20 January 1997 External T.I. 9632695 - INTEREST RATE SWAPS AND FAPI

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:

Whether interest rate swaps would come within the
purview of the term "similar agreements" as that
term is used in the FAPI provisions of subsection
95(2.1) and paragraph (a) of the definition of

"indebtedness" in subsection 95(2.5).

Position:

Yes

Reasons:

Included in the legislation as one type of "similar
agreement" is a forward rate agreement and, insofar
as an interest rate swap is a series of interest
rate forward agreements, it was deteremined that
interest rate swaps would come within the term

"similar agreements".

963269
XXXXXXXXXX J.P. Dunn

Attention: XXXXXXXXXX

January 20, 1997

Dear Sirs:

Re: Interest Rate Swaps and Foreign Accrual Property Income

We are writing further to our (Dunn/XXXXXXXXXX) discussion of December 16, 1996 regarding interest rate swaps and, in
particular, whether such items would fall within the meaning of "similar agreements" as that term is used in subsection 95(2.1) and in paragraph (a) of the definition of "indebtedness" in subsection 95(2.5) of the Income Tax Act.

Upon consideration of this matter, it is the view of the Department that the term "similar agreement" is sufficiently broad to encompass those items in those particular provisions.

We trust that this is the information which you require.

Yours truly,

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