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.
Principal Issues: Request for a ruling on the application of subsection 15(2) of the Act in respect of a loan to acquire a dwelling.
Position: Insufficient information to provide a ruling or opinion. General comments provided.
Reasons: The application of subsection 15(2) of the Act is always a question of fact.
Randy Hewlett, B.Comm.
January 11, 2005
Re: Shareholder Loan - Acquisition Of A Dwelling
We are writing in response to your letter of November 10, 2004, wherein you requested a ruling on the application of subsection 15(2) of the Income Tax Act (the "Act") in respect of a shareholder loan that will be made by XXXXXXXXXX to its two principal shareholders for the purpose of acquiring a dwelling.
We are unable to provide you with the ruling requested since the loan agreement submitted is dated October 1, 2004, and hence the transaction appears to be completed. The Canada Revenue Agency (the "CRA") only provides written confirmation of the tax implications of proposed transactions that are the subject matter of an advance income tax ruling request. If the transaction is still proposed, you must submit your ruling request in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002.
In so far as how the provisions of the Act relating to shareholder loans may apply generally, you may wish to consult Interpretation Bulletin IT-119R4, Debts of Shareholders and Certain Persons Connected With Shareholders. IT-119R4 discusses the CRA's general position on the application of subsection 15(2) of the Act. In particular, paragraphs 17 to 19 explain the exception to the application of subsection 15(2) of the Act that may apply to a loan made to an employee or an employee's spouse to enable or assist them to acquire a dwelling.
The above-noted publications may be found on the CRA's website at http://www.cra-arc.gc.ca. We trust our comments will be of assistance to you.
John Oulton, CA
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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