CRA indicates that the amount of capital gain realized on the partial repayment of two advances with low and full basis turned on whether they were separate properties and how the debtor applied the repayment

If two advances owing to the taxpayer by the same corporation were not a single property and not identical properties (a determination which per s. 248(12) was to be made without regard to their different principal amounts), then the first advance had a low ACB due to the prior application of s. 80(10), and the second advance had full basis. CRA noted that under the Quebec law, the debtor generally had the right to indicate, when repaying, which debt was being discharged. Accordingly, whether the amount of a partial repayment of the advances that exceeded the amount of the first advance but not that of the second gave rise to a capital gain turned on whether the debtor applied the repayment first to the first advance or to the second.

On the other hand, if they were identical properties or a single property (it did not matter which), their ACBs would be pooled and a capital gain, based on using a pro rata portion of the total ACB, would be realized on the repayment.

Neal Armstrong. Summary of 9 October 2025 APFF Roundtable, Q.7 under s. 47(1) and General Concepts – Payment and Receipt.