CRA considers that s. 12(1)(x) could apply to the compromise under the BIA of interest and penalties on unremitted GST (but not of the GST itself)

CRA has confirmed that, although the forgiveness of trade debts in the same year as they are incurred gives rise to s. 9 income, this will not be the case for trade debts compromised under Part III of the Bankruptcy and Insolvency Act.  Where there is such a compromise of a claim of the government for unremitted GST, s. 80 will not apply (on the basis that the unpaid GST is not a debt obligation "issued" by the debtor.)  However, rather intriguingly, CRA considers (in cryptic reasoning) that s. 12(1)(x)(iv) "could" apply to the compromise of interest or penalties on the unpaid GST (but not of the GST itself), unless a s. 12(2.2.) election is made.

Neal Armstrong.  Summaries of 20 May 2014 T.I. 2013-0516121E5 F  under s. 9 – debt forgiveness, s. 12(1)(x) and s. 80(1) – commercial debt obligation.