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

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,transac;ns 9 ,securities
,numb]3 ,,it-#dgi;,r
,date3 ,febru>y #bi1 #aihd
,ref];e3 ,sec;n #ci 7al sec;ns #i & #di
  & sec;n #fbjj (! ,regul,ns7

  ,? bullet9 replaces & c.els ,9t]pret,n
,bullet9 ,,it-#dgi dat$ ,june #bb1
#aiha4 ,curr5t revi.ns >e designat$
0v]tical l9es4

#a4 ,a ga9 or loss f ! 4posi;n ( %>es or
  a debt oblig,n s* z a bond1 deb5ture1
  bill1 note or hypo!c w 2 tax$ z ei an
  9come ga9 or loss or z a capital ga9
  or loss4 ,9 ? bullet9 transac;ns (!
  =m] type w 2 ref]r$ 6z 2+ on 89come
  a3.t0 & transac;ns (! latt] type z 2+
  on 8capital a3.t04                  #a
        ,gu>ante$ ,capital ,ga9s     a#a
           7,p>agraphs #b-h7
    
#b4 ,": a taxpay] has 4pos$ (a ,canadian
  secur;y 7see #f 2l7 9 a tax,n ye>1
  subsec;n #ci7#d7 provides t ! taxpay]
  may elect 9 ! return ( 9come = t ye> t
  7a7 e ,canadian secur;y [n$ 0! taxpay]
    9 t ye> or any subsequ5t ye> is
    deem$ 6be capital prop]ty [n$ 9 ^?
    ye>s1 &
  7b7 e 4posi;n ( e ,canadian secur;y
    [n$ 0! taxpay] 9 t & any subsequ5t
    ye> is deem$ 6be a 4posi;n (a
    capital prop]ty4
  
  ,! e6ect ( s* an elec;n is t all
  ,canadian secur;y 4posi;ns 9 ! ye> (
  elec;n & all subsequ5t ye>s1 subject
  6! -;ts 9 #c & #d 2l1 m/ 2 giv5
  capital ga9 or loss tr1t;t &! elec;n
  _c 2 resc9d$4


                                      #b
              ,,it-#dgi;,r           b#a
  ,a special elec;n =m 7,t#abc7 is
  availa# = use 0! taxpay] :5 mak+ an
  elec;n "u subsec;n #ci7#d74
#c4 ,pursuant 6subsec;n #ci7#e71 !
  elec;n "u subsec;n #ci7#d7 does n
  apply 6a 4posi;n (a ,canadian secur;y
  0a taxpay] :o1 at ! "t ! secur;y is
  4pos$ (1 is
  7a7 a trad] or d1l] 9 securities1
  7b7 a bank 6: ! ,bank ,act or !
    ,quebec ,sav+s ,bank ,act applies1
  7c7 a corpor,n lic5s$ or o!rwise
    au?oriz$ "u ! laws ( ,canada or a
    prov9ce 6c>ry on 9 ,canada ! busi;s
    ( (f]+ 6! public xs s]vices z
    tru/ee1
--------------------------------------#b
  7d7 a cr$it union )9 ! m1n+ assign$
    0subsec;n #acg7#f71
  7e7 a non-resid5t1 or1 af ,novemb]
    #ab1 #aiha
  7f7 an 9sur.e corpor,n1
  
                                      #c
              ,,it-#dgi;,r           a#b
  7g7 a corpor,n ^: pr9cipal busi;s is !
    l5d+ ( m"oy or ! pur*as+ ( debt
    oblig,ns or a -b9,n "!(1
  
  or any -b9,n "!(4
#d4 ,an elec;n t has be5 made "u
  subsec;n #ci7#d7 does n apply 6any
  securities 4pos$ ( dur+ ! "t t
  subsec;n #ci7#e7 applies 6a taxpay]4
  ,dur+ ! "t ! elec;n does n apply1 !
  -;ts f #i 6#bb 2l >e applica# 9
  asc]ta9+ :e!r a ga9 or loss is on
  9come or capital a3.t4 ,if subsec;n
  #ci7#e7 c1ses 6apply1 a previ\s elec;n
  "u subsec;n #ci7#d7 2comes reapplica#
  af t "t4
#e4 ,=! purposes ( subsec;n #ci7#e7 !
  ,de"p;t 9t]prets ! t]m 8trad] or d1l]
  9 securities0 6m1n a taxpay] :o
  "picipates 9 ! promo;n or "uwrit+ (a
  "picul> issue ( %>es1 bonds or o!r
  securities or a taxpay] :o holds hmf \
  6! public z a d1l] 9 %>es1 bonds or
  o!r securities4 ,! t]m is n         #d
              ,,it-#dgi;,r           b#b
  3sid]$ 69clude an (fic] or employee (a
  firm or corpor,n t is 5gag$ 9 !
  promo;n or "uwrit+ ( issues ( %>es1
  bonds or o!r securities nor an (fic]
  or employee (a taxpay] :o holds hmf \
  6! public z a d1l] 9 %>es1 bonds or
  o!r securities1 un.s t (fic] or
  employee transacts 9 securities z a
  result (! promot+ or "uwrit+
  activities ( ? employ]4 ,any p]son :o1
  z a result ( special k (a "picul>
  corpor,n n availa# 6! public1 utilizes
  t k 6r1lize a qk ga9 is 3sid]$ 0!
  ,de"p;t 6be a 8trad] or d1l] 9
  securities0 = ^? "picul> securities4
  ,any corpor,n ^: prime busi;s activ;y
  is trad+ 9 %>es or debt oblig,ns is al
  3sid]$ 6be a 8trad] or d1l]0 9
  securities1 b ? does n 9clude a
  corpor,n ^: prime busi;s is ! hold+ (
  b> securities & : sells s* 9ve/;ts f
  "t 6"t4
#f4 ,! elec;n "u subsec;n #ci7#d7 is
  applica# only to 8,canadian         #e
              ,,it-#dgi;,r           c#b
  securities04 ,? t]m is def9$ 9
  subsec;n #ci7#f7 z a secur;y 7o!r ?an
  a prescrib$ secur;y7 t is a %>e (!
  capital /ock (a corpor,n resid5t 9
  ,canada1 a unit (a mutual fund tru/
  7applica# 6#aigi & subsequ5t tax,n
  ye>s7 or a bond1 deb5ture1 bill1 note1
  mortgage1 hypo!c or a simil> oblig,n
  issu$ 0a p]son resid5t 9 ,canada4 ,a
  ,canadian secur;y 9cludes s* a secur;y
  t is sold %ort4 ,! t]m 8a prescrib$
  secur;y0 is def9$ 0sec;n #fbjj (!
  ,regul,ns4
--------------------------------------#c
#g4 ,:5 det]m9+ ! pr9cipal busi;s (a
  corpor,n = purposes ( #c7f7 abv1 !
  -;ts 9 #e1 #g & #h ( ,,it-#cga h
  relev.e4
#h4 ,": a taxpay] has n elect$ "u
  subsec;n #ci7#d7 or does n qualify =!
  elec;n1 ! taxpay] m/ det]m9e :e!r !
  transac;n 9 securities is on 9come
  a3.t or capital a3.t4 ,! det]m9,n (
  :e!r a ga9 or loss is on 9come      #f
              ,,it-#dgi;,r           a#c
  a3.t or capital a3.t is 4cuss$ 9 #i
  6#bb 2l4

     ,4posi;n ( ,securities--,9come
     or ,capital 7p>agraphs #i-cb7
    
#i4 ,"s secur;y transac;ns >e cle>ly on
  9come a3.t & ^! types ( transac;ns >e
  4cuss$ 9 #ae 6#ba 2l4 ,= o!r secur;y
  transac;ns x w 2 nec 6exam9e ! facts
  (! specific case 9 ord] 6det]m9e :e!r
  a transac;n is on 9come or capital
  a3.t4 ,! te/s t ! ,c\rts h appli$ 9
  mak+ s* a det]m9,n >e ^? ( 8c\rse (
  3duct0 & 89t5;n0 & ^! te/s >e 4cuss$ 9
  #aj 6#ac 2l4 ,! factors 6be 3sid]$ :5
  det]m9+ :e!r ! ga9 or loss on !
  4posi;n (a bond1 deb5ture1 bill1 note1
  mortgage1 hypo!c or simil> oblig,n
  7debt oblig,n7 is on 9come a3.t or
  capital a3.t >e set \ 9 ,,it-#aad1
  8,4c.ts1 ,premiums & ,bonuses on ,debt
  ,oblig,ns04
                                      #g
              ,,it-#dgi;,r           b#c
#aj4 ,": ! :ole c\rse ( 3duct 9dicates t
  7a7 9 secur;y transac;ns ! taxpay] is
    4pos+ ( securities 9 a way capa# (
    produc+ ga9s &) t object 9 view1 &
  7b7 ! transac;ns >e (! same k9d &
    c>ri$ on 9 ! same way z ^? (a trad]
    or d1l] 9 securities1
  
  ! proce$s ( sale w norm,y 2 3sid]$ 6be
  9come f a busi;s &1 "!=e1 on 9come
  a3.t4
#aa4 ,"s (! factors 6be 3sid]$ 9
  asc]ta9+ :e!r ! taxpay]'s c\rse (
  3duct 9dicates ! c>ry+ on (a busi;s >e
  z foll[s3
  7a7 frequ5cy ( transac;ns--a hi/ory (
    ext5sive buy+ & sell+ ( securities
    or (a qk turnov] ( prop]ties1
  7b7 p]iod ( [n]%ip--securities >e
    usu,y [n$ only =a %ort p]iod ( "t1
  7c7 k ( securities m>kets--! taxpay]
    has "s k ( or exp]i;e 9 ! securities
    m>kets1
                                      #h
              ,,it-#dgi;,r           c#c
  7d7 secur;y transac;ns =m a "p (a
    taxpay]'s ord9>y busi;s1
  7e7 "t sp5t--a sub/antial "p (!
    taxpay]'s "t is sp5t /udy+ !
    securities m>kets & 9ve/igat+
    pot5tial pur*ases1
  7f7 f9anc+--secur;y pur*ases >e f9.ed
    prim>ily on m>g9 or 0"s o!r =m (
    debt1
  7g7 adv]tis+--! taxpay] has adv]tis$
    or o!rwise made x "kn t he is will+
    6pur*ase securities1 &
--------------------------------------#d
  7h7 9 ! case ( %>es1 _! nature--norm,y
    speculative 9 nature or (a non-
    divid5d type4
#ab4 ,al? n"o (! 9dividual factors 9 #aa
  abv may 2 su6ici5t 6"*ize ! activities
  (a taxpay] z a busi;s1 ! -b9,n (a
  numb] ( ^? factors may well 2 su6ici5t
  = t purpose4 ,fur!r1 subsec;n #bdh7#a7
  def9es ! t]m 8busi;s0 69clude 8an
  adv5ture or 3c]n 9 ! nature ( trade0
  &! c\rts h held t 8an adv5ture or   #i
              ,,it-#dgi;,r           a#d
  3c]n 9 ! nature ( trade0 c 9clude an
  isolat$ transac;n 9 %>es ": ! 8c\rse (
  3duct0 & 89t5;n0 cle>ly 9dicate x 6be
  s*4
#ac4 ,a taxpay]'s 9t5;n 6sell at a ga9
  is n su6ici5t1 0xf1 6e/abli% t !
  taxpay] 0 9volv$ 9 an adv5ture or 3c]n
  9 ! nature ( trade4 ,t 9t5;n is alm
  9v>iably pres5t ev5 :5 a true 9ve/;t
  has be5 acquir$ if circum/.es %d >ise
  t wd make x f9anci,y m b5eficial 6sell
  ! 9ve/;t ?an 63t9ue 6hold x4 ,":1
  h["e1 "o or o!r (! abv te/s cle>ly
  su7e/s an adv5ture or 3c]n 9 ! nature
  ( trade &1 9 a4i;n1 x c 2 e/abli%$ or
  9f]r$ t ! taxpay]'s 9t5;n 0 6sell !
  prop]ty at ! f/ suita# opportun;y1
  9t5;n w 2 view$ z corroborative
  evid;e4 ,on ! o!r h&1 9abil;y 6e/abli%
  an 9t5;n 6sell does n preclude a
  transac;n f 2+ reg>d$ z an adv5ture or
  3c]n 9 ! nature ( trade if x c o!rwise
  2 s reg>d$ pursuant 6"o or m (! abv
  te/s4                              #aj
              ,,it-#dgi;,r           b#d
#ad4 ,! det]m9,n ( :e!r secur;y
  transac;ns made 0f9ancial 9/itu;ns1 s*
  z ^? li/$ 9 #c7b7 to 7f7 abv is on
  9come a3.t or capital a3.t is dep5d5t
  on ! nature (! a3.t f : ! transac;n
  emanates &! facts (! case4
#ae4 ,all ga9s or losses (a taxpay] t
  relate 6a "picip,n 9 ! promo;n or
  "uwrit+ (a "picul> issue (a secur;y >e
  on 9come a3.t4 ,simil>ly1 ga9s or
  losses made or 9curr$ 0an (fic] or
  employee (a firm or corpor,n t is
  5gag$ 9 ! promo;n or "uwrit+ (
  securities >e on 9come a3.t if !y
  result f ! acquisi;n ( securities
  promot$ or "uwritt5 0his employ]4 ,)
  reg>d 6any o!r taxpay] :o holds hmf \
  6! public z a d1l] 9 securities1 "! is
  a presump;n t all ga9s or losses on
  secur;y transac;ns >e "p (! normal
  op],ns ( s* a busi;s & ?us >e on 9come
  a3.t4 ,fur!r1 ! ga9s & losses made 0a
  corpor,n ^: prime activ;y is trad+ 9
  securities w 2 3sid]$ 6be on       #aa
              ,,it-#dgi;,r           c#d
  9come a3.t1 not)/&+ t ! corpor,n does
  n hold xf \ 6! public z a trad] or
  d1l] 9 securities4
--------------------------------------#e
#af4 ,z 9dicat$ 9 ,,it-#aad1 any ga9 or
  loss >is+ f ! acquisi;n & 4posi;n (a
  debt oblig,n is on 9come a3.t ": !
  acquisi;n ( debt oblig,ns1 ei =!
  purpose ( resale or = hold+ 6matur;y1
  3/itutes "p or all (! taxpay]'s
  busi;s4 ,s* wd 2 ! case ": ! taxpay] 0
  cle>ly a m"oy l5d] or a trad] or d1l]
  9 debt oblig,ns4 ,9 a4i;n1 ": a
  taxpay] 0 an 8orig9al l5d]01 z
  describ$ 9 #f & #g ( ,,it-#aad1 any
  ga9 or loss on a loan negotiat$ 0!
  taxpay] is g5],y view$ z 2+ on 9come
  a3.t4
#ag4 ,! presump;n t ga9s f secur;y
  transac;ns >e on 9come a3.t w al 2
  tak5 0! ,de"p;t 9 any situ,n ": x is
  app>5t t ! taxpay] has us$ special
  9=m,n n availa# 6! public 6r1lize a qk
  pr(it4                             #ab
              ,,it-#dgi;,r           a#e
#ah4 ,! ga9 or loss on ! 8%ort sale0 (
  %>es is 3sid]$ 6be on 9come a3.t4
#ai4 ,:5 ! 4posi;n ( %>es 9 a corpor,n
  is m]ely an alt]native me?od ( r1liz+
  9come f ! sale (a prop]ty held 0!
  corpor,n 7e4g4 r1l e/ate71 ! ga9s f !
  sale ( ^? %>es w 2 9clud$ 9 9come z if
  ! prop]ty xf _h be5 sold4
#bj4 ,sec;n #ff.c deems %>es ( capital
  /ock acquir$ "u ! circum/.es describ$
  9 subp>agraph #ff.a7#f77a77;v7 or
  #ff.b7#e77a77;v7 n 6be capital prop]ty
  (a taxpay] b 6be 9v5tory acquir$ at a
  co/ 6! taxpay] ( nil4 ,z a result1 !
  ga9 or loss on ! 4posi;n ( s* %>es w 2
  on 9come a3.t4
#ba4 ,al? a taxpay] may 2 class$ z an
  89ve/or0 or has elect$ "u subsec;n
  #ci7#d7 )! result t ga9s or losses on
  ! 4posi;n ( debt oblig,ns >e norm,y
  6be view$ z capital ga9s or capital
  losses1 "! >e c]ta9 provi.ns 9 ! ,act1
  z describ$ 2l1 : require t ! am.t (
  any ga9 m/ 2 report$ z 9come or1   #ac
              ,,it-#dgi;,r           b#e
  9 ! case ( 7f7 2l1 may 2 s report$ at
  ! taxpay]'s op;n3
  7a7 ,": a debt oblig,n does n provide
    =! pay;t ( 9t]e/1 or ": ! rate (
    9t]e/ t is specifi$ 9 ! oblig,n is
    sub/anti,y 2l ! m>ket rate at ! date
    ( issue1 any r1liz,n (! 4c.t on !
    repay;t ( all or "p ( s* a debt
    oblig,n may 2 class$ z 9t]e/ & z s*
    is 9clud$ 9 9come "u p>agraph
    #ab7#a77c7 7= fur!r -;ts on ?
    situ,n1 see #c & #d ( ,,it-#aad74
  7b7 ,on ! transf] (a debt oblig,n1 any
    am.t rcvd 0! transf]or t may prop]ly
    2 view$ z repres5t+ a3ru$ 9t]e/ m/ 2
    9clud$ 9 ! taxpay]'s 9come1 z
    requir$ 0subsec;n #bj7#ad74
  7c7 ,a por;n ( any pay;t rcvd on a
    debt oblig,n t 0 tak5 z 3sid],n =
    prop]ty previ\sly sold 0! hold] (!
    oblig,n may 2 requir$ 6be 9clud$ 9
    9come 9 a3ord.e )! rule relat+
    6bl5d$ pay;ts 9 sub-sec;n #af7#a7
                                     #ad
              ,,it-#dgi;,r           c#e
    7fur!r -;ts on ? subject appe> 9 #aa
    6#ac ( ,,it-#bfe;,r74
--------------------------------------#f
  7d7 ,! value (a debt oblig,n t is tak5
    9 satisfac;n ( an 9come debt may 2
    requir$ 6be 9clud$ 9 9come 9 a3ord.e
    )! rules 9 sec;n #gf 7see
    7,,it-#gg;,r74 7,h["e any subsequ5t
    ga9 or loss on ! 4posi;n (! debt
    oblig,n is 6be tr1t$ 9 ! normal
    mann]1 i4e4 :e!r ! ga9 or loss is on
    a3.t ( 9come or on a3.t ( capital is
    a "q ( fact dep5d5t ^u ! circum/.es
    (! case47
  7e7 ,subsec;ns #af7#b7 & #af7#c7
    provide special rules = an oblig,n t
    is a bond1 deb5ture1 bill1 note1
    mortgage1 hypo!c or simil> oblig,n
    issu$ 0a p]son exempt f tax "u sec;n
    #adi or a non-resid5t p]son n c>ry+
    on a busi;s 9 ,canada or a gov]n;t1
    municipal;y or o!r public body p]=m+
    a func;n ( gov]n;t4 ,9 c]ta9
    circum/.es1 a 4c.t on ^!         #ae
              ,,it-#dgi;,r           a#f
    oblig,ns is 9clud$ 9 9come (! f/ [n]
    (! oblig,n :o is resid5t ( ,canada4
    ,! -;ts 9 #ag & #ah ( ,,it-#aad >e
    relevant 6^! situ,ns4
  7f7 ,9 a3ord.e ) sec;n #ab.a1 a 8ca%
    bonus0 on a ,canada ,sav+s ,bond :
    may 2 report$ z a capital ga9 may1
    if ! taxpay] s *ooses1 2 report$ z
    9t]e/ 9come4
#bb4 ,": ! taxpay] :o acquires a debit
  oblig,n is ! p]son :o issu$ ! oblig,n1
  ! provi.ns ( p>agraph #bj7#a77f7 &
  subsec;n #ci7#c7 >e applica# z expla9$
  9 #ba & #bb ( ,,it-#aad4
#bc4 ,a %>e op;n is n a ,canadian
  secur;y )9 ! def9i;n 9 subsec;n
  #ci7#f74 ,z a result1 %>e op;n
  transac;ns _c qualify =! gu>ante$
  capital ga9s elec;n 7see #b abv74 ,!
  -;ts 9 #bd 6#cb 2l provide ! ,de"p;t's
  views 9 3nec;n )! tax tr1t;t ( %>e
  op;n transac;ns4 ,a ref];e 9 ? "p (!
  bullet9 to 8hold]0 ( an op;n ref]s 6!
  p]son :o acquires ! op;n &a        #af
              ,,it-#dgi;,r           b#f
  ref];e to 8writ]0 ref]s 6! p]son :o
  grants ! op;n4 ,if ! writ] [ns ! "uly+
  %>es at ! "t ! writ] grants ! op;n1 !
  op;n is "kn z a 8cov]$0 op;n1 b if !
  writ] does n [n ! %>es at t "t1 ! op;n
  is "kn z a 8nak$0 op;n4
#bd4 ,ga9s & losses on %>e op;n
  transac;ns 0taxpay]s describ$ 9 #ae &
  #ag abv >e 3sid]$ 6be on 9come a3.t4
  ,! -;ts 9 #ad abv >e 3sid]$ 6apply
  6%>e op;n transac;ns ( f9ancial
  9/itu;ns1 s* z banks1 tru/ -panies1
  cr$it unions1 life 9sur.e corpor,ns &
  o!r simil> corpor,ns4
#be4 ,= taxpay]s1 o!r ?an ^? describ$ 9
  #bd abv1 x is a "q ( fact :e!r ! ga9s
  or losses on %>e op;n transac;ns >e on
  9come a3.t or capital a3.t4 ,h["e1 !
  ,de"p;t g5],y presumes t
  7a7 ! ga9 or loss r1liz$ 0a hold] (
    op;ns is on ! same a3.t z ! hold]'s
    transac;ns 9 %>es2
  
                                     #ag
              ,,it-#dgi;,r            #g
  7b7 ! ga9 or loss r1liz$ 0a writ] (
    cov]$ op;ns is on ! same a3.t z !
    "uly+ %>es2 &
  7c7 ! ga9 or loss r1liz$ 0a writ] (
    nak$ op;ns is norm,y on 9come a3.t4
    ,h["e1 ! ,de"p;t w a3ept report+ (
    ga9s & losses on capital a3.t
    provid$ ? practice is foll[$
    3si/5tly f ye> 6ye>4
  
  ,! presump;n 9dicat$ abv may n apply 9
  ^? unusual situ,ns ": ! facts cle>ly
  9dicate o!rwise4 ,? cd 2 ! case1 =
  example1 ": a hold] ( op;ns usu,y
  transacts 9 %>es on 9come a3.t1 b
  holds a gr\p ( %>es = 9ve/;t purposes
  : >e prop]ly report$ on capital a3.t4
  ,9 ? situ,n1 op;n transac;ns ) respect
  6! =m] gr\p %d 2 report$ on 9come a3.t
  &! latt] gr\p on capital a3.t4
#bf4 ,! -;ts 9 #bh & #bi 2l 4cuss ! tim+
  (! report+ ( ga9s & losses on ex*ange-
  trad$ call op;ns :ile ! -;ts 9 #ca &
  #cb 2l 4cuss ! tim+ (! report+ (   #ah
              ,,it-#dgi;,r           a#g
  ga9s & losses on ex*ange-trad$ put
  op;ns4 ,^! -;ts >e al relevant = put &
  call op;ns t >e simil> 6^? transact$
  on an ,ex*ange b : >e 5t]$ 96\tside an
  ,ex*ange4 ,put & call op;ns >e 3tracts
  9 be>] =m : grant ! hold] ! "r 6sell
  7in ! case (a put7 or buy 7in ! case
  (a call7 a specifi$ numb] ( %>es at a
  giv5 price at or 2f a specifi$ "t = an
  agre$ premium4
#bg4 ,"u >range;ts made 0c]ta9 ,/ock
  ,ex*anges1 bo? 9 ,canada & \tside
  ,canada1 an ,ex*ange may provide a
  m>ket = call op;ns 9 %>es4 ,! hold] (!
  op;n 2comes 5titl$1 if ! hold] s
  *ooses1 6pur*ase f a cle>+ corpor,n
  e/abli%$ 0an ,ex*ange ! numb] ( units
  (! "uly+ secur;y specifi$ 9 ! op;n at
  a /at$ ex]cise price at any "t prior
  6! expiry date (! op;n4 ,! writ] "? 8
  brok] is -mitt$ 6deliv] 6! cle>+
  corpor,n ! "uly+ secur;y specifi$ 9 !
  op;n if ! op;n is ex]cis$ 0! hold]4 ,z
  3sid],n =! -mit;t 0! writ]1 !      #ai
              ,,it-#dgi;,r           b#g
  hold] (! op;n pays 6! writ] an am.t
  "kn z a 8premium01 : am.t is det]m9$
  0auc;n on ! floor (! ,ex*ange4 ,": a
  second>y m>ket 9 op;ns is ma9ta9$ 0an
  ,ex*ange1 ei a hold] or a writ] ( an
  op;n may close \ 8 posi;n prior 6!
  expiry date (! op;n4 ,! hold] ( an
  op;n may1 9 e6ect1 sell ! op;n 9 !
  second>y m>ket & rcv ! am.t ( premium
  curr5tly applica# 6t op;n4 ,! writ] (
  an op;n ord9>ily may t]m9ate ! oblig,n
  "u ! op;n 0acquir+ 9 ! second>y m>ket
  an op;n hav+ ! same attributes z !
  op;n previ\sly writt54 ,? transac;n1
  9volv+ ! pay;t (! applica# premium1
  has ! e6ect ( c.ell+ ! writ]'s pre-
  exi/+ oblig,n4
--------------------------------------#h
#bh4 ,": ! hold] tr1ts ga9s & losses on
  call op;ns z 2+ on 9come a3.t &! op;n
  is ex]cis$1 ! am.t (! premium &
  brok]age fees 9curr$ at ! "t ! op;n is
  obta9$ is a4$ 6! co/ (! %>es acquir$4
  ,if ! op;n is n ex]cis$1 ! co/ (   #bj
              ,,it-#dgi;,r           a#h
  acquir+ ! op;n %d 2 deduct$ 9 ! tax,n
  ye> 9 : ! op;n expires4 ,if ! op;n is
  clos$ \ 9 ! second>y m>ket1 ! premium
  rcvd 7or receiva#7 is 9clud$ 9 9come1
  &! co/ ( acquir+ ! op;n is writt5 (f1
  9 ! tax,n ye> 9 : ! op;n is clos$ \4
  ,": ! hold] (a call op;n tr1ts ga9s &
  losses z 2+ on capital a3.t1 ! rules 9
  sec;n #di (! ,act >e applica#4 ,! co/
  ( acquir+ ! op;n is a4$ 6! co/ (! %>es
  if ! op;n is ex]cis$4 ,if ! op;n is n
  ex]cis$1 clause #ed7c77;ii77,d7
  applies &! co/ ( acquir+ ! op;n 2comes
  a capital loss 9 ! tax,n ye> 9 : !
  op;n expires4 ,if ! hold] closes \ !
  op;n on ! second>y m>ket1 ! net ga9 or
  loss on ! acquisi;n & 4posi;n (! op;n
  is a capital ga9 or capital loss 9 !
  tax,n ye> 9 : ! op;n is clos$ \4
#bi4 ,": ! writ] tr1ts ga9s or losses on
  call op;ns z 2+ on 9come a3.t &! op;n
  is ex]cis$1 ! premium rcvd %d 2 br"\
  969come :5 ! op;n is ex]cis$4 ,if !
  op;n is n ex]cis$1 ! premium %d    #ba
              ,,it-#dgi;,r           b#h
  2 br"\ 969come :5 ! op;n expires4 ,if
  ! op;n is clos$ \ 9 ! second>y m>ket1
  ! premium %d 2 nett$ )! co/ ( acquir+
  ! (fsett+ op;n &! result+ ga9 or loss
  a3.t$ = at ! "t (! close \4 ,": !
  writ] =a call op;n tr1ts ga9s & losses
  z 2+ on capital a3.t1 ! rules 9 sec;n
  #di (! act apply at ! "t (! grant+ (!
  op;n4 ,s9ce subsec;n #di7#a7 deems t !
  writ] has 4pos$ (a prop]ty ^: adju/$
  co/ base is nil1 ! writ] wd norm,y h a
  ga9 equal 6! am.t 0: ! proce$s (! op;n
  exce$ any co/s ( 4posi;n4 ,if an
  (fsett+ op;n is acquir$ on ! second>y
  m>ket1 ! co/ ( t acquisi;n wd 2 a loss
  at t "t4 ,": ! op;n is ex]cis$1
  subsec;n #di7#c7 wd apply only if !
  writ] is al report+ ga9s & losses f !
  %>es on capital a3.t1 9 : case !
  e6ects ( subsec;n #di7#a7 is nullifi$
  &! proce$s f ! op;n is 9/1d a4$ 6!
  proce$s f ! %>es 9 -put+ ! writ]'s
  proce$s ( 4posi;n f ! %>es4
                                     #bb
              ,,it-#dgi;,r           c#h
#cj4 ,9 ! same way z x does = call op;ns
  z expla9$ 9 #bg abv1 an ex*ange may
  provide a m>ket = put op;ns 9 %>es4 ,!
  hold] (! op;n 2comes 5titl$1 if !
  hold] s *ooses1 6sell "? a cle>+
  corpor,n ! numb] ( units (! specifi$
  secur;y at a /at$ ex]cise price at any
  "t prior 6! expiry date (! op;n4 ,!
  writ] (! put op;n is -mitt$ 6pur*ase f
  ! cle>+ corpor,n ! "uly+ secur;y
  specifi$ 9 ! op;n if ! op;n is ex]cis$
  0! hold]4 ,! rema9+ -;ts 9 ! la/ f\r
  s5t;es ( #bg >e al applica# 6put op;ns
  z well z call op;ns4
--------------------------------------#i
#ca4 ,": ! hold] tr1ts ga9s & losses on
  put op;ns z 2+ on 9come a3.t &! op;n
  is ex]cis$1 ! am.t (! premium &
  brok]age fees 9curr$ at ! "t ! op;n is
  obta9$ is deduct$ f ! proce$s (
  4posi;n (! %>es 9 respect ( : ! op;n 0
  ex]cis$4 ,if ! op;n is n ex]cis$1 !
  co/ ( acquir+ ! op;n %d 2 deduct$ f
  9come 9 ! tax,n ye> 9 : ! op;n     #bc
              ,,it-#dgi;,r           a#i
  expires4 ,if ! op;n is clos$ \ on !
  second>y m>ket1 ! premium rcvd 7or
  receiva#7 is 9clud$ 9 9come &! co/ (!
  op;n is writt5 (f 9 ! tax,n ye> 9 : !
  op;n is clos$ \4 ,": ! hold] (a put
  op;n tr1ts ga9s & losses z 2+ on
  capital a3.t1 ! rules 9 sec;n #di
  apply4 ,! co/ ( acquir+ ! op;n is
  deduct$ f ! proce$s (! sale (! %>es if
  ! op;n is ex]cis$4 ,if ! op;n is n
  ex]cis$1 clause #ed7c77;ii77,d7
  applies &! co/ (! op;n 2comes a
  capital loss 9 ! tax,n ye> 9 : ! op;n
  expires4 ,if ! hold] closes \ ! op;n
  on ! second>y m>ket1 ! net ga9 or loss
  on ! acquisi;n & 4posi;n is a capital
  ga9 or loss 9 ! tax,n ye> 9 : ! op;n
  is clos$ \4
#cb4 ,": ! writ] tr1ts ga9s & losses on
  put op;ns z 2+ on 9come a3.t &! op;n
  is ex]cis$ 0! hold]1 ! premium rcvd =!
  op;n 0! writ] %d 2 deduct$ f ! co/ (!
  %>es ! writ] is requir$ 6pur*ase 9
  det]m9+ _! co/4 ,if ! op;n is n    #bd
              ,,it-#dgi;,r           b#i
  ex]cis$1 ! premium %d 2 br"\ 969come
  :5 ! op;n expires4 ,if ! op;n is clos$
  \ on ! second>y m>ket1 ! premium %d 2
  nett$ )! co/ ( acquir+ ! (fsett+ op;n
  &! result+ ga9 or loss a3.t$ = at ! "t
  (! close \4 ,": ! writ] (a put op;n
  tr1ts ga9s & losses z 2+ on capital
  a3.t1 ! rules 9 sec;n #di apply4 ,s9ce
  subsec;n #di7#a7 deems t ! writ] has
  4pos$ (a prop]ty ! adju/$ co/ base ( :
  is nil1 ! writ] wd norm,y h a ga9
  equal 6! am.t 0: ! proce$s (! op;n
  exce$ any co/s ( 4posi;n4 ,if an
  (fsett+ op;n is acquir$ on ! second>y
  m>ket1 ! co/ ( t acquisi;n wd 2 a loss
  at t "t4 ,": ! op;n is ex]cis$ 0!
  hold]1 subsec;n #di7#c7 wd apply 6!
  writ] only if ! writ] is al report+
  ga9s or losses f ! %>es on capital
  a3.t1 9 : case ! e6ects ( subsec;n
  #di7#a7 >e nullifi$ &! proce$s f !
  op;n is 9/1d deduct$ 9 -put+ ! co/ (!
  %>es acquir$ z a result (! op;n 2+
  ex]cis$4                           #be
       ,transac;ns 9 ,m ,?an ,"o     c#i
     ,k9d ( ,secur;y 7p>agraph #cc7
    
#cc4 ,x is recogniz$ t o3a.n,y a
  taxpay]1 o!r ?an "o :o has elect$ "u
  subsec;n #ci7#d71 may acquire c]ta9
  securities z an 9ve/;t & may acquire
  o!r l securities t %d 2 a3ord$ 9come
  tr1t;t4 ,an example ( s* a situ,n wd 2
  a taxpay] :o has special k n availa#
  6! public on "s %>e transac;ns b
  transacts 9
-------------------------------------#aj
  o!rs ) no special k4 ,3sequ5tly1 a
  taxpay] may1 9 ! same tax,n ye> or 9
  di6]5t tax,n ye>s1 prop]ly report "s
  ga9s or losses f transac;ns 9
  securities z 2+ on 9come a3.t & o!r
  ga9s or losses z 2+ on capital a3.t4
  ,norm,y1 h["e1 s* situ,ns wd 2 r>e &!
  9itial presump;n w 2 t ga9s or losses
  made or 9curr$ 0a "picul> taxpay] or
  transac;ns 9 securities1 hav+ reg>d 6!
  taxpay]'s circum/.es1 >e ei all (a
  capital nature or >e all ( an      #bf
              ,,it-#dgi;,r          a#aj
  9come nature1 z ! case may be1 &
  evid;e w 2 requir$ 9 support ( any
  3tr>y report+ ( s* ga9s or losses4 ,x
  is recogniz$ al t a taxpay] may
  acquire debt oblig,ns 9 circum/.es t
  qualify !m z an 9ve/;t & may acquire
  %>es 9 ! capac;y (a trad] or d1l]1 or
  ! 3v]se may 2 ! situ,n4 ,simil>ly1 a
  taxpay]1 hav+ reg>d 6! -;ts 9
  ,,it-#cdf;,r1 may 2 a# 6report ga9s &
  losses on transac;ns 9 -modities or
  -mod;y futures z 2+ ( an 9come nature
  & ga9s or losses on transac;ns 9
  securities z 2+ (a capital nature or
  vice v]sa4








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