Income Tax Severed Letters - 2019-05-22

Ruling

2018 Ruling 2017-0732001R3 - XXXXXXXXXX

Unedited CRA Tags
212(1)(b)
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b)
“interest” that could be cancelled at cost of foregoing dividends was interest
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)
interest which the issuer can elect not to pay was treated as non-deductible

Principal Issues: Whether the payments on the Notes that are held by an arm’s length person will be subject to Part XIII tax under paragraph 212(1)(b).

Position: No.

Reasons: The payments on the Notes will constitute amounts paid or credited on account or in lieu of payment of, or in satisfaction of interest for the purposes of paragraph 212(1)(b).

2018 Ruling 2018-0766771R3 - Commodity linked notes

Unedited CRA Tags
212(1)(b), 212(3)
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(3) - Participating debt interest
a note whose repayment obligation is 100% linked to a commodity does not bear participating debt interest

Principal Issues: Whether the payments on a note that are linked to XXXXXXXXXX prices constitute participating debt interest under subsection 212(3).

Position: No.

Reasons: The commodity is not sufficiently linked to the profitability of the issuer’s business.

2016 Ruling 2016-0635081R3 - Issuance of notes

Unedited CRA Tags
20(1)(c), 143.4, 212(1)(b), 212(3)

Principal Issues: 1. Whether ordinary interest on the Notes will be deductible under subparagraph 20(1)(c)(i).
2. Whether the interest will be participating debt interest for the purposes of Part XIII tax.

Position: 1. The ordinary interest under the notes will be deductible under 20(1)(c). 2. No.

Reasons: 1. The borrower-lender relationship will continue to exist until such time as a XXXXXXXXXXE occurs or until such time as it is or it became apparent the XXXXXXXXXXE would occur. 2. The interest will not be based on the profit participation features described in the definition of participating debt interest.

Technical Interpretation - External

26 May 2016 External T.I. 2014-0527251E5 F - Interest Deductibility

Unedited CRA Tags
20(1)(c)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(ii)
interest was deductible on a note indirectly issued to satisfy a dividend

Principales Questions: Whether the interest are deductible under 20(1)(c) (fill in the whole concept) in the situation (stock dividend with preferred shares, amount of dividend is less than accumulated profits od corporation, stated capital of preferred shares is equal to their FMV and redemption price, and a note issued on the redemption of the preferred shares) described in the letter?

Position Adoptée: Yes.

Raisons: Folio S3-F6-C1 and jurisprudence.