Tax wiki
s. 80.02
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 2004-08-31
Current text
In this section, commercial debt obligation, commercial obligation, distress preferred share and person have the meanings assigned by subsection 80(1).
General rules for distress preferred shares
(2)For the purpose of applying the provisions of this Act to an issuer of a distress preferred share,
the principal amount, at any time, of the share shall be deemed to be the amount (determined at that time) for which the share was issued;
the amount for which the share was issued shall, at any time, be deemed to be the amount, if any, by which the total of
the amount for which the share was issued, determined without reference to this paragraph, and
all amounts by which the paid-up capital in respect of the share increased after the share was issued and before that time
exceeds
the total of all amounts each of which is an amount paid before that time on a reduction of the paid-up capital in respect of the share, except to the extent that the amount is deemed by section 84 to have been paid as a dividend;
the share shall be deemed to be settled at such time as it is redeemed, acquired or cancelled by the issuer; and
a payment in satisfaction of the principal amount of the share is any payment made on a reduction of the paid-up capital in respect of the share to the extent that the payment would be proceeds of disposition of the share within the meaning that would be assigned by the definition proceeds of disposition in section 54 if that definition were read without reference to paragraph (j).
Substitution of distress preferred share for debt
(3)Where any part of the consideration given by a corporation to another person for the settlement or extinguishment at any time of a commercial debt obligation that was issued by the corporation and owned immediately before that time by the other person consists of a distress preferred share issued by the corporation to the other person,
for the purposes of section 80, the amount paid at that time in satisfaction of the principal amount of the obligation because of the issue of that share shall be deemed to be equal to the lesser of
the principal amount of the obligation, and
the amount by which the paid-up capital in respect of the class of shares that include that share increases because of the issue of that share; and
for the purpose of subparagraph (2)(b)(i), the amount for which the share was issued shall be deemed to be equal to the amount deemed by paragraph (a) to have been paid at that time.
Substitution of commercial debt obligation for distress preferred share
(4)Where any part of the consideration given by a corporation to another person for the settlement at any time of a distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of a commercial debt obligation issued by the corporation to the other person, for the purposes of section 80
the amount paid at that time in satisfaction of the principal amount of the share because of the issue of that obligation shall be deemed to be equal to the principal amount of the obligation; and
the amount for which the obligation was issued shall be deemed to be equal to its principal amount.
Substitution of distress preferred share for other distress preferred share
(5)Where any part of the consideration given by a corporation to another person for the settlement at any time of a particular distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of another distress preferred share issued by the corporation to the other person, for the purposes of section 80
the amount paid at that time in satisfaction of the principal amount of the particular share because of the issue of the other share shall be deemed to be equal to the amount by which the paid-up capital in respect of the class of shares that includes the other share increases because of the issue of the other share; and
for the purpose of subparagraph (2)(b)(i), the amount for which the other share was issued shall be deemed to be equal to the amount deemed by paragraph (a) to have been paid at that time.
Substitution of non-commercial obligation for distress preferred share
(6)Where any part of the consideration given by a corporation to another person for the settlement at any time of a distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of another share (other than a distress preferred share) or an obligation (other than a commercial obligation) issued by the corporation to the other person, for the purposes of section 80, the amount paid at that time in satisfaction of the principal amount of the distress preferred share because of the issue of the other share or obligation shall be deemed to be equal to the fair market value of the other share or obligation, as the case may be, at that time.
Deemed settlement on expiry of term
(7)Where at any time a distress preferred share becomes a share that is not a distress preferred share, for the purposes of section 80
the share shall be deemed to have been settled immediately before that time; and
a payment equal to the fair market value of the share at that time shall be deemed to have been made immediately before that time in satisfaction of the principal amount of the share.
Source: Justice Laws Website. Not an official version.
Historic text
This section has not been amended since the start of the point-in-time record on 31 August 2004.
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 80.02 links to the one before it.
Enacting and amending legislation
- 1995, c. 21, s. 27
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. 80.02.