CRA finds that interest on an interspousal loan cannot be paid with a promissory note

Where a loan is made to a spouse at the prescribed interest rate, s. 74.5(2) requires that each year’s interest be “paid” by January 30 of the following year. Although in other contexts, CRA accepts that a promissory note can be issued and accepted as payment of an amount, CRA considers that the context and purpose of the income attribution rules:

favour a more restrictive interpretation of the word "paid", according to which the issuance of a note, although irrevocable, unrestricted and payable on demand, does not satisfy the requirement provided for in those [provisions].

Neal Armstrong. Summary of 2018 APFF Financial Strategies and Instruments Roundtable, Q.10 under s. 74.5(2).