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.
Principal Issues:
Application of 15(2)
Position TAKEN:
Question of Fact. It has been the Department's view that
subsection 15(2) of the Act only applies where a loan is
made to a shareholder in his/her capacity as a shareholder
and not when a loan is made to a shareholder in his/her
capacity as an employee. The Federal Court of Appeal
rendered a decision on June 25, 1993 in the case of The
Queen v Silden (93 DTC 5362) and held that subsection 15(2)
applies not only to loans made to shareholders as
shareholders but also to loans made in the ordinary course
of business to employees who happen to be shareholders.
Thus, the application of paragraph 15(2) of the Act may be
impacted by the Federal Court of Appeal decision in the
above noted case and as a result, we are not able to provide
a definitive response until the issues can be resolved.
Reasons FOR POSITION TAKEN:
Silden Case.
940368
XXXXXXXXXX D. Zion
Attention: XXXXXXXXXX
May 17, 1994
Dear Sirs:
Re: Section 15(2)(a)(ii) of the Income Tax Act (the Act)
We are writing in reply to your letter of February 8, 1994, concerning the Department's position with respect to housing
loans to controlling shareholder/employees of private corporations and the application of subparagraph 15(2)(a)(ii) of the Act thereto. We apologize for the delay in responding.
In the comments that follow unless otherwise stated, all statute references are to the Income Tax Act S.C. 1970-71-72, c.63 as amended, consolidated to June 10, 1993.
The determination of whether a particular loan is an exclusion contemplated by subparagraph 15(2)(a)(ii) of the Act must be made on a case by case review based on all the relevant facts of the situation. Such determinations are generally made by District Taxation Office personnel. We do, however, make the following general comments based on the limited information in your letter.
It has been the Department's view that subsection 15(2) of the Act only applies where a loan is made to a shareholder
in his/her capacity as a shareholder and not when a loan is made to a shareholder in his/her capacity as an employee.
The Federal Court of Appeal rendered a decision on June 25, 1993 in the case of The Queen v Silden (93 DTC 5362) and
held that subsection 15(2) applies not only to loans made to shareholders as shareholders but also to loans made in the
ordinary course of business to employees who happen to be shareholders. Thus, the application of paragraph 15(2) of
the Act may be impacted by the Federal Court of Appeal decision in the above noted case and as a result, we are not able to provide a definitive response until the issues can be resolved.
We regret that we are unable to provide you with a more substantive reply at this time.
Yours truly,
P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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