X Ltd. is in financial difficulty. It has just learned that its major supplier is willing to forgive $100,000 of the debt owed by X Ltd. in order that X Ltd. will not be forced to declare bankruptcy. X Ltd. has built up non-capital losses of $80,000 over the last few years. It still owns the following assets: land (cost $70,000), building (cost $120,000; UCC $92,000), equipment (cost $40,000; UCC $32,000), intangibles (cost $5,000; CEC $4,700).
Determine the tax implications of the debt forgiveness. Income tax reference: ITA 80.