CRA finds that there can be multiple counting of loans for purposes of reducing a gift amount under ss. 118.1(16) and 110.1(6)

A private foundation makes interest-bearing loans to multiple corporations not dealing at arm’s length with each other. Within 60 months thereafter, the corporations make gifts to the foundation and the loans are also repaid within 60 months. CRA found that under s. 118.1(16) (which is made applicable to gifts by corporations by virtue of s. 110.1(6)) the amount of the gift by each corporation is reduced by the aggregate amount of the loans, notwithstanding that the loans are fully repaid.

CRA also found that ss. 118.1(16) and 110.1(6) applied (apparently with the same double-counting issue) in essentially the reverse situation of a corporation making a gift to a private foundation and making loans within 60 months thereafter to both that corporation and a person with whom that corporation did not deal at arm’s length.

Neal Armstrong. Summary of 7 October 2019 Internal T.I. 2019-0801871I7 under s. 118.1(16).