Commercial Debt Forgiveness - Creditor made bankrupt - is debt forgiven?

Where a creditor is made bankrupt and a debt becomes vested in the trustee in bankruptcy is the debt forgiven under subsection 245-35(1) of Schedule 2C to the Income Tax Assessment Act (ITAA 1936)?

No. The debtor's obligation to pay the debt has not been forgiven under subsection 245-35(1) of Schedule 2C to the ITAA 1936.

After 27 June 1996 a creditor was made bankrupt.

Subsequently a debt owed to the creditor became vested in the creditor's trustee in bankruptcy.

The debt was a commercial debt for the purposes of section 245-25 of Schedule 2C to the ITAA 1936.

Section 245-10 of Schedule 2C to the ITAA 1936 provides that Schedule 2C applies where a forgiveness of a commercial debt occurs after 27 June 1996.

The vesting of the debt does not constitute the forgiveness of the debt under subsection 245-35(1) of Schedule 2C to the ITAA 1936 as the relevant debt was neither released, waived or otherwise extinguished.