5 November 1992 Income Tax Severed Letter 9231495 - 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.

923149
        24(1)                              M. Cooke
                                           (613) 957-8972

Attention: 19(1)

November 5, 1992

Dear Sirs:

Re: Request for Technical Interpretations

This is in reply to your letter of October 19, 1992, in which you requested technical interpretations with respect to the application of section 80 and paragraph 85(1)(b), as made applicable by paragraph 97(2)(a), of the Income Tax Act (the "Act").

We cannot provide you with the technical interpretations requested because the particular circumstances referred to in your letter would appear to be contemplated transactions. As noted in paragraph 21 of Information Circular 70-6R2, when a requested interpretation relates to a contemplated transaction, a taxpayer should request an advance ruling rather than an opinion.

Although we are unable to respond to your request for technical interpretations, we have set out below some general comments relevant to your concerns.

Paragraph 4 of Interpretation Bulletin IT-448 , outlines our general views on whether there is a disposition of a debt obligation when changes are made to the terms of the obligation. In order for the Department to determine whether there would be a disposition of the debt obligation in your particular fact situation, we would have to consider whether a change in the underlying security of the debt obligation would be considered as so fundamental as to reasonably regard the amended debt obligation as being the same property as that which underwent the change. This determination can only be made after reviewing all of the relevant facts.

Further, whether section 80 of the Act would apply on such a change to the terms of the debt obligation and/or whether subsection 97(2) of the Act would apply, as described in your letter, can only be determined after assessing all the relevant factors in the particular set of circumstances.

The general anti-avoidance rule in section 245 of the Act may apply in circumstances where the terms of a debt obligation are amended, or where debt or the security for the debt is transferred, and these changes or transfers are undertaken either alone or as part of a series of transactions designed to avoid or alleviate the application of section 80 of the Act to a forgiveness of debt.

Yours truly,

for Chief Financing & Leasing Section Financial Industries Division Rulings Directorate

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