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.
Dear Sirs:
We are writing in response to your letter dated December 29, 1987 in which you have asked for the Department's views on the application of paragraph 95(2)(i) to the following hypothetical situation.
A foreign affiliate has incurred a liability and used the proceeds to acquire an excluded property. At a later time the property is disposed of and proceeds deposited into a bank account. The affiliate then makes arrangements to repay its liability and realizes an exchange gain.
We provide the following general comments.
Whether a debt "related at all times to the acquisition of excluded property" within the context of paragraph 95(2)(i) is a question of fact that can only be determined with full knowledge of all the particulars of the situation.
Provided there is clear evidence, at the time of the disposition of the excluded property, that arrangenents are being made for the repayment (with due dispatch) of the "related debt", it is our view that the fact that the actual repayment of the debt occurs after the disposition of the excluded property would not, in and by itself, result it the debt not being considered "... related at all times ... ".
However if it was determined that other factors (such as cash flow problems, or unfavourable prevailing interest or exchange rates) contributed to the delay in repayment, it is likely that the provisions of paragraph 95(2)(i) would not apply on the repayment of the debt.
We hope these comments are of assistance.
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© Her Majesty the Queen in Right of Canada, 1988
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© Sa Majesté la Reine du Chef du Canada, 1988
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