A corporation disposes of debt of a subsidiary at a substantial loss to another corporation which is related to it (and the subsidiary) by virtue only of s. 251(5)(b). The loss nonetheless is denied by s. 40(2)(e.1) and added to the adjusted cost base of the debt in the acquirer’s hands under s. 53(1)(f.1). However, the debt parking rule in s. 80.01(8) also applies to the acquisition, and deems that debt to be settled for an amount equal to its ACB to the acquirer.
CRA considered that the debt forgiveness rules could thereby apply to the debt because the deemed settlement under s. 80.01(8) occurs at the time of the acquisition, whereas the s. 53(1)(f.1) bump to the acquirer’s ACB occurs only immediately after that time