Debt forgiveness

Taxpayer cannot pay their outstanding debt to a creditor $4,520. Creditor forgave outstanding amount.

S80 ITA: Amount must use up against “unapplied non-capital losses of preceding years” (loss carryforwards)

JE:
DT AP $4000.00
CT HST $520.00 (reversing out ITC)
CT Other income - Debt forgiveness $4,520.00
To clear the AP amount

Corporation loss carryforward balace: $3,000.00.
$4520.00 - $3000 = $1520.00 remaining

According to S80, any remaining amounts must be used to reduce UCC of depreciable property.
An asset class that has a UCC of over $10,000.00 can be lowered by the remaining $1,520.00.

Do any of these Other income - debt forgiveness amounts go on line 101 of HST return?

If the debt forgiven is $4,520, then your debit to A/P is $4,520. Credit to income is $4,000.

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