I am not using external OSC I assumed it used the internal OSC. I changed a few setting settings in my code and now see it is jumping to the timesup function. So it appears that the debugin is waiting but not recieving the anything and the jumps to the timesup function.

New code below:
Code:
'----------MASTER CODE------------
INCLUDE "modedefs.bas" 
DEFINE DEBUG_REG PORTC
DEFINE DEBUG_BIT 2
DEFINE DEBUG_BAUD 2400
DEFINE DEBUG_MODE 1
bvar    var     byte

Pause 2000
bvar = 1

Loop:
	DEBUG bvar
Goto Loop:


'----------SLAVE CODE------------
INCLUDE "modedefs.bas" 
DEFINE DEBUGIN_REG PORTC
DEFINE DEBUGIN_BIT 2
DEFINE DEBUG_BAUD 2400
DEFINE DEBUGIN_MODE 1

bvar   var     byte

TRISA = %001000
PORTA = %000001

Pause 2000

Loop:
	DEBUGIN 4000, timesup, [bvar]
	IF (bvar = 1) then
		PORTA = %000010
		Pause 4000
	ENDIF
Pause 2000
		PORTA = %000100
Pause 2000
		PORTA = %100000
Pause 2000

Goto Loop:

timesup:
	PORTA = %010000
Pause 2000
	PORTA = %000001
Return