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: timing of arm's length re:sla
Position: at time of transfer
Reasons: legislation
963709
XXXXXXXXXX S.Tevlin
Attention: XXXXXXXXXX
November 18, 1996
Dear Sirs:
Re: Section 260 of the Income Tax Act (the "Act")
We are writing in response to your letter of October 29, 1996 wherein you requested our comments with respect to section 260 of the Act. In particular you asked that we confirm that in order to qualify as a securities lending arrangement ("SLA") the lender of the security must deal at arm's length with the borrower only at the time of the transfer of the security and that there is no requirement that the parties to the arrangement remain at arm's length throughout the term of the arrangement.
It is our opinion that, for purposes of paragraph 260(1)(a) of the definition of SLA, it is only necessary that the parties to the arrangement be at arm's length at the particular time that the qualified security is lent or transferred.
As to whether participants deal at arm's length at a particular time is a question of fact.
It is also our opinion that any arrangement that was in place at the particular time of a transfer, the purpose being to meet the arm's length test in the definition of SLA, would be subject to the post amble in that definition.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990 and are not binding on Revenue Canada, Taxation.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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