Section 142.3 — Income Tax Act: Amounts to be included and deducted

Subject to subsections 142.3(3) and (4), where a taxpayer that is, in a taxation year, a financial institution holds a specified debt obligation at any time in the year, there shall be included in computing the income of the taxpayer for the year the amount, if any, prescribed in respect of the obligation; there shall be deducted in computing the income of the taxpayer for the year the amount, if any, prescribed in respect of the obligation; and except as provided by this section, paragraphs 12(1)(d) and (i) and 20(1)(l) and (p) and section 142.4, no amount shall be included or deducted in respect of payments under the obligation (other than fees and similar amounts) in computing the income of the taxpayer for the year. Subject to subsection 142.3(3), where a taxpayer holds a specified debt obligation at any time in a particular taxation year in which the taxpayer is a financial institution, and all or part of an amount required by paragraph 142.3(1)(a) or subsection 12(3) to be included in respect of the obligation in computing the taxpayer’s income for a preceding taxation year was not so included, that part of the amount shall be included in computing the taxpayer’s income for the particular year, to the extent that it was not included in computing the taxpayer’s income for a preceding taxation year. Subsections 142.3(1) and (2) do not apply for a taxation year in respect of a taxpayer’s specified debt obligation that is a mark-to-market property for the year; or an indexed debt obligation, other than a prescribed obligation. Subsection 142.3(1) does not apply to a taxpayer in respect of a specified debt obligation for the part of a taxation year throughout which the obligation is impaired where an amount in respect of the obligation is deductible because of subparagraph 20(1)(l)(ii) in computing the taxpayer’s income for the year.