Commercial Debt Forgiveness And Consolidated Groups

Q&A Tax

Question :

Company A and Company B are party of a wholly owned group.

The wholly owned group is consolidated for tax purposes.

Company B owes Company A $450k for tax purposes.

If Company A would like to write the debt off, how would the commercial debt forgiveness rules apply
in a consolidated tax environment?


Answer :

If the debt owed by company B is written off by company A while both companies are members of a tax
consolidated group, this transaction would be ignored under the single entity rule. The commercial debt
forgiveness rules would have no application to this transaction.

Please refer to TR 2004/11 for further information.


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