7 June 1990 Income Tax Severed Letter ACC9536 - Interpretation Bulletin IT-114 - Paragraph 22

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.

June 7, 1990

Dear Sirs:

Re: Interpretation Bulletin IT-114 - Paragraph 22

We are replying to your letter dated April 20, 1990 concerning the following extract from paragraph 22 of IT-114 , issued August 3, 1973:

"Conversely, where an obligation is purchased for cancellation at a price less than the issue price, the full amount of the gain is included in computing the income of a taxpayer in the moneylender business and in any other case the gain is not regarded as income nor is it regarded as a capital gain unless subsection 39(3)."

In your letter you question if the transaction described is subject to the section 80 rules, in view of the absence of any reference to section 80 in the Bulletin.

Notwithstanding the absence of any reference to section 80 in the quoted extract from paragraph 22 of IT-114 , and assuming the issue price and the principal amount of the obligation purchased are the same, we can confirm that the Department's position is that section 80 would apply in the situation described.

We will refer your letter to our Publications Division so that your concern can be considered in a future revision of IT-114 .

Our comments are provided in accordance with the practice referred to in paragraph 24 of Information Circular 70-6R.

Yours truly,

for Director Financial Industries Division Rulings Directorate