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 a particular "debt obligation" constituted an "excluded oblgation" for purposes of subsection 214(8)(c) of the Act.
Position:
Yes.
Reasons:
Obligation was not issued at a discount (see file #951790 for further back-up on relevant issues).
953013
XXXXXXXXXX Jim Wilson
Attention: XXXXXXXXXX
December 13, 1995
Dear Sirs:
Re: Meaning of "Excluded Obligation"
We are writing in response to your letter of November 15, 1995 in which you requested our opinion with respect to whether a debt obligation (the "Obligation") would be considered to be an "excluded obligation" pursuant to paragraph 214(8)(c) of the Income Tax Act (the "Act"). You have indicated that the Obligation arose as a result of a $100 loan that was evidenced by a demand promissory note (the "Note") in the amount of $100 (the "Principal"). Furthermore, under the terms of the Note, interest ("Interest") is calculated at a rate of 10% per annum on the Principal and the Interest and Principal are payable only on demand without any set maturity date. There is no other yield payable to the holder of the Note, other than the Interest.
Based on the information provided it appears that the Obligation that you have described would be an "excluded obligation" pursuant to paragraph 214(8)(c) of the Act. However, we have not been provided any information that would help us assist you with respect to the Canadian tax implications on an assignment of the Obligation by a non-resident of Canada. For example, if the Obligation had been issued by a Canadian resident to a non-resident, generally any accrued interest, whether payable or not, that has not been paid to the non-resident, would be subject to Part XIII tax on an assignment of the Obligation to a Canadian resident pursuant to either subsection 214(6) of the Act or paragraph 212(1)(b) of the Act.
We trust our comments will be of assistance.
Yours truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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