Debt Forgiveness and Its Tax Implications

This module explores the unique and often misunderstood tax implications of debt forgiveness under the Income Tax Act. Participants will learn about the debt forgiveness rules in sections 80 to 80.05, including how forgiven commercial obligations can reduce tax attributes or result in income inclusions. The module examines the impact on non-capital losses, UCC balances, eligible capital property, and other tax pools. It also reviews exceptions such as insolvency, bankruptcy, and related party rules. Case studies will illustrate how debt restructuring, settlements, or related-party transactions can trigger unintended tax consequences. By the end of this module, learners will be able to navigate the intricate debt forgiveness provisions and apply them confidently in corporate reorganizations, workouts, and creditor-debtor negotiations.