2009 Ruling 2008-0300161R3 - Debt restructuring and forgiveness -- summary under Section 51.1

underline;">: Background. Forco holds a non-interest-bearing note (the Forco Note) of its Parent, which is in CCAA proceedings, as its only substantial asset. The Partnership of which Parent is the majority partner and a CBCA subsidiary of Parent (Subco) is the other partner, holds, as its only asset, a U.S. dollar non-interest-bearing note (the GP Note) owing by Parent with a latent FX capital loss to the Partnership.

Proposed transactions

:

  1. The terms of the Forco Note will be amended to change its governing law, and to make it convertible into a new interest-bearing note (the "New Forco Note"), with neither amendment resulting in a novation; and the Forco Note will be converted into the New Forco Note.
  2. The GP Note will be converted into the New GP Note similarly to 1.

Further transactions are implemented to eliminate the two notes in ATR-66-style transactions.

Rulings

:

  • The amendments/governing law changes in 1 and 5 will not result in a disposition of the Notes.
  • S. 51.1 will apply to the conversions in 1 and 5 such that Forco and the Partnership will be considered to dispose of the Notes for their ACB and to have reacquired them for the same amount.

See complete summary under s. 80.01(4).

Topics and taglines
Topic
Income Tax Act - s. 51.1
Tagline
d7 import status
Drupal 7 entity type
Node
Drupal 7 entity ID
312786
d7 import status
Drupal 7 entity type
Node
Drupal 7 entity ID
344833
Extra import data
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