Pursuant to a proposal under the Bankruptcy and Insolvency Act, Opco and its creditor agreed to write off $600,000 of its $1 million debt and to revise the terms of repayment of the new balance of $400,000, including providing for payments over four years. After finding that the time of the forgiveness was at the time of the court approval of the proposal, CRA indicated that the resulting tax applicable to the income under s. 80(13) did not arise until that time, stating:
… Opco's debt attributable to the amount of income tax payable arising from the application of I.T.A. subsection 80(13) is not a "provable claim" for the purposes of a proposal, as the tax liability of the debtor corporation arising from the application of subsection 80(13) is generally not determinable until after the proposal is approved by a court.
The time at which the creditors' claims are determined is the time of filing of the notice of intention or proposal under subsection 62(1.1) of the B.I.A. However, the tax payable by a debtor under I.T.A. subsection 80(13) is not the same as a liability to which it is subject on the date it filed a proposal or an obligation it incurred before that date, and therefore cannot be a provable claim for the purposes of the proposal under subsections 66(1) and 121(1) of the B.I.A.