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: (1) Will the interest paid or payable by the taxpayer be on a participating debt obligation? (2) Will the interest paid or payable be deductible under paragraph 20(1)(c)? Will paragraph 143.2(3)(a) be applied to re-determine the Interest expense where the interest is paid by the issuance of preferred Shares?
Position: (1) no (2) yes (3) No
Reasons: (1) The interest is not contingent or not dependent of the use or production from a property and is not computed by reference to anything but the principal amount of the debt. (2) Consistent with similar previous rulings and tax policy. (3) The Amount of Interest deductible is equal to the stated capital of the Preferred Shares.
XXXXXXXXXX 2009-030010
XXXXXXXXXX , 2009
Dear XXXXXXXXXX
Re: Advance Income Tax Ruling
XXXXXXXXXX
This is a supplemental ruling to the advance income tax ruling 2008-030010 dated on XXXXXXXXXX , 2009, (the "Ruling") on behalf of the above-named taxpayer.
Paragraph A in the Ruling is replaced with the following:
A. Provided that the proceeds from the issue of the Notes are used and continue to be used for the purpose of earning income from a business or property, and the proceeds are not used to acquire a life insurance policy or property the income from which would be exempt, ACO will be entitled, pursuant to paragraph 20(1)(c), and subsection 20(3), as the case may be, to deduct in computing its income for a taxation year from a business or property the amount of the Interest on the Notes paid in the year or payable in respect of the year (depending upon the method regularly followed by ACO in computing its income) pursuant to a legal obligation to pay the Interest on the Notes, to the extent that the amount paid or payable is reasonable.
We confirm that the Ruling, as amended herein, remains binding on the Canada Revenue Agency subject to the same limitations and qualifications set out in the Ruling.
Yours truly,
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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