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.
XXXXXXXXXX 933037
Attention: XXXXXXXXXX
December 23, 1993
Dear Sirs:
Re: Assignment of a Shareholder Loan
We are replying to your letter of October 18, 1993 concerning an assignment or transfer of an employee housing loan to a related corporation.
You describe a situation where an employee-shareholder of a corporation has received a loan which is not required to be included in the shareholder's income because it satisfies the exception criteria imposed by subparagraph 15(2)(a)(ii) of the Income Tax Act. You have asked us to confirm that the exception in subsection 15(2) would still apply where the loan is transferred to a corporation which is wholly owned by the employee in settlement of a dividend which is payable to that corporation by the employer corporation.
We do not confirm the tax implications resulting from proposed transactions except by way of an advance income tax ruling as described in Information Circular 70-6R2 "Advance Income Tax Rulings" dated September 28, 1990 and Special Release thereto dated September 30, 1992. However, we are prepared to offer the following general comments which may be of assistance to you.
Provided that the transfer does not result in a new loan agreement between the employee and the employer (i.e. where the terms of the loan remain unchanged and no new loan agreement has been negotiated), it is our view that neither the assignment nor transfer of a loan to a related corporation would alter the nature of the original loan agreement. While it must be stressed that it is a question of fact as to whether the shareholder's loan agreement has been altered to the extent that it could be considered a new loan, we would not consider the loan to be a new loan solely by reason of the assignment or transfer to the related corporation.
However, where a shareholder is not also an employee of the transferee corporation which subsequently holds the loan, the exception in subsection 15(2) of the Act will no longer apply after the assignment of the loan since the shareholder is not an employee of the transferee creditor corporation.
We trust our comments will be of assistance to you.
Yours truly,
P.D. Fuoco for Director Business and General Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1993
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1993
Email this Content