Subsection 80(2) (old)
Administrative Policy
93 C.P.T.J. - Q.38
Where one corporation (Y) lends $100,000 U.S. to an affiliate (X) at a time that the equivalent Canadian dollar amount is $115,000, and the two...
3 June 1992 T.I. 913040 (May 1993 Access Letter, p. 198, ¶C76-067)
Where on the amalgamation of a debtor corporation and creditor corporation, the creditor corporation was owed a trade debt on which it previously...
Subsection 80(1) - Definitions
See Also
Mitchell v. R., [1996] 2 CTC 2659, 97 DTC 607
The taxpayer, who was the general manager of a corporation ("HSS"), acquired debt of another corporation ("LTM") for consideration that was found...
Hanson v. The Queen, 95 DTC 311, [1993] 2 CTC 3125 (TCC)
A promissory note that the taxpayer had given as consideration for a limited partnership interest acquired by him was found to be a legally...
Les aliments Kouri Inc. v. MNR, 93 DTC 35, [1992] 2 CTC 2307 (TCC)
The taxpayer paid a relatively nominal amount to acquire all the shares of a corporation ("Grandiose") having substantial non-capital losses and...
National Trust Co. v. Mead, [1990] 5 WWR 455, [1990] 2 S.C.R. 410
The assumption of a mortgage was found not to entail its novation in light inter alia of a clause in the original mortgage which provided that no...
MNR v. Mid-West Abrasive Co. of Canada Ltd., 73 DTC 5429, [1973] CTC 548 (FCTD)
Sweet, D.J. indicated that under an arrangement where a Canadian subsidiary agreed to pay interest "when requested" on advances totalling $210,000...
Administrative Policy
2007 Ruling 2007-0245281R3 - windup of income trust on sale of assets:3rd party
In connection with the winding-up of an income fund (the "Fund") after the acquisition of all its units, the Fund disposes of its assets...
9 September 2002 External T.I. 2002-0141005 - Debt forgiveness and capital contribution
Canco, which is indebted to an NRO in an amount greater than the value of its assets, receives a contribution of capital from its non-resident...
2 August 1994 External T.I. 9418055 - ECONOMIC DEFEASANCE
S.80 would not apply to a defeasance arrangement under which the debtor is not relieved of its legal obligations under the debt instrument but...
5 April 1994 T.I. (C.T.O. "Debtor's Gain on Settlement of Debt")
Non-capital losses arising before an acquisition of control can be utilized under s. 80(1)(a) even though the prospects for such losses otherwise...
93 C.R. - Q. 46
Pursuant to s. 80(1)(a), non-capital losses for preceding taxation years will not be reduced where they are not deductible in computing the...
9 May 1994 Internal T.I. 9409347 - SHARES ISSUED FOR DEBT
Where shares are issued in exchange for indebtedness, and the shares have a lower fair market value, s. 80 will apply to the difference...
92 C.R. - Q.18
Where s. 87(7) applies to a winding-up by virtue of s. 88(1)(e.2), s. 88(1) will not apply to an obligation of the subsidiary that is assumed on...
92 C.M.TC - Q.14
Where a debt owing by a cash-basis farmer including accrued but unpaid interest is settled by a cash payment of less than the full amount owing,...
91 CPTJ - Q.2
The acquisition of control of a parent holding an intercompany debt (resulting in the application of s. 111(4)(d)) does not result in the...
November 1991 Memorandum (Tax Window, No. 13, p. 17, ¶1581)
S.80 can be applied only at the partnership level and cannot be applied to the partners.
23 October 1991 Memorandum (Tax Window, No. 12, p. 23, ¶1549)
Accounts receivable arising in the normal course of the business of a taxpayer are not capital property of the taxpayer for purposes of s. 80.
11 October 1991 Memorandum (Tax Window, No. 11, p. 22, ¶1518)
Where there has been a forgiveness of debt of the taxpayer before the end of the year that the taxpayer has disposed of all its depreciable...
10 July 1991 Decision Summary (Tax Window, No. 5, p. 12, ¶1346)
S.80 will not apply to debt restructurings involving an extension of the time to repay or a change in the method of calculating interest at a...
26 June 1991 T.I. (Tax Window, No. 4, p. 8, ¶1317)
Where $100,000 is lent to A and B on a joint and severable basis and the debt later is settled for $60,000 paid by A and B in proportion to their...
3 December 1990 T.I. (Tax Window, Prelim. No. 2, p. 11, ¶1062)
Where receivables are transferred to the debtor corporation in consideration for treasury shares, s. 80 applies if the fair market value of the...
8 November 1990 T.I. (Tax Window, Prelim. No. 2, p. 10, ¶1046)
Ss.69(1)(a) and 80(1) both will be applied where a creditor accepts low fair market value shares in satisfaction of the debt previously owing to it.
90 C.P.T.J. - Q.5
Where the creditors of a corporation in financial difficulty agree to exchange their debt for common shares of the corporation on the basis of the...
11 June 1990 T.I. (November 1990 Access Letter, ¶1524)
Where a parent corporation sells depreciable property to a wholly-owned subsidiary under a sales agreement, the depreciable property is...
7 June 1990 T.I. (November 1990 Access Letter, ¶1522)
Where a corporate taxpayer makes a gain on the purchase of its obligation where s. 39(3) does not apply, s. 80 will apply to the gain.
10 April 1990 Memorandum (September 1990 Access Letter, ¶1421)
The loss of the right to sue by prescription does not result in the settlement or extinguishment of the debt.
30 October 89 T.I. (March 1990 Access Letter, ¶1146)
Because the disposition of money in Canadian currency would not result in a capital gain or a capital loss, money is not a capital property for...
89 C.M.TC - Q.21
a partnership is a taxpayer for purposes of ss.79 and 80.
88 C.R. - Q.14
Where the debts of a partnership have been settled or extinguished, s. 80(1)(a) will not reduce the losses of the partners.
87 C.R. - Q.58
On the conversion of an interest-bearing debt into a non-interest bearing debt, the interest-bearing debt will be settled or extinguished on the...
86 C.R. - Q.60
Generally, S.80 has no effect where the taxpayer has no loss carryforwards or capital property.
80 C.R. - Q.38
Re application of s. 80 to the cancellation of debt on the winding-up of a subsidiary.
80 C.R. Q.46
S.6(1)(a) generally will prevail over s. 80 when an employee stock-acquisition loan is forgiven.
79 C.R. Q.27
Where a shareholder contributes funds to the corporation which in turn are paid to satisfy the debt owing to him, s. 80 may apply. RC is prepared...
IT-293R "Debtor's Gain on Settlement of Debt"
IT-382 "Debts Bequeathed or Forgiven on Death"
IT-239R2 "Deductibility of Capital Losses from Guaranteeing Loans for Inadequate Consideration and from Loaning Funds at less than a Reasonable Rate of Interest in Non-arm's Length Circumstances"
Articles
Schafer, "Tax Implications of Restructuring and Refinancing", 1992 Corporate Management Tax Conference Report, c. 4.
Wertschek, "Application of a Corporation's Indebtedness to the Issue Price of its Shares Constitutes the Full Payment of the Debt", Corporate Structures and Groups, Vol. 1, No. 2, 1992, p. 16
Frankovic, "Taxing Times: Foreclosures, Default Sales, Debt Forgiveness, Doubtful and Bad Debts", 1991 Canadian Tax Journal, p. 889.
Durand, "Debt Restructuring for Companies in Financial Difficulty", Tax Aspects of Corporate Financing, CCH Seminars, September 13, 1990
Discussion of authorities supporting the proposition that s. 80 does not apply where a taxpayer in financial difficulty issues shares or debt in...
Brussa, "Strategies for Troubled Times", 1990 Conference Report, c. 17.
Flynn, "Restructuring Financially Troubled Corporations", 1989 Conference Report, c. 19.
Couzin, "Debt Restructuring", 1986 Corporate Management Tax Conference Report, p. 140.
Commercial Debt Obligation
See Also
Genex Communications inc. v. The Queen, 2010 DTC 1064 [at at 2840], 2009 TCC 583, rev'd 2011 DTC 5061 [at 5707], 2010 FCA 353)
Favreau J. found that non-interest bearing shareholder advances to a corporation satisfied paragraph (b) of the definition of "commercial debt...
Administrative Policy
9 April 2014 Internal T.I. 2014-0519231I7 - Debt forgiveness and guarantees
Forco, a wholly-owned subsidiary of Canco, borrowed under a secured "Borrowing" from a lending syndicate, with Canco providing a guarantee"...
20 May 2014 External T.I. 2013-0516121E5 F - Debt forgiveness
A compromise by Aco under Division I of Part III of the Bankruptcy and Insolvency Act resulted in reassessments owing by Aco for unremitted GST...
12 January 2009 External T.I. 2008-0293901E5 F - Article 80
A small business corporation with nominal accumulated profits purchased for cancellation shares in its capital having nominal capital in...
5 December 2003 External T.I. 2002-0165195 - Debt Forgiveness in Foreign Affiliates
"If a portion of the debt has been used to earn FAPI, and the remainder to earn active business income, we are of the view that the whole debt...
Articles
Marie-Andrée Beaudry, Dean Kraus, "Selected Income Tax Considerations in the Court-Approved Debt Restructurings and Liquidations", 2015 Annual CTF Conference paper
Whether forgiven amount arises on settlement of contractual claims (pp. 13:34-13:35)
In addition to the issue of deductibility of claims for...
Debtor
Cases
Metro Can Construction Ltd. v. The Queen, 2000 DTC 6495, 2001 FCA 227
McDonald J.A. accepted the position of the Crown that former s. 80(1) applied, in computing income at the partnership level, to a partnership...
See Also
Metro-Can Construction Ltd. v. R., 99 DTC 29, [1999] 2 CTC 2206 (TCC)
Because s. 80 in its pre-1995 form applied at the partnership level rather than the level of the member partners, the forgiveness of debts owing...
Excluded Obligation
See Also
Denthor Developments Ltd. v. The Queen, 97 DTC 667, [1997] 1 CTC 2075 (TCC)
The gain of the taxpayer, which was a land developer, on being discharged pursuant to a settlement agreement of bank indebtedness of $2.2 million...
Administrative Policy
10 October 2014 APFF Roundtable Q. 15, 2014-0538151C6 F - 2014 APFF Roundtable, Q. 15 - Section 143.4 & Reverse Earn-out
A newly formed corporation ("Newco") purchases the shares of a target corporation ("Target") for consideration that includes an earn-out clause...
23 March 2004 External T.I. 2003-0049031E5 F - Paragraphe 15(2) de la Loi et "montant remis"
In connection with finding that if an interest-free loan to the adult child of Opco’s sole shareholder in in 2003 was to be included in the...
29 January 1997 External T.I. 9635975 - PARTNERSHIP TO SOLE PROPRIETOR
"A reduction of the eligible capital expenditure of a taxpayer pursuant to paragraph 14(3)(b) of the Act is a result contemplated by subparagraph...
15 July 2009 External T.I. 2008-0289731E5 - Forgiveness of Accrued Interest
In response to a question whether s. 80 would apply where a creditor waived the right to receive accrued and payable interest on a debt, the...
Paragraph (a)
Administrative Policy
20 March 2017 External T.I. 2014-0545591E5 - Upstream Loan and Debt Forgiveness Rules
FA makes a loan to Canco, its wholly-owning parent. Canco then sells its interest in FA to a third party, but due to foreign tax and other...
16 May 2005 Internal T.I. 2005-0119061I7 F - Montant d'aide-actions
Prod Co, a wholly owned subsidiary of M Co and a "qualified corporation," produces a Canadian film or video production ("CFVP") at a cost of...
Forgiven Amount
See Also
Richer v. The Queen, 2009 DTC 1413, 2009 TCC 394
A forgiven amount arose in respect of the indebtedness of the taxpayer for unpaid contribution amounts to a partnership at the time that he...
Administrative Policy
2020 Ruling 2018-0772291R3 F - Multi-wings split-up net asset butterfly 55(3)(b)
A split-up butterfly of a CCPC distributing corporation (DC) entailed its division between the respective newly-incorporated transferee...
2016 Ruling 2015-0623731R3 - Subsections 55(2) and (2.1)
Background
As described in 2015-0601441R3, Sub1 and Sub2 (both taxable Canadian corporations and wholly-owned subsidiaries of Parent, a public...
12 September 2012 Annual CTF Roundtable, 2012-0453381C6 - 2012 CICA Conference
An insolvent (but not bankrupt) company negotiates a settlement with CRA of unpaid source deductions and unremitted GST for less than the balance...
28 November 2010 CTF Roundtable, 2010-0387451C6 - Debt forgiveness and Bankruptcy Annulment
IT-293R continues to reflect CRA's view that para. (i) of the definition of "forgiven amount" does not apply in circumstances in which a...
2012 Ruling 2012-0452821R3 - Forgiveness of debt
Aco is a Canadian public company holding interest-bearing promissory notes (Bco Notes) and shares of a Canadian subsidiary (Bco). Preliminarily...
20 April 2009 Internal T.I. 2008-0302511I7 - LYONS - Open Market Purchase
On an open market purchase of liquid yield option notes ("Lyons"), s. 80 will not apply on the repurchase if s. 39(3) so applies (i.e., there is a...
22 March 2005 Internal T.I. 2005-0115451I7 F - Extinction d'une remise de dette
The creditor forgave a debt pursuant to an agreement with an improved fortunes clause, such that the forgiveness was subsequently cancelled. Is...
30 April 2004 External T.I. 2004-005753
Respecting the situation where a wholly-owned corporation with an accounting deficit was wound-up pursuant to s. 238(1)(e) of the Business...
5 December 2002 Internal T.I. 2002-0155667 F - DEDUCTIBILITE DES INTERETS CAPITALISEES
In finding that the debt forgiveness rules would not apply to the compound interest component of interest owing on a loan that had been...
23 January 1996 External T.I. 9527905 F - ARTICLE 79 ET 80
"Section 79 has priority over section 80 except if paragraph 80.01(8) has applied in a previous year." [Translation]
19 January 1996 External T.I. 9528105 - FORGIVEN AMOUNT - 2ND PARTNERSHIP TIER
Where a corporation that is active in the operations of a particular partnership is not a member of the particular partnership but, instead, is a...
Articles
Janette Pantry, Carrie Smit, "Tax Considerations in Restructuring under the Companies’ Creditors Arrangement Act", draft 2020 CTF Annual Conference paper
Description of reverse vesting transaction (pp. 17-18)
- In a “reverse vesting transaction”, the obligations of the debtor which are to be...
Element B
Paragraph B(a)
Administrative Policy
15 June 2022 STEP Roundtable Q. 5, 2022-0928231C6 - Trust and Debt Forgiveness
A Canadian resident trust makes a loan to a beneficiary, who uses the loan proceeds for investment purposes. Later, the trust distributes the loan...
2016 Ruling 2016-0651621R3 - Partnership carried on by sole proprietor
Immediately before the winding-up of a partnership under s. 98(5), the general partner assumed a debt that was owing to it by the partnership,...
13 January 2016 External T.I. 2015-0604521E5 - ACB increase in paragraph 55(3)(a) reorganization
Described steps included the holder of a "Newco note" (Holdco) transferring the Newco note to Newco (the debtor) as a capital contribution or...
2013 Ruling 2013-0498551R3 - Loss Consolidation
Lossco, an indirect subsidiary of Parent, will make interest-bearing loans to (profitable) Parent, and Parent will subscribe for redeemable...
2010 Ruling 2009-0330901R3 - Reorganization of XXXXXXXXXX
A unit trust (Trust 1) purchases for cancellation most of its units held by its parent (Subco) in consideration for the transfer to Subco of debt...
Paragraph B(i)
Administrative Policy
Income Tax Mandatory Disclosure Rules Consultation: Sample Notifiable Transactions (Finance Release Webpage), 4 February 2022
The notifiable transactions designated by CRA pursuant to draft s. 237.4(3) with the concurrence of Finance include:
Temporary assignment into...
Articles
Janette Pantry, Carrie Smit, "Tax Considerations in Restructuring under the Companies’ Creditors Arrangement Act", draft 2020 CTF Annual Conference paper
Notwithstanding IT-293R, para. 26, there may be no forgiven amount even though debtor’s proposal subsequently approved (pp. 8-9)
- Although under...
Relevant loss balance
Administrative Policy
7 October 2011 APFF Roundtable, 2010-0371941C6 F - Application de l'article 80 - fusion/liquidation
Where following an acquisition of control of a subsidiary, non-capital losses and net capital losses of the subsidiary for taxation years ending...
Subsection 80(2) - Application of debt forgiveness rules
Paragraph 80(2)(a)
Cases
Dieni v. The Queen, 2001 DTC 290 (TCC)
The transfer of Quebec real estate by the taxpayer to a lender pursuant to a Deed of Giving In Payment which was executed following an action by...
Wigmar Holdings Ltd. v. R., 97 DTC 5203, [1997] 2 CTC 263 (FCA)
The predecessor of the taxpayer ("Diversified Holdings") purchased, in an arm's length transaction, all the shares of another BC company ("860")....
See Also
Central City Financial Services Ltd. v. R., 98 DTC 1021, [1997] 3 C.T.C. 2949 (TCC), aff'd 98 DTC 6645 (FCA)
A hand-written settlement agreement (whose terms were not clearly described in the reasons for judgment) between the guarantor of debt of the...
Carma Developers Ltd. v. The Queen, 96 DTC 1798, [1996] 3 CTC 2029 (TCC), briefly aff'd 96 DTC 6569 (FCA)
Under a plan that was approved by the requisite majority of creditors in accordance with the companies' Creditors Arrangement Act, various classes...
Administrative Policy
7 October 2022 APFF Roundtable Q. 9, 2022-0942281C6 F - Section 80 - proposals under BIA
Pursuant to a proposal under the Bankruptcy and Insolvency Act, Opco and its creditor agreed to write off $600,000 of its $1 million debt and to...
26 May 2016 Internal T.I. 2016-0628741I7 - Interaction of s. 80 and s. 143.4
The Taxpayer, which for a number of years had gone without paying interest on its Notes, had a Plan accepted in Year X and implemented in Year X+1...
12 October 2016 Internal T.I. 2016-0637781I7 - Employee loan or debt extinguished or settled
Respecting the situation where an employee debt became statute-barred, and the employer then wrote it off because it was thus no longer legally...
21 November 2014 External T.I. 2014-0535361E5 - Debt forgiveness rules
In the course of a general discussion, CRA stated:
Carma Developers Ltd. v. The Queen, [1996] 3 C.T.C. 2029 (T.C.C.), affirmed at [1997] 2 C.T.C....
8 August 2014 External T.I. 2014-0524951E5 - Debt forgiveness; liability on dissolution
Before going on to note that the debt parking rules in ss. 80.01(6) and (8) would in any event deem the debt to be forgiven, CRA noted that in the...
2 August 1994 T.I. 941805
Generally, it is the view of RC that s. 80 does not apply to an economic defeasance arrangement.
4 April 1997 External T.I. 9704365 - APPLICATION OF SECTION 80
"Section 80 would apply where a son repays a commercial debt obligation owing to his father from a gift received immediately before and for the...
Paragraph 80(2)(b)
Administrative Policy
13 June 2011 External T.I. 2011-0393561E5 - Debt forgiveness
In the course of a general discussion, CRA stated:
Paragraph 80(2)(b) of the Act is a deeming clause, and, in essence, it provides that for the...
15 July 2009 External T.I. 2008-0289731E5 - Forgiveness of Accrued Interest
In response to a question as to whether s. 80 would apply where interest is waived and forgiven in the same taxation year in which it was accrued,...
5 December 2002 Internal T.I. 2002-0155667 F - DEDUCTIBILITE DES INTERETS CAPITALISEES
An employee of a CCPC was lent money by the corporation to acquire common shares of the corporation. In the years thereafter, the employee paid no...
Paragraph 80(2)(g)
See Also
Pièces automobiles Lecavalier Inc. v. The Queen, 2014 DTC 1126, 2013 TCC 310
Prior to its acquisition by an arm’s length purchaser, the Canadian taxpayer used share subscription proceeds from its US parent to pay a...
Corner Brook Pulp and Paper Limited (Formerly Deer Lake Power Company Limited) v. The Queen, 2006 DTC 2329, 2006 TCC 70
In determining the fair market value of shares issues by a subsidiary ("Deerlake Power"), a power company, to its parent in satisfaction of debt...
King Rentals Ltd. v. The Queen, 96 DTC 1132, [1995] 2 CTC 2612 (TCC)
The pre-1994 version of s. 80 did not apply to the satisfaction of indebtedness of the taxpayer (a New Brunswick corporation) through the issuance...
Administrative Policy
10 March 1999 External T.I. 9829125 - PRICE ADJUSTMENT CLAUSE & 80(2)(G)
Although a price adjustment clause may be used for satisfying the requirements of s. 80(2)(g), "an acceptable price adjustment clause should not...
Paragraph 80(2)(h)
Administrative Policy
28 February 1996 External T.I. 9601795 - FOREIGN EXCHANGE LOSS
Where a debt denominated in U.S. dollars was replaced by a new debt obligation denominated in Canadian dollars whose amount was equivalent to the...
24 May 1995 CICA Roundtable Q. 4, 9512100 - DEBT FORGIVENESS
There is no forgiven amount where one commercial debt obligation is exchanged for another commercial debt obligation having the same principal...
Articles
Marie-Andrée Beaudry, Dean Kraus, "Selected Income Tax Considerations in the Court-Approved Debt Restructurings and Liquidations", 2015 Annual CTF Conference paper
Changes that reduce debt FMV (p. 13:7)
[C]hanges to certain terms of a debt, such as interest rates and payment schedules, should not lead to a...
Paragraph 80(2)(k)
Administrative Policy
2009 Ruling 2009-0313921R3 - Wind-up of creditor into debtor
Ruling that when a Canadian debtor is wound-up into its Canadian parent and an election under s. 80.01(4)(c) is made, then, in light of s....
28 February 1996 External T.I. 9601795 - FOREIGN EXCHANGE LOSS
Where a debt denominated in U.S. dollars was replaced by a new debt obligation denominated in Canadian dollars whose amount was equivalent to the...
Articles
Carrie Aiken, Johnson Tai, "Debt Restructuring Transactions – Issues, Strategies and Trends", 2016 CTF Annual Conference draft paper
Facts of conversion of DIP financing and USD bonds to equity (pp. 7-8)
Canco has US$1 billion of bonds (the "Bonds") payable to unrelated parties...
Didier Fréchette, Ryan Rabinovitch, "Current Issues Involving Foreign Exchange", 2015 CTF Annual Conference paper
Repayment of FX debt with Cdn-dollar note (pp. 26:31-32)
[T]he application of paragraph 80(2)(k) is less straightforward, however, when the debt...
Carrie Smit, "Debt Restructuring and the Falling Canadian Dollar"
No automatic offset of FX loss against forgiven amount on USD debt restructuring (p. 5)
Canadian corporations undergoing debt restructurings of US...
Thomas A. Bauer, "Restructuring Debt Obligations", 2008 Conference Report
Discussion of issues where US dollar debt is settled in Canadian dollars (an issue raised in 1996 Conference Report article by Firoz Ahmed and...
Paragraph 80(2)(o)
Administrative Policy
2 October 1997 External T.I. 9725425 - FORGIVENESS OF ONE JOINT DEBTOR
"Paragraph 80(2)(o) of the Act results in section 80 only applying to the particular person for his proportionate share ... . Section 80 of the...
Subsection 80(3) - Reductions of non-capital losses
Administrative Policy
17 June 2003 External T.I. 2002-0178255 - FORGIVENESS OF DEBT DEBT AFTER AOC+AMALG
The non-capital losses of a subsidiary which amalgamates with its parent would be available to be applied against a forgiven amount arising on the...
Articles
Joint Committee, "Excessive Interest and Financing Expenses Limitation Proposals", 5 May 2022 Submission of the Joint Committee
S. 80 should be extended to RIFEs
- Restricted interest and financing expenses should be treated similarly to non-capital losses so that, for...
Marie-Andrée Beaudry, Dean Kraus, "Selected Income Tax Considerations in the Court-Approved Debt Restructurings and Liquidations", 2015 Annual CTF Conference paper
Wind-up of subsidiary (Subco) immediately before CCAA compromise to insulate its non-capital losses (“NOLs”) from s. 80 (p. 13:16)
The winding...
Paragraph 80(3)(a)
Administrative Policy
23 May 2012 Internal T.I. 2011-0418071I7 F - Remise de dettes, PAC
After the taxpayer had settled a commercial debt obligation so as to give rise to a forgiven amount, it was assessed by CRA to increase its...
Subsection 80(4) - Reductions of capital losses
Administrative Policy
92 C.M.TC - Q.15
S.80(4) would not apply to accrued but unpaid interest for a cash basis farmer, because such interest is not deductible until paid.
92 C.M.TC - Q.14
Where a debt owing by a cash-basis farmer including accrued but unpaid interest is settled by a cash payment of less than the full amount owing,...
11 June 1991 T.I. (Tax Window, No. 4, p. 8, ¶1297)
S.80 does not apply to forgiven interest which was not deductible because of the thin capitalization rules.
Articles
Marie-Andrée Beaudry, Dean Kraus, "Selected Income Tax Considerations in the Court-Approved Debt Restructurings and Liquidations", 2015 Annual CTF Conference paper
Generation of net capital losses (NCLs) to absorb forgiven amount (p. 13:11)
Another common tax planning theme…is to trigger any embedded...
Subsection 80(5) - Reductions with respect to depreciable property
See Also
Richer v. The Queen, 2009 DTC 1413, 2009 TCC 394
After finding that various other provisions subsequent to ss.80(3) and (4) applied only if the taxpayer chose to utilize them, Jorré, J. found...
MNR v. Mid-West Abrasive Co. of Canada Ltd., 73 DTC 5429, [1973] CTC 548 (FCTD)
Sweet, D.J. indicated that under an arrangement where a Canadian subsidiary agreed to pay interest "when requested" on advances totalling $210,000...
Administrative Policy
2007 Ruling 2007-0245281R3 - windup of income trust on sale of assets:3rd party
In connection with the winding-up of an income fund (the "Fund") after the acquisition of all its units, the Fund disposes of its assets...
5 December 2003 External T.I. 2002-0165195 - Debt Forgiveness in Foreign Affiliates
"If a portion of the debt has been used to earn FAPI, and the remainder to earn active business income, we are of the view that the whole debt...
9 September 2002 External T.I. 2002-0141005 - Debt forgiveness and capital contribution
Canco, which is indebted to an NRO in an amount greater than the value of its assets, receives a contribution of capital from its non-resident...
2 August 1994 External T.I. 9418055 - ECONOMIC DEFEASANCE
S.80 would not apply to a defeasance arrangement under which the debtor is not relieved of its legal obligations under the debt instrument but...
5 April 1994 T.I. (C.T.O. "Debtor's Gain on Settlement of Debt")
Non-capital losses arising before an acquisition of control can be utilized under s. 80(1)(a) even though the prospects for such losses otherwise...
93 C.R. - Q. 46
Pursuant to s. 80(1)(a), non-capital losses for preceding taxation years will not be reduced where they are not deductible in computing the...
9 May 1994 Internal T.I. 9409347 - SHARES ISSUED FOR DEBT
Where shares are issued in exchange for indebtedness, and the shares have a lower fair market value, s. 80 will apply to the difference...
92 C.R. - Q.18
Where s. 87(7) applies to a winding-up by virtue of s. 88(1)(e.2), s. 88(1) will not apply to an obligation of the subsidiary that is assumed on...
92 C.M.TC - Q.14
Where a debt owing by a cash-basis farmer including accrued but unpaid interest is settled by a cash payment of less than the full amount owing,...
91 CPTJ - Q.2
The acquisition of control of a parent holding an intercompany debt (resulting in the application of s. 111(4)(d)) does not result in the...
November 1991 Memorandum (Tax Window, No. 13, p. 17, ¶1581)
S.80 can be applied only at the partnership level and cannot be applied to the partners.
23 October 1991 Memorandum (Tax Window, No. 12, p. 23, ¶1549)
Accounts receivable arising in the normal course of the business of a taxpayer are not capital property of the taxpayer for purposes of s. 80.
11 October 1991 Memorandum (Tax Window, No. 11, p. 22, ¶1518)
Where there has been a forgiveness of debt of the taxpayer before the end of the year that the taxpayer has disposed of all its depreciable...
10 July 1991 Decision Summary (Tax Window, No. 5, p. 12, ¶1346)
S.80 will not apply to debt restructurings involving an extension of the time to repay or a change in the method of calculating interest at a...
26 June 1991 T.I. (Tax Window, No. 4, p. 8, ¶1317)
Where $100,000 is lent to A and B on a joint and severable basis and the debt later is settled for $60,000 paid by A and B in proportion to their...
3 December 1990 T.I. (Tax Window, Prelim. No. 2, p. 11, ¶1062)
Where receivables are transferred to the debtor corporation in consideration for treasury shares, s. 80 applies if the fair market value of the...
8 November 1990 T.I. (Tax Window, Prelim. No. 2, p. 10, ¶1046)
Ss.69(1)(a) and 80(1) both will be applied where a creditor accepts low fair market value shares in satisfaction of the debt previously owing to it.
90 C.P.T.J. - Q.5
Where the creditors of a corporation in financial difficulty agree to exchange their debt for common shares of the corporation on the basis of the...
11 June 1990 T.I. (November 1990 Access Letter, ¶1524)
Where a parent corporation sells depreciable property to a wholly-owned subsidiary under a sales agreement, the depreciable property is...
7 June 1990 T.I. (November 1990 Access Letter, ¶1522)
Where a corporate taxpayer makes a gain on the purchase of its obligation where s. 39(3) does not apply, s. 80 will apply to the gain.
10 April 1990 Memorandum (September 1990 Access Letter, ¶1421)
The loss of the right to sue by prescription does not result in the settlement or extinguishment of the debt.
30 October 89 T.I. (March 1990 Access Letter, ¶1146)
Because the disposition of money in Canadian currency would not result in a capital gain or a capital loss, money is not a capital property for...
89 C.M.TC - Q.21
a partnership is a taxpayer for purposes of ss.79 and 80.
88 C.R. - Q.14
Where the debts of a partnership have been settled or extinguished, s. 80(1)(a) will not reduce the losses of the partners.
87 C.R. - Q.58
On the conversion of an interest-bearing debt into a non-interest bearing debt, the interest-bearing debt will be settled or extinguished on the...
86 C.R. - Q.60
Generally, S.80 has no effect where the taxpayer has no loss carryforwards or capital property.
80 C.R. - Q.38
Re application of s. 80 to the cancellation of debt on the winding-up of a subsidiary.
80 C.R. Q.46
S.6(1)(a) generally will prevail over s. 80 when an employee stock-acquisition loan is forgiven.
79 C.R. Q.27
Where a shareholder contributes funds to the corporation which in turn are paid to satisfy the debt owing to him, s. 80 may apply. RC is prepared...
IT-293R "Debtor's Gain on Settlement of Debt"
IT-382 "Debts Bequeathed or Forgiven on Death"
IT-239R2 "Deductibility of Capital Losses from Guaranteeing Loans for Inadequate Consideration and from Loaning Funds at less than a Reasonable Rate of Interest in Non-arm's Length Circumstances"
Articles
Schafer, "Tax Implications of Restructuring and Refinancing", 1992 Corporate Management Tax Conference Report, c. 4.
Wertschek, "Application of a Corporation's Indebtedness to the Issue Price of its Shares Constitutes the Full Payment of the Debt", Corporate Structures and Groups, Vol. 1, No. 2, 1992, p. 16
Frankovic, "Taxing Times: Foreclosures, Default Sales, Debt Forgiveness, Doubtful and Bad Debts", 1991 Canadian Tax Journal, p. 889.
Durand, "Debt Restructuring for Companies in Financial Difficulty", Tax Aspects of Corporate Financing, CCH Seminars, September 13, 1990
Discussion of authorities supporting the proposition that s. 80 does not apply where a taxpayer in financial difficulty issues shares or debt in...
Brussa, "Strategies for Troubled Times", 1990 Conference Report, c. 17.
Flynn, "Restructuring Financially Troubled Corporations", 1989 Conference Report, c. 19.
Couzin, "Debt Restructuring", 1986 Corporate Management Tax Conference Report, p. 140.
Subsection 80(9) - Reductions of adjusted cost bases of capital properties
Administrative Policy
22 March 2017 External T.I. 2016-0666481E5 - Debt forgiveness in a tiered partnership
A bottom partnership (BP) is wound-up into its partners including an upper-tier partnership (TP) in the same year that BP realizes...
10 January 2011 External T.I. 2010-0371021E5 - Debt forgiveness - 80(9)(a)
Debts issued by a partnership will not be considered to be debts issued by a corporate member of that partnership, provided that there is a bona...
Subsection 80(13) - Income inclusion
See Also
GKN Sinter Metals - St. Thomas Ltd. v. The Queen, 2006 DTC 3025, 2006 TCC 248
Before going on to consider the interpretation of regulations pursuant to the debt forgiveness rules that have since been repealed, Paris J....
Administrative Policy
7 October 2022 APFF Roundtable Q. 9, 2022-0942281C6 F - Section 80 - proposals under BIA
Pursuant to a proposal under the Bankruptcy and Insolvency Act, Opco and its creditor agreed to write off $600,000 of its $1 million debt and to...
2 September 2009 Internal T.I. 2009-0329251I7 F - Application du paragraphe 80(16)
The forgiveness of a commercial debt obligation that ACO had issued in the course of carrying on its business gave rise under s. 80(13) to income...
2 June 2003 External T.I. 2003-0002485 - DEBT FORGIVENESS-GIFT FUND
A farmer transfers farm property to an adult child at fair market value taking back a promissory note as consideration, then makes a gift to his...
Articles
Marie-Andrée Beaudry, Dean Kraus, "Selected Income Tax Considerations in the Court-Approved Debt Restructurings and Liquidations", 2015 Annual CTF Conference paper
Requirement to use related person’s tax attributes on s. 80.04 designation (p. 13:9)
Further considerations arise when a debtor seeks to make a...
Bernstein, "Update on Debt Forgiveness - Part I", Tax Profile, Vol. 4, No. 25, July 1995, p. 269.
Ahmed, "Debt Forgiveness Rules and Share Purchase Transactions", Canadian Current Tax, March 1995, Vol. 5, No. 6, p. 58.
- The creditor must accept the new debtor as principal debtor and not merely as an agent or guarantor; and
- The creditor must accept the new...
Subsection 80(15)
Administrative Policy
22 March 2017 External T.I. 2016-0666481E5 - Debt forgiveness in a tiered partnership
What is the interaction of ss. 80(9) and (15) where a bottom partnership (the “BP”) in a tiered partnership structure has a forgiven amount in...
21 June 2005 Internal T.I. 2005-0120341I7 F - Paragraphe 80(15).
Mr. X was a limited partner of a partnership (LP) that realized a gain on the settlement of a commercial debt obligation, and reduced the forgiven...
Subsection 80(16)
Administrative Policy
2 September 2009 Internal T.I. 2009-0329251I7 F - Application du paragraphe 80(16)
In the particular taxation year, a commercial debt obligation that ACO issued in the course of carrying on its business was forgiven. In addition,...