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: What is the CRA's position with respect to the application of paragraph 20(1)(f) in the context of exchangeable debentures and commodity based loans, in light of the Federal Court of Appeal's decision in the Tembec Inc. et al. v. The Queen, 2008 DTC 6601, 2008 FCA (application for leave to appeal dismissed by the Supreme Court of Canada on January 22, 2009)?
Position: None.
Reasons: Our analysis with respect to this issue has not been completed yet. If, as a result thereof, there is a change in CRA's position, such change will be announced to the public as soon as the analysis is completed.
Canadian Petroleum Tax Society Round Table 2009
Question #1 - Exchangeable Debentures
At the 2008 Canadian Tax Foundation's annual conference, the CRA was asked if it could provide its views in respect of the application of paragraph 20(1)(f) to exchangeable debentures in light of the Federal Court of Appeal decision in Tembec Inc. v. R. The CRA was not prepared to comment at that time because the taxpayer in that case had applied for leave to appeal the decision to the Supreme Court of Canada. On January 22, 2009, the Supreme Court refused leave to appeal.
Question
Is the CRA now in a position to provide its views on this issue?
CRA Response
At the 2006 Canadian Tax Foundation's annual conference, we stated that the CRA would consult with its Legal Services advisors to determine whether its long-standing positions in respect of the application of paragraph 20(1)(f) to exchangeable debentures were supportable at law in light of the comments expressed in the Supreme Court's decision in the Imperial Oil case. We also stated that these positions would continue to be maintained for exchangeable debentures in place at that time, and mentioned that if these consultations resulted in a change in CRA's position, it would be announced to the public when the decision was made.
These consultations were necessary due to certain statements made by the Supreme Court of Canada in the Imperial Oil case which questioned the above-mentioned positions. Since the basis of the majority's analysis in the Imperial Oil case was that paragraph 20(1)(f) did not contemplate foreign exchange losses, there was some debate as to whether this case was limited to foreign currency denominated borrowings, or whether its principles were to be extended and applied to all kinds of borrowings. This issue was raised in the Tembec case and had not reached its final conclusion at the time of the 2008 Canadian Tax Foundation's annual conference.
Hence, at the 2008 Canadian Tax Foundation's annual conference, we stated the CRA was awaiting the final conclusion of the Tembec Inc. case in order to complete the analysis announced in 2006. We reiterated that if, as a result thereof, there is a change in CRA's position, such change will be announced to the public as soon as the analysis is completed.
Our analysis with respect to this issue has not been completed yet. Any change in CRA's position resulting from this analysis will be announced to the public as soon as the analysis is completed.
Mélanie Beaulieu
(613)957-9226
June 10, 2009
2009-032440
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