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:
Whether outstanding cheque constitutes a loan or advance under 181.2(3)(c)?
Position TAKEN:
Outstanding cheques do not, in themselves, constitutes an indebtedness of the corporation. However, the bank overdraft reflected in the balance sheet and resulting from outstanding cheques constitutes a loan or advance under 181.2(3)(c).
Reasons FOR POSITION TAKEN:
See 0-933069 and question VI TEI Conference May 1994.
5-941753
XXXXXXXXXX Robert Gagnon
Attention: XXXXXXXXXX
November 14, 1994
Dear Sirs:
Re: Paragraphs 181.2(3)(c) and (d)
This is in reply to your letter of July 7, 1994 wherein you requested a technical interpretation concerning paragraphs 181.2(3)(c) and (d) of the Income Tax Act ("Act").
It is our view that outstanding cheques do not, in themselves, constitutes an indebtedness of the corporation. However, the bank indebtedness (bank overdraft) reflected in the balance sheet and resulting from outstanding cheques constitutes a loan or advance to a corporation pursuant to paragraph 181.2(3)(c) of the Act where the giving of a cheque by a debtor to its creditor operates as payment under the common law.
The fact that money may be received and deposited by a corporation subsequent to the year end is not relevant.
The foregoing opinions are not rulings and, in accordance with the guidelines set out in Information Circular 70-6R2 dated September 28, 1990, are not binding on the Department.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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