Words and Phrases - "bonds"

a
82
b
44
c
75
d
50
e
37
f
31
g
17
h
13
i
71
j
2
k
2
l
30
m
51
n
25
o
38
p
79
q
2
r
74
s
85
t
44
u
14
v
8
w
20
y
2
“
1

Hersh Joshi, Jack Silverson, "Understanding and Doing Business with Tax-Exempt Entities", 2018 Conference Report (Canadian Tax Foundation), 29:1 – 35

Summary Under
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(o.2) - Subparagraph 149(1)(o.2)(iii) - Clause 149(1)(o.2)(iii)(B)

Trade payables not bonds etc. (p. 29:10)

[T]he CRA has accepted that intercompany payables and trade payables that are not evidenced in writing are not considered to be bonds, notes, debentures, or “similar obligations” for the purposes of clause 149(1)(o.2)(iii)(B). [fn 18: 2012-0461151E5]. … [T]rade payables not evidenced in writing are not similar to bonds, notes, debentures, or mortgages. …

Bonds etc. issued by LP are not issued by (o.2) corp as limited partner (pp. 29:10 -

In some common-law jurisdictions, a debt obligation issued by a partnership might be considered to be a debt obligation issued by the partnership’s investors….

Hudson’s Bay Company v. OMERS … denies the existence of any legal relationship between the limited partners and a third party that has entered into a contract with the limited partnership (or, as the court more precisely puts it, a contract between the third party and the general partner acting in its capacity as general partner of the limited partnership). …

[S]ection 253.1 provides that, for the purposes of paragraph 149(1)(o.2) and other listed provisions, when a trust or a corporation holds an interest as a member of a partnership and, by operation of law, the liability of the partner as a member of the partnership is limited, the partner is not considered to be carrying on the business or other activity of the partnership solely by virtue of acquiring or holding an interest in the partnership. … The issuing of debt should be viewed as part of the “business” or “activity” of the partnership that would not, as a result of section 253.1, be considered to be carried on by the investment corporation. …

Consolidated Mogul … [stated:]

[T]he financing function of a mining company is an integral part of its business.

… Accordingly … [t]he result of such application is that the issuance of a debt obligation by a limited partnership should not be attributed to its limited partners.

Guarantee of LP debt does not engage s. 149(1)(o.2)(iii)(B) (pp. 29:13 - 16)

[O]n June 26, 2013…the phrase “that had not issued debt obligations” was replaced with “that had not . . . issued bonds, notes, debentures or similar obligations.”…

[A]ccording to … Federated Co-operatives … “similar obligation” is a narrower category than “obligation.” It includes only obligations that have a character similar to bonds, notes, debentures, and mortgages—namely, the character of debt. As noted by the court, each of bonds, notes, debentures, and mortgages “is a document evidencing indebtedness of the maker in the form of a promise to pay” and indebtedness for which the issuer is primarily (not secondarily) liable. … In this respect, a guarantee would likely not be considered to be a “similar obligation”… .

… Generally, if the guarantee is a performance guarantee, the investment corporation has no obligation to pay a sum certain or readily reducible to certainty. Thus, while the performance guarantee may create a liability for the investment corporation in the sense of unliquidated or unspecified legal obligations, it should not result in the creation of a debt obligation in the sense of an obligation to pay liquidated or certain sums. …

… With respect to the investment corporation guaranteeing the debt obligations of the limited partnership,…Arguably, however, such a guarantee should not be considered to be a bond, note, or debenture for the purposes of clause 149(1)(o.2)(iii)(B), because no creditor-debtor relationship is created under which the investment corporation is primarily liable for the particular debt. In other words, as the Federal Court of Appeal stated in Federal Co-operatives, such a guarantee would be “merely a secondary obligation that is contingent upon the [limited partnership’s] failure to pay.”

No incurring of debts of subsidiary unit trust (p. 29:17)

… Consistent with the general scheme for the taxation of trusts and their beneficiaries, a CRA technical interpretation states that when an investment corporation is a beneficiary of a trust, the investment corporation is not considered to be the issuer of debt obligations issued by the trust. [fn 47: 2006-0195451R3]…

Words and Phrases
bonds notes debentures or similar obligations