1 May 1990 Income Tax Severed Letter AC74105 - Inducement Payments - Forgiveness of Debt by Crown Corporation

MAY 1 1990

B.J. Bryson, Acting Director    Specialty Rulings
Current Amendments and            Directorate
  Regulations Division          C. Tremblay
                                957-2095

Paragraph 12(1)(x) and Section 80          7-4105

In a previous memorandum, we outlined a situation where a provincial crown corporation was providing a form of financial assistance to a Co-op by way of yearly cancellation of share certificates. In turn, you sought comments from the Department of Finance.

This is to advise you that we are recommending to the District Office that they assess the forgiveness as an inducement pursuant to paragraph 12(1)(x) of the Act. We base our recommendation according to Mr. Short's letter and the fact that there is evidence in an earlier unsigned agreement that the taxpayer was being induced.

Accordingly, the transactions can be caught by subparagraph 12(1)(x)(iii) of the Act.

B.W. Dath Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch