February 16, 1982 D.H. Tingley 613-996-1834
Dear Sir:
Re: Subsection 39(2) and section 80 of the Income Tax Act ("Act")
We acknowledge receipt of your enquiry letter of October 16, 1981 and apologize for the delay in responding. This will also confirm our telephone conversation of February 8, 1982.
It is our opinion that section 80 of the Act will not apply to a situation where the foreign exchange gain of one predecessor corporation (the "creditor") to an amalgamation, effected pursuant to subsection 87(1) of the Act, is offset by a corresponding foreign exchange loss of the other predecessor corporation (the "debtor") to the amalgamation.
While there is no disposition of the inter-corporate debt by reason only of the amalgamation of the creditor and debtor, if the juridical effect of such an amalgamation is to cancel the said debt, paragraph 54 (c)(ii)(B) and subsection 80 of the Act might apply in the absence of an offset. It is to be noted that inter-corporate debts are specifically excluded from the property of the predecessor corporations that becomes the property of the new corporation under subsection 87(1) of the Act.
Yours truly,
for Director General Corporate Rulings Directorate Legislation Branch