1991 CPTS ROUNDTABLE
QUESTION
21. Where the debts of a partnership have been settled or extinguished such that section 80 applies, will paragraph 80(1)(a) reduce the losses of the partners of the partnership? Assume that the partnership has no depreciable property or capital property on hand at the time that the debt is settled.
ANSWER
21. Section 80 would not apply to the partners of a partnership in respect of any part of the partnership's gain on settlement of its debts. Generally, section 80 will apply to the partners only where they have obligations to pay amounts and these obligations are subsequently settled for amounts less than their principal amounts.
If any part of the gain remains after applying section 80 to the partnership, there are no provisions in the Act that specifically deal with the treatment of that excess. However, depending on the circumstances, it is possible that either subsection 245(2) (GAAR) or 246(1) (benefits conferred on a person) may have application.
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