The predecessor of the taxpayer ("Diversified Holdings") purchased, in an arm's length transaction, all the shares of another BC company ("860"). Prior to the amalgamation of Diversified Holdings and 860 to continue as the taxpayer, a corporation wholly owned by the taxpayer's individual shareholder ("173235") purchased mortgage indebtedness of 860 owing to Central Trust Company as part of transactions that resulted in the encumbered land being transferred by 860 to Central Trust Company and the mortgage being discharged.
Although agreeing (at p. 5205) "that for all practical purposes the debt no longer exists", Strayer J.A. indicated (at p. 5206) "that for a debt to be settled or extinguished within the meaning of subsection 80(1) there must be a legally binding termination in form and that does not exist in the present case".