Section 12.6 — Income Tax Act: Definitions

The definitions in section 18.3 apply in this section. Subsection (3) applies for a taxation year of an entity in respect of a security of the entity if the security becomes, at a particular time in the year, a stapled security of the entity and, as a consequence, amounts described in paragraphs 18.3(3)(a) and (b) are not deductible because of subsection 18.3(3); the security (or any security for which the security was substituted) ceased, at an earlier time, to be a stapled security of any entity and, as a consequence, subsection 18.3(3) ceased to apply to deny the deductibility of amounts that would be described in paragraphs 18.3(3)(a) and (b) if the security were a stapled security; and throughout the period that began immediately after the most recent time referred to in paragraph (b) and that ends at the particular time, the security (or any security for which the security was substituted) was not a stapled security of any entity. If this subsection applies for a taxation year of an entity in respect of a security of the entity, the entity shall include in computing its income for the year each amount that was deducted by the entity (or by another entity that issued a security for which the security was substituted) in computing its income for a taxation year that includes any part of the period described in paragraph (2)(c); and would not have been deductible if subsection 18.3(3) had applied in respect of the amount. For the purposes of subsection 161(1), if an amount described in paragraph (3)(a) is included in the income of an entity for a taxation year under subsection (3), the entity is deemed to have an excess immediately after the entity’s balance-due day for the year computed as if the entity were resident in Canada throughout the year; the entity’s tax payable for the year were equal to the tax payable by the entity on its taxable income for the year; the amount were the entity’s only taxable income for the year; the entity claimed no deductions under Division E for the year; the entity had not paid any amounts on account of its tax payable for the year; and the tax payable determined under paragraph (b) had been outstanding throughout the period that begins immediately after the end of the taxation year for which the amount was deducted and that ends on the entity’s balance-due day for the year.