A $1,000 escalating-rate investment certificate (that is an "investment contract") with a three-year term was issued to an individual on January 1 of a particular year. It bears interest, payable annually, at a rate of 6% in the first year (Year 1), 8% in the second year (Year 2) and 10% in the third year (Year 3). CRA stated:
[T]he "anniversary day" would be December 31 since that day is one year after the day before the date the contract was issued (the date of issue). Since the individual would hold an interest in the investment certificate on December 31 of Year 1, the individual would be required by subsection 12(4) to include in computing income for that year the interest accrued to the individual on the investment certificate to the end of that day to the extent that such interest was not otherwise included in computing the individual's income for the year or a preceding taxation year. The same logic would apply for Year 2 and/or Year 3.