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.
RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY
DOCUMENT TYPE:
Opinion
PRINCIPAL ISSUES:
Whether the exemption in 212(1)(b)(vii) applies in
a situation where interest in based on a formula,
one of the components of which is computed by
reference to dividends.
POSITION TAKEN:
No.
REASONS FOR POSITION TAKEN:
By virtue of the post-amble to 212(1)(b), where
interest is computed by reference to dividends,
interest shall be deemed not to be interest for
purposes of 212(1)(b)(vii) notwithstanding that the
dividend component of a particular formula at the
time of payment is nil.
LEGAL:
FINANCE OPINION:
JURISPRUDENCE:
RCT PUBLICATIONS:
HAA NUMBER:
XXXXXXXXXX 933305
Attention: XXXXXXXXXX
December 10, 1993
Dear Sirs:
Re: Subparagraph 212(1)(b)(vii) of the Income Tax Act (the"Act")
This is in reply to your letter of November 11, 1993, wherein you requested an opinion with respect to the application of subparagraph 212(1)(b)(vii) of the Act to a particular fact situation.
As noted in Information Circular 70-6R2, we do not give opinions with respect to factual transactions otherwise than in the context of an advance income tax ruling. If the situation involves a completed transaction, please consult with you local district taxation office.
However, we will offer the following general comments.
Generally, it is our view that in a situation where interest is computed by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation, the interest shall be deemed not to be interest for purposes of subparagraph 212(1)(b)(vii) of the Act, by virtue of the postamble thereto, notwithstanding that the dividend component of a particular formula at the time of payment of interest is nil.
The above comments are an expression of opinion and as stated in Information Circular 70-6R2 are not binding on the Department.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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