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.
Subject: Forgiven Interest
This is in reply to your memorandum of August 28, 1991 concerning the timing of the application of paragraph 80(1)(b) and subsection 20(16) of the Income Tax (the "Act").
XXX
We agree that because of the words "where at any time in a taxation year" in the preamble of subsection 80(1) the adjustment to reduce the capital cost under paragraph 80(1)(b) would be made on XXX We also agree that because of the words "where at the end of a taxation year" in the preamble of subsection 20(16) a terminal loss can only be deducted XXX (the taxation year-end). Consequently at the end of the taxation year on XXX the taxpayer, in computing the amount of the terminal loss which may be deducted for the year, must take into consideration the amount of the XXX capital cost reduction under paragraph 80(1)(b).
As regards the taxpayers position, it is our view that as a general rule if at the time of settlement the taxpayer does not own any capital property no adjustment can be made to the cost of such property under section 80 of the Act. However, section 80 does apply where property is transferred to the creditor prior to the forgiveness or settlement as part of the same transaction or series of transactions in settlement of the debt.
We trust our comments will be of assistance to you.
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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