Tax wiki
s. 79
PART I — Income Tax · DIVISION B — Computation of Income · SUBDIVISION F — Rules Relating to Computation of Income
Definitions
Not yet annotated · Text current to 2026-06-21 · section last amended 2017-01-01
Current text
In this section,
creditor of a particular person includes a person to whom the particular person is obligated to pay an amount under a mortgage, hypothecary claim or similar obligation and, where property was sold to the particular person under a conditional sales agreement, the seller of the property (or any assignee with respect to the agreement) is deemed to be a creditor of the particular person in respect of that property; (créancier)
debt includes an obligation to pay an amount under a mortgage, hypothecary claim or similar obligation or under a conditional sales agreement; (dette)
person includes a partnership; (personne)
property does not include
money, or
indebtedness owed by or guaranteed by the government of a country, or a province, state, or other political subdivision of that country; (bien)
specified amount at any time of a debt owed or assumed by a person means
the unpaid principal amount of the debt at that time, and
unpaid interest accrued to that time on the debt. (montant déterminé)
Surrender of property
(2)For the purposes of this section, a property is surrendered at any time by a person to another person where the beneficial ownership of the property is acquired or reacquired at that time from the person by the other person and the acquisition or reacquisition of the property was in consequence of the person’s failure to pay all or part of one or more specified amounts of debts owed by the person to the other person immediately before that time.
Proceeds of disposition for debtor
(3)Where a particular property is surrendered at any time by a person (in this subsection referred to as the “debtor”) to a creditor of the debtor, the debtor’s proceeds of disposition of the particular property shall be deemed to be the amount determined by the formula
(A + B + C + D + E - F) × G/H
where
is the total of all specified amounts of debts of the debtor that are in respect of properties surrendered at that time by the debtor to the creditor and that are owing immediately before that time to the creditor;
is the total of all amounts each of which is a specified amount of a debt that is owed by the debtor immediately before that time to a person (other than the creditor), to the extent that the amount ceases to be owing by the debtor as a consequence of properties being surrendered at that time by the debtor to the creditor;
is the total of all amounts each of which is a specified amount of a particular debt that is owed by the debtor immediately before that time to a person (other than a specified amount included in the amount determined for A or B as a consequence of properties being surrendered at that time by the debtor to the creditor), where
any property surrendered at that time by the debtor to the creditor was security for
the particular debt, and
another debt that is owed by the debtor immediately before that time to the creditor, and
the other debt is subordinate to the particular debt in respect of that property;
is
where a specified amount of a debt owed by the debtor immediately before that time to a person (other than the creditor) ceases, as a consequence of the surrender at that time of properties by the debtor to the creditor, to be secured by all properties owned by the debtor immediately before that time, the lesser of
the amount, if any, by which the total of all such specified amounts exceeds the portion of that total included in any of the amounts determined for B or C as a consequence of properties being surrendered at that time by the debtor to the creditor, and
the amount, if any, by which the total cost amount to the debtor of all properties surrendered at that time by the debtor to the creditor exceeds the total amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, and
in any other case, nil;
is
where the particular property is surrendered at that time by the debtor in circumstances in which paragraph 69(1)(b) would, but for this subsection, apply and the fair market value of all properties surrendered at that time by the debtor to the creditor exceeds the amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, that excess, and
in any other case, nil;
is the total of all amounts each of which is the lesser of
the portion of a particular specified amount of a particular debt included in the amount determined for A, B, C or D in computing the debtor’s proceeds of disposition of the particular property, and
the total of
all amounts included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person because the particular debt was settled, or deemed by subsection 80.01(8) to have been settled, at or before the end of the taxation year that includes that time,
all amounts renounced under subsection 66(10), (10.1), (10.2) or (10.3) by the debtor in respect of the particular debt,
all amounts each of which is a forgiven amount (within the meaning assigned by subsection 80(1)) in respect of the debt at a previous time that the particular debt was deemed by subsection 80.01(8) to have been settled,
where the particular debt is an excluded obligation (within the meaning assigned by subsection 80(1)), the particular specified amount, and
the lesser of
the unpaid interest accrued to that time on the particular debt, and
the total of
the amount, if any, by which the total of all amounts included because of section 80.4 in computing the debtor’s income for the taxation year that includes that time or for a preceding taxation year in respect of interest on the particular debt exceeds the total of all amounts paid before that time on account of interest on the particular debt, and
such portion of that unpaid interest as would, if it were paid, be included in the amount determined under paragraph 28(1)(e) in respect of the debtor;
is the fair market value at that time of the particular property; and
is the fair market value at that time of all properties surrendered by the debtor to the creditor at that time.
Subsequent payment by debtor
(4)An amount paid at any time by a person as, on account of or in satisfaction of, a specified amount of a debt that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) in respect of a property surrendered before that time by the person shall be deemed to be a repayment of assistance, at that time in respect of the property, to which
subsection 39(13) applies, where the property was capital property (other than depreciable property) of the person immediately before its surrender;
paragraph 20(1)(hh.1) applies, where the cost of the property to the person was an eligible capital expenditure at the time the property was acquired;
the description of E in the definition cumulative Canadian exploration expense in subsection 66.1(6), the description of D in the definition cumulative Canadian development expense in subsection 66.2(5) or the description of D in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), as the case may be, applies, where the cost of the property to the person was a Canadian exploration expense, a Canadian development expense or a Canadian oil and gas property expense; or
paragraph 20(1)(hh) applies, in any other case.
Subsequent application with respect to employee or shareholder debt
(5)Any amount included under paragraph 6(1)(a) or subsection 15(1) in computing a person’s income for a taxation year that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) as a consequence of properties being surrendered before the year by the person shall be deemed to be a repayment by the person, immediately before the end of the year, of assistance to which subsection 79(4) applies.
Surrender of property not payment or repayment by debtor
(6)Where a specified amount of a debt is included in the amount determined at any time for A, B, C or D in subsection 79(3) in respect of a property surrendered at that time by a person to a creditor of the person, for the purpose of computing the person’s income, no amount shall be considered to have been paid or repaid by the person as a consequence of the acquisition or reacquisition of the surrendered property by the creditor.
Foreign exchange
(7)Where a debt is denominated in a currency (other than Canadian currency), any amount determined for A, B, C or D in subsection 79(3) in respect of the debt shall be determined with reference to the relative value of that currency and Canadian currency at the time the debt was issued.
Source: Justice Laws Website. Not an official version.
Historic text
Immediately preceding version, in force from 2004-08-31 to 2016-12-31:
Show the text in force 2004-08-31 to 2016-12-31
Definitions
79 (1) In this section,
creditor
créancier
creditor of a particular person includes a person to whom the particular person is obligated to pay an amount under a mortgage, hypothecary claim or similar obligation and, where property was sold to the particular person under a conditional sales agreement, the seller of the property (or any assignee with respect to the agreement) is deemed to be a creditor of the particular person in respect of that property; (créancier)
debt
dette
debt includes an obligation to pay an amount under a mortgage, hypothecary claim or similar obligation or under a conditional sales agreement; (dette)
person
personne
person includes a partnership; (personne)
property
bien
property does not include
(a) money, or
(b) indebtedness owed by or guaranteed by the government of a country, or a province, state, or other political subdivision of that country; (bien)
specified amount
montant déterminé
specified amount at any time of a debt owed or assumed by a person means
(a) the unpaid principal amount of the debt at that time, and
(b) unpaid interest accrued to that time on the debt. (montant déterminé)
Surrender of property
(2) For the purposes of this section, a property is surrendered at any time by a person to another person where the beneficial ownership of the property is acquired or reacquired at that time from the person by the other person and the acquisition or reacquisition of the property was in consequence of the person’s failure to pay all or part of one or more specified amounts of debts owed by the person to the other person immediately before that time.
Proceeds of disposition for debtor
(3) Where a particular property is surrendered at any time by a person (in this subsection referred to as the “debtor”) to a creditor of the debtor, the debtor’s proceeds of disposition of the particular property shall be deemed to be the amount determined by the formula
(A + B + C + D + E - F) × G/H
where
Ais the total of all specified amounts of debts of the debtor that are in respect of properties surrendered at that time by the debtor to the creditor and that are owing immediately before that time to the creditor;Bis the total of all amounts each of which is a specified amount of a debt that is owed by the debtor immediately before that time to a person (other than the creditor), to the extent that the amount ceases to be owing by the debtor as a consequence of properties being surrendered at that time by the debtor to the creditor;Cis the total of all amounts each of which is a specified amount of a particular debt that is owed by the debtor immediately before that time to a person (other than a specified amount included in the amount determined for A or B as a consequence of properties being surrendered at that time by the debtor to the creditor), where(a) any property surrendered at that time by the debtor to the creditor was security for
(i) the particular debt, and
(ii) another debt that is owed by the debtor immediately before that time to the creditor, and
(b) the other debt is subordinate to the particular debt in respect of that property;
(a) where a specified amount of a debt owed by the debtor immediately before that time to a person (other than the creditor) ceases, as a consequence of the surrender at that time of properties by the debtor to the creditor, to be secured by all properties owned by the debtor immediately before that time, the lesser of
(i) the amount, if any, by which the total of all such specified amounts exceeds the portion of that total included in any of the amounts determined for B or C as a consequence of properties being surrendered at that time by the debtor to the creditor, and
(ii) the amount, if any, by which the total cost amount to the debtor of all properties surrendered at that time by the debtor to the creditor exceeds the total amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, and
(b) in any other case, nil;
(a) where the particular property is surrendered at that time by the debtor in circumstances in which paragraph 69(1)(b) would, but for this subsection, apply and the fair market value of all properties surrendered at that time by the debtor to the creditor exceeds the amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, that excess, and
(b) in any other case, nil;
(a) the portion of a particular specified amount of a particular debt included in the amount determined for A, B, C or D in computing the debtor’s proceeds of disposition of the particular property, and
(b) the total of
(i) all amounts included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person because the particular debt was settled, or deemed by subsection 80.01(8) to have been settled, at or before the end of the taxation year that includes that time,
(ii) all amounts renounced under subsection 66(10), (10.1), (10.2) or (10.3) by the debtor in respect of the particular debt,
(iii) all amounts each of which is a forgiven amount (within the meaning assigned by subsection 80(1)) in respect of the debt at a previous time that the particular debt was deemed by subsection 80.01(8) to have been settled,
(iv) where the particular debt is an excluded obligation (within the meaning assigned by subsection 80(1)), the particular specified amount, and
(v) the lesser of
(A) the unpaid interest accrued to that time on the particular debt, and
(B) the total of
(I) the amount, if any, by which the total of all amounts included because of section 80.4 in computing the debtor’s income for the taxation year that includes that time or for a preceding taxation year in respect of interest on the particular debt exceeds the total of all amounts paid before that time on account of interest on the particular debt, and
(II) such portion of that unpaid interest as would, if it were paid, be included in the amount determined under paragraph 28(1)(e) in respect of the debtor;
Subsequent payment by debtor
(4) An amount paid at any time by a person as, on account of or in satisfaction of, a specified amount of a debt that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) in respect of a property surrendered before that time by the person shall be deemed to be a repayment of assistance, at that time in respect of the property, to which
(a) subsection 39(13) applies, where the property was capital property (other than depreciable property) of the person immediately before its surrender;
(b) paragraph 20(1)(hh.1) applies, where the cost of the property to the person was an eligible capital expenditure;
(c) the description of E in the definition cumulative Canadian exploration expense in subsection 66.1(6), the description of D in the definition cumulative Canadian development expense in subsection 66.2(5) or the description of D in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), as the case may be, applies, where the cost of the property to the person was a Canadian exploration expense, a Canadian development expense or a Canadian oil and gas property expense; or
(d) paragraph 20(1)(hh) applies, in any other case.
Subsequent application with respect to employee or shareholder debt
(5) Any amount included under paragraph 6(1)(a) or subsection 15(1) in computing a person’s income for a taxation year that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) as a consequence of properties being surrendered before the year by the person shall be deemed to be a repayment by the person, immediately before the end of the year, of assistance to which subsection 79(4) applies.
Surrender of property not payment or repayment by debtor
(6) Where a specified amount of a debt is included in the amount determined at any time for A, B, C or D in subsection 79(3) in respect of a property surrendered at that time by a person to a creditor of the person, for the purpose of computing the person’s income, no amount shall be considered to have been paid or repaid by the person as a consequence of the acquisition or reacquisition of the surrendered property by the creditor.
Foreign exchange
(7) Where a debt is denominated in a currency (other than Canadian currency), any amount determined for A, B, C or D in subsection 79(3) in respect of the debt shall be determined with reference to the relative value of that currency and Canadian currency at the time the debt was issued.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 79
- 1994, c. 7, Sch. II, s. 57
- 1995, c. 21, s. 26
- 1998, c. 19, s. 109
- 2001, c. 17, s. 209
Earlier versions: Justice Laws point-in-time versions of the Act (from 31 August 2004), and CanLII (under “Versions”). On Justice Laws, each version of section 79 links to the one before it.
Enacting and amending legislation
- R.S., 1985, c. 1 (5th Supp.), s. 79; 1994, c. 7, Sch. II, s. 57; 1995, c. 21, s. 26; 1998, c. 19, s. 109; 2001, c. 17, s. 209; 2016, c. 12, s. 22
Text before 2004 is found in the annual Statutes of Canada cited above. Application and coming-into-force provisions are not part of the consolidation; see the amending Acts.
Cross-references
Citation
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 79.