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.
Dear Sirs:
Re: Subsection 15(1), Vine Estate Case
This is in reply to your letter dated March 27, 1991 requesting the Department's current position with respect to the possible application of subsection 15(1) to intercompany loans.
Generally, it is the Department's position that subsection 15(1) of the Act will not be applied in respect of intercorporate loans arising in the course of carrying on the businesses of the two corporations.
However, depending on the facts and circumstances of a particular situation, it may be evident that the recipient corporation may not be in a position to repay the loans or advances or to provide reasonable security for the repayment of the loans and advances. In this situation, the payer corporation has provided valuable consideration with no reasonable expectation of repayment. The shareholder directing such a payment would be viewed as having deliberately and permanently removed value from the payer corporation in a transaction not made in the ordinary course of business. It would be our position that a benefit, taxable under 15(1) of the Act, has been conferred on the shareholder in these circumstances.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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