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ARTICLE · 09 MAY 2013

ThumbTax: New Tax Rules Adversely Affect Monetization, Derivative And Similar Transactions

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The Federal budget which was recently released, proposes to introduce new rules that may have significant tax implications.

CanadaTax
Anna Malazhavaya
Anna Malazhavaya
Matthew Peters
Matthew Peters
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The Federal budget, released on March 21, 2013 (the "Budget"), proposes to introduce new rules that may have significant tax implications to any person entering into agreements or other arrangements that effectively lock in the gain on property held by the person or certain other non-arm's length persons but do not give rise to a taxable disposition of the property. The categories of transactions that may be affected are extremely broad and may include certain hedging transactions, forward sales, exchangeable debt and put-call arrangements (see the table below for examples of transactions that may be subject to the proposed rules).

Currently, such arrangements are not taxable in many circumstances because they are structured to defer an "actual sale" of the property until sometime in the future, even though the arrangements may effectively crystallize the taxable gain and often allow the person to monetize their position upon entering into the arrangements.

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