“interest” that could be cancelled at cost of foregoing dividends was interest
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Principal Issues: Whether the payments on the Notes that are held by an arm’s length person will be subject to Part XIII tax under paragraph 212(1)(b).
Position: No.
Reasons: The payments on the Notes will constitute amounts paid or credited on account or in lieu of payment of, or in satisfaction of interest for the purposes of paragraph 212(1)(b).
Principal Issues: 1. Whether ordinary interest on the Notes will be deductible under subparagraph 20(1)(c)(i).
2. Whether the interest will be participating debt interest for the purposes of Part XIII tax.
Position: 1. The ordinary interest under the notes will be deductible under 20(1)(c). 2. No.
Reasons: 1. The borrower-lender relationship will continue to exist until such time as a XXXXXXXXXXE occurs or until such time as it is or it became apparent the XXXXXXXXXXE would occur. 2. The interest will not be based on the profit participation features described in the definition of participating debt interest.
Submitted by narmstrong on Thu, 05/23/2019 - 03:12
interest was deductible on a note indirectly issued to satisfy a dividend
Opco wishes to distribute its accumulated profits of $500,000 to its parent (Holdco) without using cash and so as to generate an interest...
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Principales Questions: Whether the interest are deductible under 20(1)(c) (fill in the whole concept) in the situation (stock dividend with preferred shares, amount of dividend is less than accumulated profits od corporation, stated capital of preferred shares is equal to their FMV and redemption price, and a note issued on the redemption of the preferred shares) described in the letter?
