When a Canadian corporation borrows funds from an arm's length lender and its non-resident parent guarantees the loan for no consideration, the parent will not be deemed to have been paid interest on the loan because it did not receive consideration for its guarantee. However, if the Canadian corporation's borrowing of funds or the giving of the guarantee can be considered to be part of the series of transactions which results in a tax benefit and may reasonably be considered to have been undertaken or arranged primarily to obtain a tax benefit, the transaction nonetheless may be subject to s. 245(2).
