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.
7-903487
24(1)
Subject: Losses Arising from Guaranteeing a Loan of a U.S. Company
This is in response to your memorandum dated November 28, 1990. You requested our comments whether losses arising from loan guarantees given by the above corporation on behalf of U.S. corporations which it controls, for no or inadequate consideration, would be deemed to be nil by subparagraph 40(2)(g)(ii) of the Income Tax Act (the "Act") on the basis that the guarantees were not given for the purpose of gaining or producing income.
21(1)(b)
Accordingly in our view
24(1)
The exception in paragraph 6 of IT-239R2 and paragraph 7 was established to address specific tax policy concerns. The policy to apply strictly to loans utilized by Canadian corporations or its Canadian subsidiaries is clarified in the Notice of Ways and Means Motion concerning the deductibility of interest (copy attached). In our view the administrative policy should not be extended to allow a loss with respect to loans made or guaranteed by a Canadian company to its foreign subsidiary.
for DirectorReorganization Non-Resident DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch
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