CRA provides limited comfort on an advance by a pension fund to a pension fund subsidiary

Two of the requirements for a pension fund subsidiary to qualify under the s. 149(1)(o.2)(iii) branch are that it make only PBSA-type investments and that it not issue "bonds, debentures, notes or similar obligations." In considering an advance made by a pension fund to a wholly-owned corporation, CRA stated that provided that the advance "is not evidenced by the issuance of a bond, debenture, note or similar obligation" the second test would be satisfied.  Although apodictic on its face, this statement likely implies that advances documented only by book entries (or perhaps by certain types of loan agreements) are OK.

CRA gratuitously added that the advance must also be permitted by the PBSA or similar provincial legislation, as required under the first test.  The proposition that an amount owing can be a bad investment is startling (see also 9231345 dealing with the application of the more onerous pre-2004 version of the second test regarding a running account with the shareholder).

Neal Armstrong. Summary of 17 April 2014 T.I. 2012-0461151E5 F under s. 149(1)(o.2)(iii).