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.
SUBJECT: DEBTOR'S GAIN ON SETTLEMENT OF DEBT SECTION: 80(1),
80(4)]
1992 Corporate Management Tax Conference
FORGIVENESS OF LOAN INTEREST - FARMERS
Question 15
Subsection 80(4) provides that interest that was deductible is considered to be principal for the purposes of subsections 80(1) and (3). Prior to amendments to this subsection, only interest that was actually deducted was considered to be principal. Is it the Department's view that this change from "deducted" to "deductible" should not change the fact that a cash basis farmer would not have a forgiveness of debt for accrued but unpaid interest?
Department's Position
Subsection 80(4) applies where there has been a settlement or extinguishment of an obligation to pay interest that was deductible in computing income, or that would have been deductible had the interest not been capitalized under subsection 18(2) or (3.1) or section 21.
Subsection 80(4) would not apply to accrued but unpaid interest for a cash basis farmer, since the interest is not deductible until it is paid.
Prepared by: Allan Nelson
June 11, 1992
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