A Canadian-resident Vendor agreed to sell all the assets of its business, having a fair market value of $1,000, to the Canadian-resident Purchaser. Deferred revenue which the Vendor had previously included in its income under s. 12(1)(a) was $400. The parties agree to a $400 offset against the asset purchase price of $1,000 in consideration for the Purchaser's assumption of the Vendor's commitments.
After noting that if a s. 20(24) election were made, the Vendor would be entitled to deduct $400 and that amount would be included in the Purchaser's income under s. 12(1)(a), CRA noted that there is no prescribed form for the election. If no election was made, the Vendor would not be entitled to the deduction, and the payment would be included in the Purchaser's income under s. 9 or 12(1)(x).