Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Is there a taxable benefit where an employee pays interest at a higher rate than the Government prescribed rate at the time a mortgage is taken out?
Position: Generally, no.
Reasons: CCRA's position on section 80.4 is set out in IT-421R2
XXXXXXXXXX 2001-006540
J. E. Grisé
January 25, 2001
Dear XXXXXXXXXX:
Re: Benefits from Loans or Debt
This is in reply to your fax of January 15, 2001, requesting confirmation of our position on the income tax consequences where the rate of interest to be paid by an employee-mortgagee exceeds the prescribed rate of interest.
Subsection 80.4(1) of the Income Tax Act (the Act) applies in certain circumstances to deem a benefit to have been received by an individual if, by virtue of the office or employment or the future office or employment of that individual, any person or partnership receives a loan or otherwise incurs a debt. A discussion of subsection 80.4(1) of the Act and related provisions, is set out in the attached Interpretation Bulletin IT-421R2, Benefits to individuals, corporations and shareholders from loans or debt.
Where an employee receives a loan in the circumstances described in subsection 80.4(1) of the Act and in a year or within 30 days thereafter pays interest on the loan at a rate in excess of the prescribed rate or rates for the year, the employee will not be deemed to have received a benefit pursuant to subsection 80.4(1) of the Act. In this respect, please refer to paragraphs 2 and 3 of IT-421R2.
We hope our comments are helpful.
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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