15 September 1995 External T.I. 9428735 - SECTION 77

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Principal amount for sec 77 and 51

Position TAKEN:

No

Reasons FOR POSITION TAKEN:

Value at maturity may not be the same as the principal or face amount of the bond.

		942873
XXXXXXXXXX		C. Tremblay

Attention: XXXXXXXXXX

September 15, 1995

Dear Sirs:

Re: Section 77 of the Income Tax Act (the "Act")

This is in reply to your letter of November 8, 1994, and further to our telephone conversation of July 13, 195 (XXXXXXXXXX/Tremblay) wherein you asked us to confirm that the word "amount" referred to in section 77 of the Act and subsection 51(1) of the Act is a reference to the principal amount of the debt in question. We apologize for the delay.

We are not sure from your letter whether a series of actual or proposed transactions are contemplated. It is not our practice to give written opinions concerning proposed transactions, as indicated in Information Circular 70-6R2. Although we are unable to provide any opinion in respect of any specific transactions, we have set out some general comments which may be of some assistance.

The word "amount" is defined in subsection 248(1) of the Act and generally means money, rights or things expressed in terms of the amount of money or the value in terms of money in the right or thing.

Section 77 of the Act provides for a rollover when a taxpayer exchanges bonds for other bonds of the same debtor. However, the rollover provision is limited to cases where the exchanged bond has a provision giving the owner the right to make the exchange, and the amount payable at maturity on the acquired bond is the same as the amount that would have been payable at maturity on the exchanged bond (i.e., the bonds have the same maturity values). Accordingly, we cannot confirm that the reference to "amount" in section 77 of the Act is a reference to the principal amount of the debt obligation in question.

Since we have not received the revision that would clarify your question with regards to subsection 51(1) of the Act, we have considered your question on subsection 51(1) of the Act to have been withdrawn; therefore, we have limited our comments to section 77 of the Act.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch