Tax wiki
s. 42
PART I — Income Tax · DIVISION B — Computation of Income · SUBDIVISION C — Taxable Capital Gains and Allowable Capital Losses
Dispositions subject to warranty
Not yet annotated · Text current to 2026-06-21 · section last amended 2013-06-26
Current text
For the purposes of this Subdivision,
an amount received or receivable by a person or partnership (referred to in this subsection as the “vendor”), as the case may be, as consideration for a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of a property (referred to in this section as the “subject property”) disposed of by the vendor,
if it is received or receivable on or before the specified date, is deemed to be received as consideration for the disposition by the vendor of the subject property (and not to be an amount received or receivable by the vendor as consideration for the obligation) and is to be included in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and
in any other case, is deemed to be a capital gain of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the amount is received or becomes receivable; and
an outlay or expense paid or payable by the vendor under a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of the subject property disposed of by the vendor,
if it is paid or payable on or before the specified date, is deemed to reduce the consideration for the disposition by the vendor of the subject property (and not to be an outlay or expense paid or payable by the vendor under the obligation) and is to be deducted in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and
in any other case, is deemed to be a capital loss of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the outlay or expense is paid or becomes payable.
Meaning of
(2)In subsection (1), specified date means,
if the vendor is a partnership, the last day of the vendor’s fiscal period in which the vendor disposed of the subject property; and
in any other case, the vendor’s filing-due date for the vendor’s taxation year in which the vendor disposed of the subject property.
Source: Justice Laws Website. Not an official version.
Historic text
Immediately preceding version, in force from 2004-08-31 to 2013-06-25:
Show the text in force 2004-08-31 to 2013-06-25
Dispositions subject to warranty
42 In computing a taxpayer’s proceeds of disposition of any property for the purposes of this subdivision, there shall be included all amounts received or receivable by the taxpayer as consideration for warranties, covenants or other conditional or contingent obligations given or incurred by the taxpayer in respect of the disposition, and in computing the taxpayer’s income for the taxation year in which the property was disposed of and for each subsequent taxation year, any outlay or expense made or incurred by the taxpayer in any such year pursuant to or by reason of any such obligation shall be deemed to be a loss of the taxpayer for that year from a disposition of a capital property and for the purposes of section 110.6, that capital property shall be deemed to have been disposed of by the taxpayer in that year.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- 1970-71-72, c. 63, s. 1“42”
- 1985, c. 45, s. 16
- 1988, c. 55, s. 23
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 42 links to the one before it.
Enacting and amending legislation
- R.S., 1985, c. 1 (5th Supp.), s. 42; 2013, c. 34, s. 184
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. 42.