Section 61.2 — Income Tax Act: Reserve for debt forgiveness for resident individuals

There may be deducted in computing the income for a taxation year of an individual (other than a trust) resident in Canada throughout the year such amount as the individual claims not exceeding the amount determined by the formula A + B - 0.2(C - $40,000) where A is the amount, if any, by which the total of all amounts each of which is an amount that, because of the application of section 80 to an obligation payable by the individual (or a partnership of which the individual was a member) was included under subsection 80(13) in computing the income of the individual for the year or the income of the partnership for a fiscal period that ends in the year (to the extent that, where the amount was included in computing income of a partnership, it relates to the individual’s share of that income) exceeds the total of all amounts deducted because of paragraph 80(15)(a) in computing the individual’s income for the year, B is the amount, if any, included under section 56.2 in computing the individual’s income for the year, and C is the greater of $40,000 and the individual’s income for the year, determined without reference to this section, paragraph 20(1)(ww), section 56.2, paragraph 60(w), subsection 80(13) and paragraph 80(15)(a).