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: Will a change in the corporation doing the cash sweeping affect the rulings given?
Position: No
Reasons: No material change to rulings given in original ruling 2008-027343.
XXXXXXXXXX 2009-032111
XXXXXXXXXX , 2009
Dear XXXXXXXXXX :
Re: Advance Income Tax Ruling Request
XXXXXXXXXX
This is in reply to your email of XXXXXXXXXX , wherein you request a supplemental ruling with respect to Advance Income Tax Ruling 2008-027343 (the "Original Ruling") that was issued on XXXXXXXXXX , 2008.
In this letter, all capitalized terms have the meanings specified in the Original Ruling.
A reference herein to a "Paragraph" or to "Paragraphs", as the case may be, is to a paragraph or to paragraphs in the Original Ruling.
As a result of your email, the following changes are made to the Original Ruling:
1. "GCo" is removed from the definition of "Participants" and is replaced with "BBCo".
2. The following is added to Paragraph 9: "GCo's business number is XXXXXXXXXX , its address is XXXXXXXXXX and it is located within the area served by the XXXXXXXXXX TSO and the XXXXXXXXXX TC. GCo carries on an active business."
3. "BBCo" is removed from the second sentence of Paragraph 14 and is replaced with "GCo".
4. "BBCo" is removed from the first and second sentences of Paragraph 15 and is replaced with "GCo".
5. The two instances of "BBCo" are removed from Paragraph 16 and, in each instance, are replaced with "GCo".
6. "BBCo" is removed from Paragraph 17 and is replaced with "GCo".
7. "BBCo" is removed from Paragraph 19 and is replaced with "GCo".
8. The three instances of "BBCo" are removed from Paragraph 20 and, in each instance, are replaced with "GCo".
As a result of the above changes, the rulings are amended and replaced with the following:
A. Provided the interest paid or payable by GCo on the funds borrowed from the NR Holdco as described in 14 above is reasonable and is paid pursuant to a legal obligation to pay interest and that the borrowed funds continue to be used by GCo for the purpose of earning income from a business or property, GCo will be entitled to deduct, in computing its income for a taxation year, pursuant to paragraph 20(1)(c) of the Act, the interest paid or payable on the borrowed funds from the NR Holdco (depending on the method regularly followed by GCo in computing its income for the purposes of the Act) in respect of the taxation year to the extent such amount does not exceed a reasonable amount.
B. Provided GCo and each of the Participants are corporations resident in Canada and provided there will be no repatriation or loans by GCo, or the Participants, back to the NR Holdco, beyond those described in 20 above, subsection 15(2) of the Act will not apply to the cash sweeping transaction described in 15 above.
C. Provided the loans referred to in 16 above are bona fide, continue to arise in the ordinary business of GCo and the Participants, and the Participants receiving the loans will, at the time a loan is entered into, be in a position to repay the loan or provide reasonable security for repayment, the fact that GCo may make a loan to a Participant in financial difficulty will not, in and of itself, result in a subsection 15(1) benefit being conferred on NR Holdco.
We confirm that the rulings as amended above will continue to be binding on the CRA in the manner set out in the Original Ruling and provided that the proposed transactions are entered into by XXXXXXXXXX .
Yours truly,
XXXXXXXXXX
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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