| March 29, 1990 | |
| Audit Applications Division | Leasing and Financing Section |
| K. Warren, Director | Kevin Donnelly |
| 957-3500 | |
| Attention: Phil Jolie | |
| File No. 7-4255 |
Subject: 24(1) Application of subsection 80(1)
We are replying to your memorandum of August 21, 1989 in which you forwarded to us a referral which you had received from the Calgary District Office requesting your comments on the application of subsection 80(1) of the Income Tax Act (the "Act"). The material which you had sent with your request is returned with your memorandum.
24(1)
We confirm that the Department's position with respect to the application of subsection 80(1) in these circumstances is as set out in paragraph 2 of IT-293R - Special Release, which states in part:
... where a debtor corporation issues its own shares to a creditor in settlement of a debt... section 80 will have application to the corporation where the fair market value of the shares is less than the principal amount of the debt...
23
The amount of the subsection 80(1) adjustment will depend on the results of the Department's valuation of the 24(1) shares. We understand that the Calgary district office has referred this question to it's Valuations Section.
We have attached for your information a copy of an advance income tax ruling with respect to 24(1)
Brian DarlingDirectorFinancial Industries Division
Attachments