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:
Does section 80 apply when a son repays a commercial debt obligation owing to his father from funds gifted from the father?
Position:
Question of fact
Reasons:
Possible avoidance of section 80
970436
XXXXXXXXXX C. Tremblay
Attention: XXXXXXXXXX
April 4, 1997
Dear Sirs:
Re: Section 80
This is in reply to your letter of February 3, 1997, wherein you set out 6 different examples where a father and son are debtor and creditor of a commercial debt obligation that is repaid by the son from funds that have been gifted to him.
The situations that is described appears to involve a series of actual proposed transactions. It is not our practice to give written opinions concerning proposed transactions, as indicated in Information Circular 70-6R3. Should you wish to request an advance ruling on these or other transactions which may be proposed, please refer to Information Circular 70-6R3 for the procedure to be followed. Although we are unable to provide any opinion in respect of the specific transactions described in your letter, we have set out some general comments which may be of some assistance.
Generally, the forgiveness of a commercial debt obligation to the debtor will be subject to section 80. It is a question of fact whether the application of section 80 will apply in the situations described in your letter. For example, in our view, where a son repays a commercial debt obligation from funds saved from prior gifts made by his father over the years, section 80, generally, would not be invoked. However, in our view, the provisions of section 80 would apply where a son repays a commercial debt obligation owing to his father from a gift received immediately before and for the sole purpose of repayment of the commercial debt obligation.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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