Previous measure not yet enacted

Draft section 3.1 of the Income Tax Act was first introduced on October 31, 2003, to be effective for taxation years commencing after 2004. The provision was intended to legislate a “no reasonable expectation of profit” rule. It would have had a particularly harsh impact on interest deductibility in many circumstances.

In response to harsh criticism from the tax community and others, the provision is being reviewed by Finance. The Budget makes no mention of the provision. It is not clear when it will be reintroduced, what changes will be made to it and what its effective date will be.