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 subsection 15(2) applies to a loan made to a future shareholder.
Position:
It does not apply.
Reasons:
Previous correspondence indicates that the person must be a shareholder at the time of the loan.
964065
XXXXXXXXXX Jacques E. Grisé
(613) 957-2059
Attention: XXXXXXXXXX
February 17, 1997
Dear Sirs:
Re: Subsection 15(2) of the Income Tax Act
This is in reply to your letter of November 29, 1996 requesting our technical interpretation on the application of subsection 15(2) of the Income Tax Act with respect to a loan made by a corporation to an individual who only becomes a shareholder of the corporation after the loan is made but within the same taxation year.
We are of the opinion that, in order to trigger the application of subsection 15(2) of the Act, the person receiving the loan from, or becoming indebted to, a corporation or related corporation must be a shareholder of the particular corporation or be connected with a shareholder of the particular corporation when the loan was made or the indebtedness arose. This position is not altered by the proposed change to subsection 15(2) of the Act set out in the June 20, 1996 Notice of Ways and Means Motion.
Yours truly,
John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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