27 August 1990 Internal T.I. 901759 F - Bad Debts

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

August 27, 1990

Dear Sir:

This is in reply to your letter of July 24, 1990 concerning deductions for debts that have arisen on the sale of eligible capital property (ECP) that subsequently become doubtful or bad.

Paragraph 19 of IT-123R4 was an administrative position intended to provide relief for taxpayers who were required to include an amount in income in respect of proceeds of a disposition of an ECP which becomes uncollectible.  With the enactment of subsection 20(4.2) of the Act by 1988, c. 55, subsection 12(11), the comments in paragraph 19 of IT-123R4 are no longer valid.

A taxpayer would not be permitted to deduct under paragraph 20(1)(1) of the Act a reserve for doubtful debts respecting proceeds of disposition of an ECP in that such debts are notincluded in the calculation of a taxpayer's cumulative eligible capital and it is the excess amount described in subsection 14(1) of the Act that is required to be included in income.

We trust our comments will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c. Technical Publications Division