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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
SUBJECT: PURCHASE PRICE/PRESCRIBED DEBT OBLIGATION SECTION: 12(9), 16(1), REG 7000(1)(a)]
May 1992 Vancouver Round Table.
A Canadian company sells assets to another company, with which it deals at arms length, pursuant to a written agreement. The proceeds are equal to fair market value and are paid over a three year period, with no interest stipulated in the agreement. Would this transaction be subject to the provisions of subsection 16(1) or would the debt be considered a prescribed debt obligation and subject to the provisions of subsection 12(9) ?
ANSWER.
IT-265R2, paragraph 9, continues to represent the Department's policy where it is determined that subsection 16(1) is applicable. In the example, subsection 12(9) is applicable as the debt arising under the agreement is a debt obligation in respect of which no interest is stipulated to be payable in respect of the principal amount and is by virtue of Regulation 7000(1)(a) a prescribed debt obligation. However, as indicated in the answer to Q.10 at the 1990 Revenue Canada Round Table, in this example the calculation in Regulation 7000(2)(a) will not result in an amount of accrued interest income.
K.J.D. 7-921492
May 25,1992
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