CRA considers that the debt parking rule can apply even if no capital loss is recognized

If a corporation disposes of debt of a subsidiary at a substantial loss to another corporation which is related to it (and the subsidiary) by virtue only of s. 251(5)(b), the loss nonetheless is denied by s. 40(2)(e.1) and added to the adjusted cost base of the debt in the acquirer’s hands under s. 53(1)(f.1). However, the debt parking rule in s. 80.01(8) also applies to the acquisition, and deems that debt to be settled for an amount equal to its ACB to the acquirer.

CRA considers that the debt forgiveness rules could thereby apply to the debt because the deemed settlement under s. 80.01(8) occurs at the time of the acquisition, whereas the s. 53(1)(f.1) bump to the acquirer’s ACB occurs only immediately after that time, i.e., the debt apparently is deemed to be settled for an amount equal to the acquirer’s cost rather than its post-bump ACB.

Neal Armstrong. Summary of 31 March 2016 T.I. 2014-0524391E5 Tr under s. 80.01(8).