10 August 1994 External T.I. 9419945 - DEBT FORGIVENESS

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

debt forgiveness- bequest inheritance

Position TAKEN:

no opinion

Reasons FOR POSITION TAKEN:

legal determination- provincial law

XXXXXXXXXX 941994

Attention: XXXXXXXXXX

August 10, 1994

Dear Sirs:

Re: Paragraph 80(1)(h) of the Income Tax Act (the "Act")

We are writing in response to your letter of May 11, 1994, wherein you requested our opinion with respect to the application of paragraph 80(1)(h) of the Act in the following hypothetical situation.

Mr. A enters into an agreement to sell certain property to his daughter, Ms. B. The debt is payable 30 days after demand and stipulates that on the death of Mr. A, any balance owing under the agreement will be forgiven.

You have asked that we confirm that the agreement would meet the exemption of paragraph 80(1)(h) of the Act, which states that the rules in subsection 80(1) of the Act do not apply if the debt owing is extinguished by way of bequest or inheritance.

Opinion

It is our opinion that the determination of whether the forgiveness under the agreement constitutes a bequest or inheritance is a question of fact which can only be determined after a review of all the particular documents. Such a determination may also depend on the Provincial laws governing relevant agreements or inheritances.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch