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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether subsection 74.5(2) can apply to a demand note
Position: Yes
Reasons: A fixed term is not one of the criteria set out in 74.5(2)
XXXXXXXXXX 2002-014369
Denise Dalphy, LL.B.
(613) 941-1722
July 16, 2002
Dear XXXXXXXXXX:
Re: Attribution Rules
We are writing in reply to your letter dated May 31, 2002 wherein you enquired whether a promissory note that is payable on demand, bears interest at the prescribed rate in effect at the time that the loan was made, and where interest is paid within 30 days of each year end can meet the requirements of subsection 74.5(2) of the Income Tax Act (the "Act").
Written confirmation of the consequences inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5. Where the particular transactions are partially completed or completed, the enquiry should be addressed to the relevant Tax Services Office. Notwithstanding the foregoing, we are providing the following comments.
The fact that a loan is payable on demand will not, in and of itself, prevent subsection 74.5(2) of the Act from applying.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.
Yours truly,
Steve Tevlin
for Director
Financial Industries Division
Income Tax Rulings Directorate
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