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Budget 2024 extends debt forgiveness rules to bankrupt corporations

On April 16, 2024, Canada’s Deputy Prime Minister and Minister of Finance, Chrystia Freeland, delivered the Liberal Government’s federal budget, Fairness for Every Generation (Budget 2024). The most notable tax measure in Budget 2024 is the proposal to increase the capital gains inclusion rate from one-half to two-thirds, for capital gains realized on or after June 25, 2024. This measure will apply to all capital gains realized by corporations and trusts, but only will apply to individuals in respect of the portion of capital gains realized in the year that exceeds $250,000.

Of particular interest to insolvency and restructuring professionals, Budget 2024 proposes to repeal the existing exception to the debt forgiveness rules for bankrupt corporations. Where applicable, the debt forgiveness rules reduce the losses and certain other tax attributes of a debtor by amounts that have been forgiven in respect of commercial debt obligations. 

For a discussion of these tax measures and others in Budget 2024, please see McCarthy Tétrault’s Budget 2024 Commentary.



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