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.
Revenue Canada Round Table
Tax Executives Institute, Inc.
1995 Annual Canadian Tax Conference
Question #1
CAPITAL LOSS ON INTEREST-FREE LOAN TO FOREIGN CORPORATION
The court decisions in Business Art Inc. v. MNR (86 DTC 1842), Floyd R. Glass Jr. v. MNR (92 DTC 1759) and National Developments Ltd. v. The Queen (94 DTC 1061) consistently ruled that subparagraph 40(2)(g)(ii) is not applicable to disallow taxpayers' capital losses incurred in respect of interest-free loans made to foreign corporations in which they owned shares. Will Revenue Canada now allow such capital losses ?
Department’s position
The Department has not appealed the decisions rendered by the court in each of the above cases and has accepted the decisions only in relation to the facts of each particular case. The Department's position regarding the deductibility of capital losses resulting from a loan bearing interest at less than a reasonable rate remains as stated in IT-239R2.
Similar cases were heard in 1994 and are presently awaiting court decision or under appeal. The Department will review its position in light of the outcome of these cases.
Author: M. Ton-That
File: 951073
Date: April 27, 1995
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