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.
DRAFT
REVENUE CANADA ROUND TABLE
Tax Executive Institute Conference
December 13, 1994
Question No. XV
FORGIVENESS OF DEBT RULES - FOREIGN AFFILIATES
Do the forgiveness of debt rules in section 80 apply to the forgiveness of debt of a controlled foreign affiliate by an unrelated, non-resident party? The determination of the amount of the foreign affiliate's foreign accrual property income ("Fapi") will be affected depending on whether section 80 applies to reduce the affiliate's non-capital losses.
Department's Position
Fapi is computed under Canadian tax rules. Section 80 is only relevant where a foreign affiliate's debt has been forgiven and the interest paid or payable on the debt is (or if interest had been payable would have been) deductible in computing the Fapi of the affiliate. However a foreign affiliate would not have a non-capital loss unless the loss related to a business carried on in Canada. In the more usual circumstances, the impact of section 80 would be to grind the capital cost of the affiliate's depreciable property, or the adjusted cost base of its capital property.
The above response relates to the law at the present time and does not take into account the draft legislation for section 80 released by the Department of Finance in July 1994.
Prepared by: Tim Kuss
Date: December 6, 1994
File # 943078
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