
  abv may apply4 ,^! provi.ns may al
  apply 6an 9solv5t p]son :o has a ga9
  on settle;t (a debt 0virtue ( an
  approv$ proposal "u ,"p ,,iii (!
  ,bankruptcy ,act s9ce s* a p]son is n
  a bankrupt4

     ,9t]e/ ,n ,deducti# 7p>agraphs
                #ag-ah7
    
#ag4 ,9 apply+ ! te/ 9 #ae7b7 abv1 all
  (! tax,n ye>s dur+ : ! debt or oblig,n
  0 \t/&+ m/ 2 3sid]$4 ,if any       #ac
              ,,it-#bic;,r           a#e
  am.t ( 9t]e/ 0 deducti# 7or wd h be5
  deducti# _h 9t]e/ be5 pd7 9 respect (
  any ( ^! ye>s1 ! 3di;ns = exclu.n >e n
  satisfi$4
#ah4 ,! exclu.n describ$ 9 #ae7b7 abv
  9cludes3
  7a7 any loan n made =! purpose ( e>n+
    busi;s or prop]ty 9come1
  7b7 a debt 9curr$ 6acquire a prop]ty t
    is n 9come produc+1
  7c7 a debt or oblig,n 9curr$ =!
    purpose ( acquir+ a life 9sur.e
    policy or an 9t]e/ "!91 &
  7d7 a debt or oblig,n 9curr$ =!
    purpose ( e>n+ 9come t is tax
    exempt4
  ,debts or oblig,ns n exempt$ f !
  applic,n (! rules describ$ 9 #a abv 0?
  exclu.n 9clude3

  7e7 debts (a corpor,n ": ! 9t]e/ paya#
    "!on is n fully deducti# 0r1son (!
    8?9 capitaliz,n0 rules 3ta9$ 9
    subsec;n #ah7#d71 &              #ad
              ,,it-#bic;,r           b#e
  7f7 a loan ext5d$ 6a develop] 6acquire
    l& if any 9t]e/ "!on is deducti# 9 !
    curr5t tax,n ye> or 0 deducti# 9 an
    e>li] tax,n ye>4
  
     ,excess ,o!rwise ,requir$ 6be
       ,9clud$ 9 ,9come 7p>agraph
                  #ai7
    
#ai4 ,! exclu.n describ$ 9 #ae7d77;i7
  abv 9cludes3
  7a7 ! ga9 r1liz$ 0! issu] ( bonds1
    deb5tures or o!r simil> oblig,ns :5
    pur*as$ 9 ! op5 m>ket at an am.t 2l
    ! issue price 7subsec;n #ci7#c771
  7b7 am.ts requir$ 6be 9clud$ 9 ! 9come
    (a taxpay] 9 respect ( unpd remun],n
    or o!r unpd exp5ses 9 a3ord.e )
    sec;n #gh 7see ,,it-#aji71
--------------------------------------#f
  7c7 ca%1 volume1 p]=m.e or simil>
    4c.ts or rebates on trade debts
    79clud$ 9 ! -put,n ( pr(it "u sec;n
    #i71                             #ae
              ,,it-#bic;,r           a#f
  7d7 adju/;t ( trade debts = lo/ or
    defective m]*&ise 79clud$ 9 ! -put,n
    ( pr(it "u sec;n #i71
  7e7 ! =give;s (a trade debt 9 respect
    ( an exp5se t 0 deduct$ 9 -put+
    9come = tax purposes 9 ! same ye>1
    s9ce ! rules gov]n+ ! -put,n ( pr(it
    "u sec;n #i require t ! =give;s
    (fset ! exp5se1
  7f7 an am.t 9clud$ 9 -put+ ! 9come (a
    debtor 0r1son ( subsec;n #bde7#b7 9
    respect (! =give;s (a trade debt [+
    6a cr$itor ) :om he does n d1l at
    >m's l5g?1 &
  7g7 a debt [+ 0an employee 6a corpor,n
    t is =giv5 & 9clud$ 9 ! employee's
    9come 0virtue ( subsec;n #e7#a71
    p>agraph #f7#a77a7 or subp>agraph
    #ef7#a77a77;ii7 7see ,,it-#bbb;,r at
    p>agraph #f74
  
  

                                     #af
       ,excess ,o!rwise ,requir$     b#f
     6be ,deduct$ f ,co/ ( ,prop]ty
           7p>agraphs #bj-ba7
    
#bj4 ,! exclu.n describ$ 9 #ae7d77;ii7
  abv 9cludes3
  7a7 a gov]n;t loan ": any ga9 on xs
    =give;s 9 :ole or 9 "p is requir$
    0subsec;n #ac7#g.a7 or p>agraph
    #ec7#b77k7 6be appli$ 6reduce !
    capital co/ or adju/$ co/ base (a
    capital prop]ty 7see #bh 2l71 &
  7b7 a debt t is reduc$ z a result (a
    g5u9e d[nw>d adju/;t (! pur*ase
    price (a capital prop]ty or an
    eligi# capital prop]ty 7see
    ,,it-#agd;,r at p>agraph #f74
#ba4 ,if ! adju/;t describ$ 9 #bj7b7 abv
  c 2 reg>d$ z a true =give;s ( debt1 !
  rules describ$ 9 #a abv apply4 ,an
  adju/;t is usu,y 3sid]$ 6be a true
  =give;s ( debt if x
  7a7 0 n made 0! cr$itor 2c ( value
    rcvd 0hm 9 "s o!r way1
                                     #ag
              ,,it-#bic;,r           c#f
  7b7 does n repres5t a ca% or o!r 4c.t
    (a r1sona# am.t or an adju/;t = lo/
    or defective prop]ty1 &
  7c7 c 2 attribut$ 6f9ancial
    di6iculties (! debtor4
  
       ,o!r ,exclu.ns 7p>agraphs
                #bb-bd7
    
#bb4 ,sec;n #hj only applies ": ! am.t
  pd is less ?an ! pr9cipal am.t (! debt
  or oblig,n4 ,s9ce ! def9i;n (
  8pr9cipal am.t0 9 subsec;n #bdh7#a7
  specific,y excludes 9t]e/1 sec;n #hj
  is n applica# 6! =give;s ( 9t]e/4
#bc4 ,s9ce p>agraph #hj7f7 ref]s only
  6am.ts o!rwise requir$ 6be 9clud$ 9
  9come =! tax,n ye> 9 : ! =give;s takes
  place1 x is possi# 6apply ! rules
  describ$ 9 #a abv at t "t1 ev5
--------------------------------------#g
  ?\< ! same am.t is 9clud$ 9 9come (a
  prec$+ or subsequ5t ye> 7"u sec;n #gh
  = example74 ,h["e1 9 s*            #ah
              ,,it-#bic;,r           a#g
  circum/.es1 sec;n #hj is 3sid]$ n 6be
  applica#4
#bd4 ,! provi.ns ( sec;n #hj >e n appli$
  9 respect ( 9t]-company debt ext+ui%$
  on an amalgam,n t is subject 6!
  provi.ns ( sec;n #hg4

          ,trade ,debts ,=giv5
           7p>agraphs #be-bf7
    
#be4 ,z m5;n$ 9 #ai7e7 abv1 =give;s (a
  trade debt 9 ! same tax,n ye> 9 : x 0
  9curr$ is requir$ 6be 9clud$ 9 -put+ !
  debtor's 9come = t ye> "u ! g5]al
  rules = -put+ pr(it f a busi;s or
  prop]ty4 ,": ! debt =giv5 is 9 respect
  ( m]*&ise or o!r prop]ty 9 : ! debtor
  d1ls1 ! co/ (! prop]ty acquir$ is
  reduc$ 0! am.t ( =give;s :e!r or n x 0
  sold 9 ! ye> 9 : ! debt 0 =giv54 ,": !
  =give;s o3urs 9 a tax,n ye> subsequ5t
  6t 9 : ! debt 0 9curr$1 ! same g5]al
  rules ( pr(it -put,n require t an am.t
  2 9clud$ 9 ! pr(it -put,n =! ye>   #ai
              ,,it-#bic;,r           b#g
  ( =give;s equal 6t por;n (! =giv5 debt
  t relates 6! 9v5tory ( m]*&ise on h&
  at ! 2g9n+ ( t ye>4 ,9 o!r circum/.es
  "u : a trade debt is =giv51 ! rules
  describ$ 9 #a abv apply 7subject 6any
  applica# exclu.ns describ$ 9 #ae abv74
#bf4 ,3tr>y 6! -;ts 9 #be abv 7& 9
  #ai7e7 abv71 ! provi.ns ( sec;n #hj
  apply 6situ,ns ": "! is a bona fide
  -promise on a trade debt "u ,"p ,,iii
  (! ,bankruptcy ,act or "u o!r f$]al or
  prov9cial legisl,n relat+ 6cr$itors1
  >range;ts &! ga9 is exclud$ f ! -put,n
  ( 9come4

       ,waiv$ ,divid5ds 7p>agraph
                  #bg7
    
#bg4 ,! rules describ$ 9 #a abv >e n
  3sid]$ applica# 6a pay] corpor,n ": a
  %>ehold] has uncondi;n,y waiv$ 8 "r 6a
  dcld divid5d 7see ,,it-#bjh74

                                     #bj
        ,=giva# ,gov]n;t ,loans      c#g
             7p>agraph #bh7
    
#bh4 ,": ! t]ms (a gov]n;t loan 9clude a
  =give;s f1ture 3t+5t ^u ! happ5+ ( an
  ev5t t is 3sid]$ remote at ! "t ! loan
  is negotiat$1 ! provi.ns ( subsec;n
  #ac7#g.a7 & p>agraph #ec7#b77k7 )
  respect to 8=giva# loans0 >e n 3sid]$
  applica#4 ,?us1 if ! =give;s f1ture
  2comes op]ative1 ! provi.ns ( sec;n
  #hj apply4 ,"o example (a loan ( ?
  type is ! #aigf ,assi/$ ,r5tal
  ,program ( ,c5tral ,mortgage & ,h\s+
  ,corpor,n4









                                     #ba