U.S. tax prohibition against secured guarantees of Canadian sub can scupper the de minimis safe harbour under the back-to-back loan rules

A "de minimis" rule provides a potential safe harbour from application of the back-to-back loan rules respecting situations where the debt owing by Canco to the intermediary is one of a number of debts owing by a group of related debtors to the same creditor, and the same assets which secure the Canco debt also secure the other debts owing by those group members.  This safe harbour would not be available, for example, where there are secured loans to both a U.S. parent and its Canadian subsidiary and, for U.S. tax reasons, the Canadian assets are provided as security only for the Canadian obligation and not for the U.S. obligation.

Neal Armstrong.  Summary of Edward A. Heakes, "The Proposed Revisions to Back-to-Back Loan Rules," International Tax Planning (Federated Press), Vol. XIX, No. 4, 2014, p. 1357 under s. 212(3.1)(e).