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.
D. Yuen
(613) 957-2111
24(1)
Attention: 19(1)
August 21, 1990
Dear Sirs:
Re: Subsections 15(1) and 56(2) of the Income Tax Act (Canada) (the "Act")
We are writing in response to your letter of July 27, 1990 in which you requested elaboration of a comment made in our letter to you dated April 17, 1990.
You have posed the following questions:
1. What facts or circumstances of the case of Helen Vine, in her capacity as Executrix of the Last Will and Testament of William J. Vine v. Her Majesty The Queen ( 89 DTC 5528) (the "Vine case") are different from those of a situation wherein intercorporate loans between related corporations are used to finance the business operations?
2. In the Vine case, on what facts or circumstances did the Department base the application of subsection 15(1) of the Act?
COMMENTS
Depending on the facts and circumstances of a particular situation, it may be evident that the recipient corporation may not be in a position to repay the loans or advances or to provide reasonable security for the repayment of the loans or advances. In this situation, the payer corporation has provided valuable consideration with no reasonable expectation of repayment. The shareholder directing such a payment would be viewed as having deliberately and permanently removed value from the payer corporation in a transaction not made in the ordinary course of business. It would be our position that a benefit, taxable under subsection 15(1) of the Act, has been conferred on the shareholder in these circumstances.
The comments expresses are not advance income tax rulings and are not considered binding on the Department, in respect of any taxpayer, in accordance with paragraph 24 of Information Circular 70-6R dated December 18, 1978.
ILLEGIBLE SIGNATURE for Director Reorganizations and Non-Resident Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1990
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