30 November 1997 Ruling 9808763 - FINANCING

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.

XXXXXXXXXX 980876
XXXXXXXXXX
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling

We are writing in response to your letter dated XXXXXXXXXX wherein you requested an advance income tax ruling with respect to the above noted taxpayer. We also acknowledge your letters dated XXXXXXXXXX, and our several telephone calls.

To the best of your knowledge and that of any taxpayers referred to herein, none of the issues in respect of which rulings are herein requested is currently under consideration by a tax services office or a taxation centre in connection with a tax return or notice of objection already filed.

Except as otherwise noted, all statutory references in this ruling are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th Supplement) C.1, as amended (the “Act”).

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:

Facts

1.

XXXXXXXXXX

2.

XXXXXXXXXX

3.

XXXXXXXXXX

4.

XXXXXXXXXX

5.

XXXXXXXXXX

6.

XXXXXXXXXX

7.

XXXXXXXXXX

XXXXXXXXXX

8.

XXXXXXXXXX

9.

XXXXXXXXXX

10.

XXXXXXXXXX

11.

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12.

XXXXXXXXXX

13.

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14.

XXXXXXXXXX

15.

XXXXXXXXXX

16.

XXXXXXXXXX

17.

XXXXXXXXXX

18.

XXXXXXXXXX

Proposed Transactions

19.

XXXXXXXXXX
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XXXXXXXXXX
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XXXXXXXXXX
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XXXXXXXXXX
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Purpose of the Proposed Transactions

XXXXXXXXXX

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts and proposed transactions and purpose of the proposed transactions, we confirm the following:

A. Pursuant to the provisions of subsection 20(3) and paragraphs 20(1)(c) and (d), XXXXXXXXXX will be entitled to deduct, subject to subsection 21(3), in computing its income for a taxation year, the lesser of the interest paid or payable in respect of a taxation year or a reasonable amount in respect thereof that is pursuant to a legal obligation to pay interest on the funds borrowed by XXXXXXXXXX as described in paragraph 19 above.

B. We confirm that reasonable expenses that are not otherwise deductible by XXXXXXXXXX in respect of the Fees or Expenses incurred in the course of borrowing the money described in paragraph 19 above, will be deductible, subject to subsection 21(3), by XXXXXXXXXX, pursuant to paragraph 20(1)(e) in the computation of the income of XXXXXXXXXX for the particular taxation year and subsequent taxation years in an amount equal to the lesser of:

(a) that proportion of 20% of the expenses that the number of days in the year is 365; and

(b) the amount of such expenses less amounts deductible in computing the income of XXXXXXXXXX in preceding taxation years.

C. Provided that XXXXXXXXXX makes an election under subsection 21(3) in a taxation year and has made an election under subsection 21(1) in a preceding taxation year and in each taxation year thereafter, the amounts specified in the election as would have been deductible under paragraphs 20(1)(c), (d) or (e) in respect of interest on the XXXXXXXXXX, or in respect of Fees or Expenses, respectively, will be added to the capital cost to XXXXXXXXXX.

D. By virtue of the exemption contained in subparagraph 212(1)(b)(vii), no tax under Part XIII will be exigible in respect of any amounts paid or credited on the XXXXXXXXXX to a person with whom XXXXXXXXXX is dealing at arm’s length and who is a non-resident of Canada, as on account of or in lieu of payment of, or in satisfaction of interest.

These rulings are given subject to the general limitations and qualifications set out in Information Circular 70-6R2 dated December 30, 1995 and are binding on Revenue Canada, Taxation provided that the proposed transactions described herein are completed by XXXXXXXXXX.

Our rulings are based on the Act in its present form and do not take into consideration any proposed amendments to the Act.

Comment

Nothing in this letter should be construed as confirmation that Revenue Canada has reviewed or accepted that the XXXXXXXXXX described in paragraph 17 above is deductible by XXXXXXXXXX in the calculation of its taxable income.

Yours truly,

for Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch