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21 July 2009 Internal T.I. 2009-0322591I7 F- Déduction des intérêts-- summary under Disposition Summary Under Tax Topics- Income Tax Act- Section 248- Subsection 248(1)- Disposition replacement of note and capitalized interest by new note with increased amount did not constitute payment by novation of the old debt The taxpayer purchased assets from the vendor (apparently, a non-resident) in consideration for shares of the taxpayer and interest-bearing debt, that was evidenced by a note providing that unpaid interest could be added to the principal of the note. ...

After assuming that the corporation was a “common carrier” (as referenced in Reg. 1104(2)), which CRA described as “a person who carries on the business of providing, for consideration, a service of transporting property or persons from one place to another and who generally offers its services to the public,” CRA stated: [P]roperty described in subparagraph (h)(ii) of Class 1 …, that is, property acquired after May 25, 1976, may be included in a railway system. ...

In indicating that there generally was an increase to the ACB of their shares, the Directorate stated: [A] transaction that otherwise increases the capital of a corporation without any consideration being given by the corporation in respect of that increase may result in a contribution of capital …. ...

. … [I]f a person who ceases to be a partner, demonstrates that the person contributed to the creation of goodwill and receives payments in respect thereof, the payments could be consideration for the former partner's rights to partnership property and would, therefore, be payments of capital. … … A member who ceases to be a member of a partnership has an income interest in the partnership under subsection 96(1.1) if, inter alia, all the members agree to allocate a portion of the partnership's income to the member who has ceased to be a member of the partnership. ...

The Settlement Agreement stated that the Settlement Amount was paid to them “in consideration of the loss of entitlement to PRBs, the alleged violation of their Charter rights and discontinuing litigation … as general damages for future loss of PRBs...” ...

The Settlement Agreement stated that the Settlement Amount was paid to them “in consideration of the loss of entitlement to PRBs, the alleged violation of their Charter rights and discontinuing litigation … as general damages for future loss of PRBs...” ...

Is a subsequent transaction to use the note (or other property, including cash, received as consideration for a share redemption), such as the above transfer of the note to Newco, a necessary trigger for GAAR to be so applied, i.e., could the receipt of a note with a high ACB in itself cause GAAR to apply? ...

The consideration given by the employee is considered to be the employee's covenants as found in the collective agreement or in the contract of service. ...

12 January 2009 External T.I. 2008-0293901E5 F- Article 80-- summary under Commercial Debt Obligation Summary Under Tax Topics- Income Tax Act- Section 80- Subsection 80(1)- Commercial Debt Obligation de minimis interest deductibility on a debt could cause it to be a commercial debt obligation A small business corporation with nominal accumulated profits purchased for cancellation shares in its capital having nominal capital in consideration for the issuance by it of interest-bearing debt. ...

In responding affirmatively, CRA stated: …[T]he issued shares represent consideration for the employee surrendering their rights under the agreement. ...