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: Can an upstream loan be considered "repaid" for the purposes of paragraph 90(8)(a) when set off against another obligation or debt between the same parties?
Position: Yes
Reasons: Consistent with case law and our previous positions on the application of subsection 15(2).
National CTF Conference
November 24 - 26, 2013
Whether an Upstream Loan Has Been Repaid?
Question 2.2.1
Pursuant to paragraph 90(8)(a) of the Act, subsection 90(6) does not apply to a loan or indebtedness if it is repaid, other than as part of a series of loans or other transactions and repayments, within two years of the day on which the loan was made or the indebtedness arose. Would the CRA consider a loan that has been settled or "set-off" to have been repaid?
Answer
The CRA will consider a loan or indebtedness to have been repaid by a debtor for the purposes of paragraph 90(8)(a) and subsection 90(14) of the Act by way of set-off against a receivable of the debtor, if the set-off represents a legal discharge of the loan or indebtedness.
The CRA will generally accept that a loan or indebtedness has been repaid by set-off if the intention to do so is evidenced in the relevant books and records including any contracts or agreements between the parties and the accounting records of the parties.
Angelina Argento
2013-050814
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