2 May 1990 Ministerial Letter 59438 F - Loan by Corporation to Partnership

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.

Attention: 19(1)

May 2, 1990

Dear Sirs:

This is in reply to your hand written memorandum of January 16, 1990 stating your conclusion that where a loan is made by a corporation to a partnership of which the owner of the corporation  is a member, paragraph 15 of Interpretation Bulletin IT-419 confirms that the loan would not be subject to subsection 15(2) of the Income Tax Act.

We do not necessarily agree.  Whether or not a partner is in a position to control a partnership is a question of fact.  As set out in paragraph 10 of IT-419, it is also a question of fact whether or not unrelated persons are dealing at arm's length at a particular time.  The comments that follow paragraph 10 are the Department's general guidelines that it will follow in reviewing a particular fact situation in which all the facts are known.  Also, please note the use of the word "may" in the last sentence of paragraph 15 of IT-419.

If you have a proposed transaction in mind and have a specific concern, you could consider an advance income tax ruling request as outlined in Information Circular 70-6R.  On the other hand, if the transaction has already occurred, you could submit the details thereof to your local District Office.

We hope the foregoing comments will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch