Subsection 18(2) - Limit on certain interest and property tax
Cases
Jobin v. Canada (Attorney General), 2005 DTC 5405, 2004 FCA 386
The Tax Court Judge did not commit a reviewable error when he found that s. 18(2) prohibited the deduction of interest and property taxes claimed...
Urbandale Realty Corp. v. Minister of National Revenue, 97 DTC 5353, [1997] 3 C.T.C. 6 (FCTD)
Subsection 18(2) only limited deductions otherwise available and did not establish that property taxes that the taxpayer was unable to deduct...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Timing | 107 |
Heinze v. The Queen, 97 DTC 5219 (FCTD)
The taxpayer acquired farmland and buildings for $130,000 and rented the farm out at $2,500 per year with the intention that they would not farm...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Start-Up and Liquidation Costs | 70 |
Ward v. The Queen, 88 DTC 6212, [1988] 1 CTC 336 (FCTD)
Interest and taxes were non-deductible under the pre-1978 version of the provision both because the land in question was held for ultimate...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Ownership | doctors were property owners notwithstanding holding of title by trustees | 49 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | adventure is not the carrying on of a business | 46 |
| Tax Topics - Income Tax Act - Section 79 | 34 | |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(g) | 34 |
Administrative Policy
20 February 2013 External T.I. 2012-0469811E5 F - Interest deductibility
The taxpayer acquired a large tract of land on income account using borrowed money and, after subdivision, sold a portion of the lots in Year 2....
5 November 2009 External T.I. 2009-0333031E5 F - Taxes foncières et scolaires
In the first scenario, Ms. A bought land in 2003 for $36,000 in order to construct a rental building but, in the interim, rented the land out for...
4 April 1997 Internal T.I. 9638817 - ACQUISITION OF VACANT LAND
Where the owner of a motel purchases a city-owned lot adjacent to the motel property in an effort to prevent it from being developed in a manner...
7 February 1992 T.I. (Tax Window, No. 16, p. 19, ¶1738)
The carrying charges that relate to a particular parcel can only be deducted in arriving at the net income from that parcel and cannot be applied...
91 C.R. - Q.39
Revenues that relate to a particular parcel of land may only be included in computing the net income from that parcel and not applied to the...
13 June 1991 T.I. (Tax Window, No. 4, p. 29, ¶1303)
Because s. 18(2)(f) does not apply to a partnership of two corporations, interest and property taxes to which s. 18(2) applies are not deductible...
5 February 1990 T.I. (July 1990 Access Letter, ¶1314)
A corporation whose principal business is the holding of a more-than-10% interest in a principal-business partnership generally will be regarded...
1 December 1989 T.I. (May 1990 Access Letter, ¶1209)
Expenses that relate to a particular lot can only be deducted from the net income from that lot and not against the net income of any other lots...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(3) - Land | 12 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) | 42 |
89 C.R. - Q.46
The acquisition of land includes the addition of services. Therefore, interest on funds borrowed to acquire the services is interest on debt...
89 C.M.TC - Q.11
partnerships are not entitled to the base level deduction.
89 C.M.TC - Q.12
a corporate co-tenant having a taxation year that differs from the fiscal year of the co-tenancy should calculate its base level deduction for...
89 C.M.TC - Q.13
the reference in s. 18(2)(e) to "gross revenue, if any, from the land" does not include revenue from sales of individual parcels of a large tract...
89 C.M.TC - Q.14
where funds borrowed to acquire land cannot be related to particular parcels, the denied deduction generally is allocated to all land held during...
IT-153R3 "Land Developers - Subdivision and Development Costs and Carrying Charges on Land"
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 10 - Subsection 10(1) | 119 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(3) - Land | 0 | |
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | 32 |
Articles
Bourgeois, "Some Tax Considerations in Real Estate Development and Construction: Soft Costs, Capitalization, Inventory Write-Downs and Characterization of Partnership Income", 1995 Corporate Management Tax Conference Report, c. 4.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1) | 0 | |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | 26 |
Subsection 18(3) - Definitions
Land
See Also
Re Trizec Equities (1987), 36 DLR (4th) 318 (N.S.C.A.)
A finding that seven floors that were in the process of being added to a 12-storey building, were "building" for purposes of the Assessment Act...
Administrative Policy
1 December 1989 T.I. (May 1990 Access Letter, ¶1209)
Services added to land meet the legal definition of land.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(2) | 44 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) | 42 |
IT-153R3 "Land Developers - Subdivision and Development Costs and Carrying Charges on Land"
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 10 - Subsection 10(1) | 119 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(2) | 0 | |
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | 32 |
Subsection 18(3.1) - Costs relating to construction of building or ownership of land
Cases
Trynchy v. The Queen, 2001 DTC 5582 (FCTD)
A limited partnership of which the taxpayer was a member poured a single concrete piling for a project that would have required 100 pilings as...
Fiore v. The Queen, 93 DTC 5215 (FCA)
At the time the taxpayer's appeal was heard by the Tax Court, it was agreed with the Crown that of a total of $326,648 spent by the taxpayers in...
See Also
9127-6287 Québec Inc. v. Agence du revenu du Québec, 2023 QCCQ 4688
The taxpayer, during the taxation years at issue, suspended the operation of its golf course to backfill two artificial lakes in its driving range...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit | golf course operations were suspended for construction whose purpose was to generate business income | 215 |
Charron v. Agence du revenu du Québec, 2021 QCCQ 12137
The taxpayer and another individual acquired a lot for $24,500 in May 2004, and incurred various expenses during the period of construction...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | municipal and school taxes, insurance, electricity and interest incurred from building permit to being inhabitable were capitalized | 176 |
Morris v. The Queen, 2014 DTC 1149 [at at 3481], 2014 TCC 142 (Informal Procedure)
The taxpayer's wife purchased a home, which had been their principal residence, from the taxpayer in order to convert it to rental property. They...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Start-Up and Liquidation Costs | rental operation commenced with repairs and touch-ups | 132 |
Janota v. The Queen, 2010 TCC 395, 2010 DTC 1268 at 3893 (Informal Procedure)
The taxpayers bought an old duplex house and carried out extensive repairs, the expenses of which were deductible. Subsection 18(3.1)(a) only bars...
Baggs v. MNR, 90 DTC 1296, [1990] 1 CTC 2391 (TCC)
In August 1983 the taxpayer commenced the expansion of a two-unit apartment building into a fourteen-unit apartment building. On December 8, 1983,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense | 33 |
Administrative Policy
S3-F4-C1 - General Discussion of Capital Cost Allowance
Overview
1.46 Subsection 18(3.1) of the Act denies the deduction, on a current basis, of certain outlays and expenses that are attributable to the...
5 July 2013 Internal T.I. 2013-0489821I7 F - Application of subsection 18(3.1)
The taxpayer carried out renovations on a rental property extending over more than a year, resulting in the property not being available for...
9 June 2005 Internal T.I. 2004-0105421I7 F - Déductibilité des frais juridiques et d'intérêts
The taxpayer, who had contracted with a construction firm for the firm to enlarge the taxpayer’s building, failed to pay invoices of the firm...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Damages | legal fees to defend against claim for unpaid construction fees on building addition were on capital account | 126 |
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A | legal fees to defend against claim for unpaid construction fees on building addition were not a capital cost addition | 127 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(ii) | interest paid pursuant to a judgment requiring payment of construction fees would be deductible but for s. 18(3.1) | 165 |
9 April 2003 Internal T.I. 2003-0001597 F - FRAIS ACCESSOIRES
The Directorate indicated that s. 18(3.1) applied to the following categories of expenditures if work on a rental building constituted a...
2 April 2003 External T.I. 2002-0171215 F - FRAIS DE FINANCEMENT
A partnership that constructed a rental property over a 12-month period paid a guarantee fee to CMHC as each advance was made to it under the...
9 March 1992 T.I. (Tax Window, No. 17, p. 22, ¶1792))
Interest income received from customers' deposits for buildings under construction cannot be set-off against the interest expense of the...
19 September 89 T.I. (February 1990 Access Letter, ¶1099)
Payments made by the lessee under an emphyteutic lease to terminate leases in order that it could transform the rental property into a hotel...
89 C.M.TC - "Capitalization of Soft Costs - Buildings Under Construction"
general discussion
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.2) - Paragraph 18(3.2)(a) | 44 |
88 C.R. - Q.52
Where a taxpayer has an ownership interest in a building being erected, the taxpayer is considered to have acquired the building to the extent of...
84 C.R. - Q.66
The restriction applies to costs incurred during the period of the construction of the entire building regardless whether it is constructed or...
Articles
Bourgeois, "Some Tax Considerations in Real Estate Development and Construction: Soft Costs, Capitalization, Inventory Write-Downs and Characterization of Partnership Income", 1995 Corporate Management Tax Conference Report, c. 4.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(2) | 0 | |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | 26 |
Paragraph 18(3.1)(a)
Administrative Policy
9 October 2015 APFF Roundtable Q. 3, 2015-0595761C6 F - Application of ss. 18(3.1)
When asked if it agreed with Janota (cited for the proposition that s. 18(3.1) applies only to the capitalization of soft costs), CRA was somewhat...
4 May 2005 Internal T.I. 2005-0121761I7 F - Déduction des intérêts - améliorations locatives
In order to expand his bookshop, the taxpayer rented larger premises and undertook renovations before fitting them out, and continued to carry on...
Subparagraph 18(3.1)(a)(i)
See Also
Customs and Excise Commissioners v. Viva Gas Appliances Ltd., [1983] BTC 5064, [1983] 1 WLR 1445, [1984] 1 All E.R. 112 (HL)
The replacement of coal-burning fireplaces in old houses by gas furnaces was found to be the supply of services "in the course of the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Noscitur a Sociis | 116 |
ACT Construction Ltd. v. Customs and Excise Commissioners, [1982] 1 All E.R. 84 (HL)
The construction of additional foundations for buildings constituted the "alteration" of those buildings. (Finance Act 1972)
Subsection 18(3.2) - Included costs
Paragraph 18(3.2)(a)
Administrative Policy
89 C.M.TC - "Capitalization of Soft Costs - Buildings Under Construction"
"where a corporation uses available cash to fund the construction of a building and ostensibly borrows money to finance its trade receivables, a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1) | 4 |
84 C.R. - Q.67
The interest expense relating to the capital contribution of an arm's length partner will be deductible even though the funds are used by the...
Subsection 18(3.4) - Where s. (3.1) does not apply
See Also
Re Regional Assessment Commissioner, Region No. 14 and Silton Ltd. (1986), 54 OR (2d) 282 (Ont. D.C.)
Respecting s. 7(7) of the Assessment Act (Ont.), Steele J. stated:
"In considering what is the preponderating business, all aspects of the...
Administrative Policy
89 C.M.TC - "Capitalization of Soft Costs - Buildings under Construction" - "Principal Business Corporation"
Subsection 18(3.5) - Idem [Where s. (3.1) does not apply]
See Also
Barat v. M.N.R., 91 DTC 1097, [1991] 2 CTC 2360 (TCC)
A parking garage which was being constructed as part of the same project as a hotel located across the street and which was connected to it by an...
Schneider v. MNR, 89 DTC 198, [1989] 1 CTC 2295 (TCC)
The purchaser of a building was not entitled to deduct soft costs incurred during the construction period and subsequent to his signing of the...
Administrative Policy
85 C.R. - Q.51
Criteria respecting "substantially advanced".
Paragraph 18(3.5)(d)
See Also
Pogson v. Lowe, [1984] 1 WLR 182 (HL)
It was held that an arrangement had not been made in writing to dispose of land when the notes in writing did not evidence the essential terms of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Transitional Provisions and Policies | 45 |
Subsection 18(4) - Limitation — deduction of interest by certain corporations
Cases
Wildenburg Holdings Ltd. v. Minister of Revenue (Ontario), 2001 DTC 5145 (Ont CA)
The taxpayer submitted that a borrowing from the taxpayer's sole shareholder (a non-resident) to finance the acquisition of Ontario real property...
Wildenburg Holdings Ltd. v. Ontario (Minister of Revenue)!, 98 DTC 6462, [1999] 2 CTC 161 (Ont. C.J. (G.D.)), aff'd 2001 DTC 5145 (Ont CA)
The sole non-resident shareholder of the taxpayer made a loan to what was documented as a partnership between the taxpayer and another...
Uddeholm Ltd. v. The Queen, 87 DTC 5431, [1987] 2 CTC 236 (FCTD)
Short-term indebtedness owing by the taxpayer to its Swedish parent for goods shipped to it was included in the formula indebtedness...
The Queen v. Thyssen Canada Ltd., 87 DTC 5038, [1987] 1 CTC 112 (FCA)
Late payment charges levied on the taxpayers by its German parent in respect of delays by the taxpayer in paying for merchandise that had been...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 10 - Subsection 10(1) | 54 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) | no double taxation where Pt. XIII tax on amount for which no deduction | 62 |
See Also
Specialty Manufacturing Ltd. v. R., 97 DTC 1511, [1998] 1 CTC 2095 (TCC)
Article IX of the 1980 Canada-U.S. Convention and Article IV of the 1942 Canada-U.S. Convention did not prevent the application of s. 18(4) of the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Treaties - Income Tax Conventions - Article 10 | 54 |
Administrative Policy
Income Tax Mandatory Disclosure Rules Consultation: Sample Notifiable Transactions (Finance Release Webpage), 4 February 2022
The notifiable transactions designated by CRA pursuant to draft s. 237.4(3) with the concurrence of Finance include:
Avoidance of thin...
11 September 2015 Internal T.I. 2015-0599161I7 - Subsection 18(4) and section 216
A non-resident corporation (the “Taxpayer”), which filed a return under s. 216, took the position that the rules in s. 18(4) (the “Rules”)...
24 December 2013 Internal T.I. 2013-0512551I7 - Thin Cap and partnership income
A ULC and its wholly-owned subsidiary (ULC II) were the partners of a partnership with a different year end than of ULC. The correspondent...
5 December 2012 External T.I. 2012-0445891E5 - Contributed Surplus and Thin Capitalization
A non-resident corporation (NRco) transferred its shares of Canco, having a cost and paid-up capital of $100 and a fair market value of $1,000 to...
2005 Ruling 2005-0123631R3 - Thin Capitalization Rules
GAAR will apply to prevent what otherwise would be the avoidance of the thin capitalization rule when debts owing by a Canadian corporation to a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 62 |
9 September 2002 External T.I. 2002-0136985 - Interpretation of Thin Cap Terms
The calculation takes into account all the calendar months ending in the year even if there is no debt or equity outstanding in a particular...
Income Tax Technical News, No. 16, 8 March 1999
Comment on Wildenburg case.
Income Tax Technical News, No. 16
If there is a bona fide partnership and the partners are jointly and severally liable for the partnership debts, RC will view the partnership as...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(5) | 75 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Reasonable Expectation of Profit | 42 |
29 July 1997 External T.I. 9638945 - INTERACTION OF SUBSECTIONS 18(4) AND 216(1)
Where a non-resident corporation has elected under s. 216(1), the calculation of its "outstanding debts to specified non-residents" and of its...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 216 - Subsection 216(1) | 60 |
3 October 1996 Internal T.I. 1996-9523657 - Capitalization rules applicable to non-res.
Surplus contributed by a person when it was a specified non-resident shareholders included in the computation of the Canadian resident shareholder...
1996 Corporate Management Tax Conference Round Table, Q. 6
Although preferred shares will be treated as equity even if for accounting purposes they are classified as debt, "the amount of the retained...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 181 - Subsection 181(3) | 41 |
30 August 1995 External T.I. 9520115 - APPLICATION OF 78(1) AND 18(4)
"Subsection 18(4) of the Act can only apply to amounts 'otherwise deductible' and therefore would have no application in the year inventory is...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 78 - Subsection 78(1) | 25 |
92 C.R. - Q.12
S.18(4) will not apply to a loan made to a non-Canadian partnership of which a resident Canadian corporation that is related to the lender is a...
23 November 1990 T.I. (Tax Window, Prelim. No. 2, p. 5, ¶1038)
The thin capitalization rule does not apply to interest paid by a partnership of corporations unless s. 245 applies.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | 34 |
IT-59R3 "Interest on Debts Owing to Specified Non-Residents (Thin Capitalization)"
Articles
Jack Bernstein, Francesco Gucciardo, "Update on Canada-U.S. Merges and Acquisitions", Tax Notes International, March 16, 2015, p. 993
A cashless application of cross-border interest payments (owing Canco to USCo) to satisfy a subscription obligation for shares of Canco is...
Nathan Boidman, Rhonda Rudick, "Recent Developments Affecting Foreign Investment in Canadian Real Estate", Tax Notes International, 30 April 2012, p. 449
Comparison of investing in Quebec real estate through a non-resident trust or non-resident corporation.
Janette Y. Pantry, Soraya M. Jamal, "The Thin Cap Rules: Revisiting the Foreign Exchange Anomaly", Corporate Finance, 2011, p. 1934: discussion of effect of s. 261(2)(b) and of Imperial Oil decision.
Greg M. Johnson, "Selected Tax Issues Relating to Capitalizing Private Equity Investments in the Oil and Gas Industry", Resource Taxation, Vol. VI, No. 4, 2009, p. 466
Suggests that the thin capitalization rules do not apply to a non-resident private equity partnership, having no 25% partners, which invests in a...
Ewens, "The Thin Capitalization Restrictions", 1994 Canadian Tax Journal, Vol. 42, No. 3, p. 954.
Subsection 18(5) - Definitions
Administrative Policy
4 March 2016 External T.I. 2016-0626841E5 - 18(5) and 20(1)(d)
A loan owing by Canco to a specified non-resident accrues simple interest, as well as compound interest on the balance of the unpaid simple...
(c)
Administrative Policy
19 September 2015 STEP Roundtable, Q.3
Does the position in 9619120, that redeemable preferred shares are treated as equity, irrespective of their accounting treatment, when applying...
Equity Amount
Paragraph (a)
See Also
Mac's Convenience Stores Inc. v. A.G. of Canada, 2015 QCCA 837
The taxpayer did not realize at the time that paying a substantial dividend to its Canadian parent (which reduced its retained earnings) would...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Rectification & Rescission | thin cap issues were not considered at time of paying a dividend | 234 |
Administrative Policy
29 October 2018 Internal T.I. 2018-0746351I7 - Retained earnings under IFRS
A multi-national entity’s Canadian subsidiary has voluntarily adopted IFRS for the purpose of preparing its Canadian income tax returns. In this...
18 June 2015 STEP Roundtable Q. 3, 2015-0572201C6 - 2015 STEP Q3 Redeemable Preferred Shares and 18(4)
Does the position in 9619120 still apply? CRA responded:
It continues to be the position of the CRA that the classification of a financial...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Share | equity/debt classification based on legal form | 57 |
Subparagraph (a)(i)
Administrative Policy
19 January 2018 Internal T.I. 2017-0721641I7 - Thin Cap.-Retained Earnings-Other Income (Loss)
During the relevant Taxation Years, the Taxpayer (a taxable Canadian corporation) had an interest-bearing loan (the “Loan”) owing to its...
23 November 2016 Internal T.I. 2015-0618511I7 - Thin Capitalization - Retained Earnings
The Canadian-resident corporate Taxpayer has applied the International Financial Reporting Standards (“IFRS”) in preparing its consolidated...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Accounting Principles | consistency between unconsoidated and consolidated financials | 151 |
Subparagraph (a)(ii)
Cases
Thinaddictives Inc. v. Agence du revenu du Québec, 2022 QCCQ 3029
The taxpayer (“Thinaddictives”), which was initially formed by its US parent (“Nonni”) with nominal issued share capital, received...
Administrative Policy
15 May 2019 IFA Roundtable Q. 1, 2019-0798831C6 - Thin capitalization
Does CRA still follow 9521415? In particular:
- Does the s. 18(5) definition of "specified shareholder" require a person to own shares of the...
Subparagraph (a)(iii)
Articles
Peter Lee, Paul Stepak, "PE Investments in Canadian Companies", draft 2017 CTF Annual Conference paper
Potential adverse thin cap consequences of U.S. lenders pushing for a single U.S. borrower (pp. 10-11)
One of the Canadian tax issues that can...
Paragraph (b)
Administrative Policy
19 August 2016 External T.I. 2015-0585471E5 - Thin cap rules and trusts
Clarification was requested on the application to a trust of (b)(i)(A) of the definition of “equity amount:”
(A) the average of all amounts...
Paragraph (c)
Administrative Policy
4 June 2014 External T.I. 2013-0513761E5 - Meaning of "cost" in determining "equity amount"
Generally, … the "cost" of property …include[s] the amount laid down to acquire such property. … The Queen v. Canada Trustco Mortgage...
22 July 2014 External T.I. 2014-0526631E5 - Definition of equity amount - cost of ECP
Eligible capital property is used by a non-resident corporation in its business carried on in Canada. CRA stated:
Outstanding Debts to Specified Non-Residents
Administrative Policy
24 November 2015 CTF Annual Roundtable, Q.10
Based on s. 261(2), the amount of U.S.-dollar denominated debt is to be measured for thin cap purposes in Canadian dollars based on the FX rate at...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) | application where no gain on shares/non-application to loss-shifting transactions | 338 |
21 November 2011 External T.I. 2010-0384001E5 - Guarantee/Collateral/ASPE effect on Thin Cap
Generally the hypothecation of assets by a non-resident controlling individual, or a guarantee by him or her, in order to secure a loan from an...
93 C.M.TC - Q. 3
Any accrued interest that is not paid on its due date becomes a "debt or other obligation to pay an amount" at that time, with the result that...
15 July 1992 T.I. 920963 (January - February 1993 Access Letter, p. 11, ¶C9-255)
Given the breadth of s. 18(5)(a)(i)(A)(II), the thin capitalization rules will apply to loans made by a U.S. subsidiary to a Canadian parent...
Paragraph (a)
Subparagraph (a)(ii)
Administrative Policy
15 May 2019 IFA Roundtable Q. 4, 2019-0798721C6 - 78(1)(b)(ii) deemed loan & thin capitalization
Assuming compound interest does not accrue on unpaid simple interest owing by a Canadian corporation to a non-resident creditor for which an...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 78 - Subsection 78(1) - Paragraph 78(1)(b) - Subparagraph 78(1)(b)(ii) | deemed s. 78(1)(b)(ii) loan is not also deemed to bear interest | 97 |
Specified Right
Administrative Policy
31 October 2017 External T.I. 2017-0690691E5 F - New section 15 back to back loan rules
A 50% shareholder of Corporation B (Ms. B) received a $3M bank loan that was secured by a pledge to the bank of a $3M term deposit held by...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.16) - Paragraph 15(2.16)(c) - Subparagraph 15(2.16)(c)(i) - Clause 15(2.16)(c)(i)(B) | application to a term deposit pledged by a family corporation to secure a business loan taken out by a shareholder | 195 |
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.16) - Paragraph 15(2.16)(c) - Subparagraph 15(2.16)(c)(ii) | term deposit to secure shareholder loan potentially a specifed right | 199 |
14 September 2017 Roundtable, 2017-0703901C6 - CPA Alberta 2017 Q11: Shareholder loans
When will the back-to-back loan rules in s. 15(2.17) apply where a corporation provides security to a lender to its shareholder. CRA noted that...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.16) - Paragraph 15(2.16)(c) - Subparagraph 15(2.16)(c)(ii) | not a specified right where security for repayment of shareholder loan on default | 297 |
Finance
6 October 2017 APFF Financial Strategies and Instruments Roundtable, Q.13
When asked to comment on the policy respecting the use of the definition “specified right” for purposes of the application of ss. 15(2.16) to...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.16) | B2B rules in s. 15(2.16) apply mechanically irrespective whether s. 15(2) has been circumvented | 399 |
Articles
Raj Juneja, Pierre Bourgeois, "International Tax Issues That Get in the Way of Doing Business", 2019 Conference Report (Canadian Tax Foundation), 36:1 – 42
Uncertainty regarding specified right exclusion in multiparty group secured facility
- Under a multiparty credit agreement, all parties (Foreign...
Jason Boland, Christopher Montes, "A Detailed Review of the Back-to-Back Loan Rules", 2016 Conference Report (Canadian Tax Foundation), 26:1-32
Scope of “specified right” (pp. 26:6)
...[O]ne of the main reasons for the introduction of a more robust back-to-back rule in the thin...
Amanda S.A. Doucette, Britney Wangler, "Normal Borrowing by CCPC Owners Can Create an Income Inclusion", Canadian Tax Focus, Vol. 7, No. 1, February 2017, p. 1
A secured guarantee by a private corporation of a bank loan to its individual shareholder may very well cause an income inclusion to the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.17) | 381 |
John Lorito, Trevor O'Brien, "International Finance – Cash Pooling Arrangements", 2014 Conference Report, (Canadian Tax Foundation), 20:1-33
Specified rights (defined as tantamount to ownership) rarely granted to creditors except re cash collateral (p. 9)
[I]n simple terms, a specified...
Steve Suarez, "Canada Releases Revised Back-to-Back Loan Rules", Tax Notes International, October 27, 2014, p. 357.
Expansion of permitted security rights under s. 18(5) - "specified right"(p. 362)
Second…[t]he revised ''specified right'' definition appears...
Subsection 18(6) - Loans made on condition
See Also
Langhammer v. The Queen, 2001 DTC 45 (TCC)
Before going on to find that losses sustained by the taxpayer after investing in bonds of a condominium development were deductible under s....
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(p) - Subparagraph 20(1)(p)(ii) | occasional loans were money-lending business given that done similarly to a money lender | 259 |
Administrative Policy
18 May 2004 Internal T.I. 2004-0063351I7 F - Double déduction des intérêts et paragraphe 18(6)
In the course of a general discussion of a double-dip structure that also entailed a guarantee of a loan by a US specified shareholder, the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | double-dip structure does not preclude access to s. 20(1)(c) deduction | 115 |
27 July 1990TI AC 59653
With respect to a situation where a company deposited borrowed funds from a related non-resident person into a bank account which was pooled by a...
23 June 1989 TI 7-3792
S.18(6) would not apply where a non-resident corporation ("NRP") acquired a security that was not a debt obligation of a Canadian bank or a person...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(6) | 35 |
Income Tax Technical News, No. 15, "The Tax Consequences of the Adoption of the 'Euro' Currency"
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | 20 | |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | 0 |
2 October 1996 T.I. 961781 (C.T.O. "Thin Capitalization Back-to-Back Loans")
S.18(6) will not be applied to a second loan made by a corporation resident in Canada ("Canco 1") to a second Canadian-resident corporation...
93 C.M.TC - Q. 9
Where a loan is made by a non-resident person to his wholly-owned Canadian subsidiary which, in turn, makes a similar loan to a second-tier...
18 January 1993 External T.I. 5-921647
Where a U.S. parent loans $100 to a wholly-owned Canadian subsidiary, and s. 18(4) applies to deny all of the interest charges of $10 payable on...
18 July 1989 T.I. (Dec. 89 Access Letter, ¶1044)
S.18(4) applies where a non-resident corporation lends to an adequately-capitalized wholly-owned Canadian subsidiary, which subsequently loans...
23 June 1989 TI 7-3792
Discussion of consequences of a guarantee by the non-resident parent of the Canadian borrower of a Canadian bank loan, including a finding that s....
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(6) | 162 |
Paragraph 18(6)(c)
Administrative Policy
17 November 2015 Roundtable, 2015-0614241C6 - 2015 TEI Liaison Meeting Q.6 - Specified Right
A notional cash pooling arrangement between (i) a non-resident parent and its various subsidiaries including Canco, and (ii) a non-resident bank,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(3.1) - Paragraph 212(3.1)(c) | cross-border notional cash-pooling arrangement engages the B2B loan rules | 235 |
28 May 2015 IFA Roundtable Q. 5, 2015-0581531C6 - IFA 2015 Q.5: "Causality test" in 18(6) & 212(3.1)
What is the requisite degree of linkage referenced by the "because" test in clause (B) of ss.18(6)(c)(i), 18(6)(c)(ii), 212(3.1)(c)(i) and...
Articles
Shane Onufrechuk, Warren Pashkowick, "Tax Considerations of Major Construction Projects", 2014 Conference Report, Canadian Tax Foundation, 10:1-35.
Simplified overview of rule (p. 10:13)
A back-to-back loan exists when a Canadian resident has an outstanding interest-bearing debt obligation...
Steve Suarez, "Canada Releases Revised Back-to-Back Loan Rules", Tax Notes International, October 27, 2014, p. 357.
Introduction of requirement for strong causal connection (p. 361)
Two aspects of the revised secondary obligation definition merit further...
Subparagraph 18(6)(c)(i)
Articles
Jason Boland, Christopher Montes, "A Detailed Review of the Back-to-Back Loan Rules", 2016 Conference Report (Canadian Tax Foundation), 26:1-32
Meaning of “because of” in s. 18(6)(c)(i) (p. 26:8)
While the Supreme Court's comments in Copthorne appear to soften the "strong causal...
Paragraph 18(6)(d)
Articles
Jason Boland, Christopher Montes, "A Detailed Review of the Back-to-Back Loan Rules", 2016 Conference Report (Canadian Tax Foundation), 26:1-32
Purposes of the s. 18(6)(d) de minimis rule (p. 26:5)
[There] is a de minimis requirement that ensures that the back-to-back rule applies only if...
Shane Onufrechuk, Warren Pashkowick, "Tax Considerations of Major Construction Projects", 2014 Conference Report, Canadian Tax Foundation, 10:1-35.
Simplified overview of rule (p. 10:13)
[A] safe harbour exists when the intermediary debt represents less than 25 percent of the Canadian debt,...
Subsection 18(7) - Partnership debts
Administrative Policy
28 July 2015 External T.I. 2015-0567811E5 - Thin cap rules for members of a partnership
Canco (wholly-owned by NRco) and its wholly-owned subsidiary (Canco Sub) held respective 99.9% and 0.1% interests in the "Partnership" and, before...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(l.1) | sale by Cancos of their partnership interests part-way through year did not eliminate their proportionate pick-up of partnership debt | 354 |
Articles
John Tobin, "Infrastructure and P3 Projects", 2017 Conference Report (Canadian Tax Foundation), 10:1-31
Application of thin cap rules to a non-resident (collective investment vehicle) partnership lending to a P3 Projectco (pp. 10:24-25)
[F]or the...
Subsection 18(9) - Limitation respecting prepaid expenses
Cases
Urbandale Realty Corp. Ltd. v. The Queen, 2000 DTC 6118 (FCA)
The taxpayer, a real estate developer, prepaid municipal real estate development charges applicable to one of its residential lots developments....
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Timing | 85 |
Canderel Ltd. v. Canada, 98 DTC 6100, [1998] 1 S.C.R. 147, [1998] 2 C.T.C. 35
After noting that tenant inducement payments ("TIPs") were not covered by s. 18(9), Iacobucci J. stated (at p. 6110) that "the fact that...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Onus | 105 | |
| Tax Topics - Income Tax Act - Section 9 - Accounting Principles | not following matching principle accorded with well-accepted business practices | 153 |
| Tax Topics - Income Tax Act - Section 9 - Timing | lease inducement payments currently deductible | 124 |
| Tax Topics - Statutory Interpretation - Expressio Unius est Exclusio Alterius | inference made from narrow scope of s. 18(9) | 34 |
| Tax Topics - Statutory Interpretation - Deference to Parliament/ No judicial legislation | presumption against judicial legislation | 79 |
The Queen v. Toronto College Park Ltd., 96 DTC 6407, [1996] 3 CTC 94 (FCA), rev'd 98 DTC 6088 (SCC)
Before finding that s. 18(9) extended to running expenses which, therefore, would not otherwise be subject to the matching principle, Robertson...
See Also
SPG International Ltée v. R., [1998] 3 CTC 2046, 98 DTC 1706 (TCC)
S.18(9)(b) authorized the deduction in 1991 by the taxpayer of expenses incurred by it in 1990 to participate in a 1991 trade fair.
Administrative Policy
14 March 2024 External T.I. 2015-0596761E5 F - Traitement fiscal
After indicating that it appeared that an expenditure incurred for the anti-theft marking of an automobile used in carrying on a business...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense | expenditure on anti-theft marking of car likely would be on current account | 202 |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(k) - A - Subparagraph A(iv) | mandatory requirement for employee notification to employer by end of year | 51 |
2015 Ruling 2015-0601441R3 - XXXXXXXXXX Partnership - winding up
Current structure
Sub1 and Sub2 (both taxable Canadian corporations and wholly-owned subsidiaries of Parent) are currently the sole partners of a...
28 April 2015 External T.I. 2015-0566011E5 - Whether s. 16.1 applies to a transport truck
After finding that since a transport truck was an exempt property for s. 16.1 purposes, no s. 16.1 election could be made, CRA noted that the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) | identification of lease based on legal substance/no election for transport truck | 209 |
27 August 2012 Internal T.I. 2012-0442831I7 - Audit referral on prepaid rent
In reviewing a "step-down" lease (i.e., one where the annual lease payments are higher in the initial years), CRA concluded that there was no...
2 December 2004 External T.I. 2004-0083931E5 F - Frais relatifs à une garantie prolongée
Regarding the deductibility of the cost of an extended warranty on an automobile paid by a self-employed individual, CRA stated:
[T]he costs would...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h.1) | cost of extended car warranty that meets the s. 8(1)(f) or (h.1) conditions is deductible on cash basis | 103 |
30 January 2003 External T.I. 2002-0169785 - PRODUCT LIABILITY INSURANCE
The purchase of a single-premium product liability policy by a manufacturer covering goods manufactured in the year would be subject to s....
11 July 1995 Internal T.I. 9505997 - EXTENDED WARRANTY
A client, who purchases an extended warranty on an asset that will be used for business purposes, will be required to apply s. 18(9) "where the...
14 June 1994 External T.I. 9409775 - SINGLE PREMIUM ON A GROUP TERM LIFE INSUR FOR RETIRE
A single group term life insurance premium paid by an employer in the situation where the coverage is obtained during the ongoing employment of an...
1994 A.P.F.F. Round Table, Q. 36
Where after paying annual municipal taxes of $1,000 for five years, the taxpayer is offered two options - continue to pay municipal local...
25 October 1990 T.I. (Tax Window, Prelim. No. 1, p. 19, ¶1017)
Where an employer discharges its obligation to provide life insurance coverage to retired employees by purchasing a single premium insurance...
29 January 1990 T.I. (June 1990 Access Letter, ¶1250)
Where an up-front fee is paid by a bank to another financial institution in respect of an interest-rate cap, no deduction may be made in the year...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) | 37 |
89 C.M.TC - Q.4
for the 1989 and prior years, RC will accept that an interest buy-down payment which is made in the middle of a mortgage term and which was not...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 249 - Subsection 249(1) | 69 |
84 C.R. - Q.68
Where the party that was to provide prepaid services has gone out of business, with the result that the taxpayer is unable to recover the prepaid...
IT-417R2 "Prepaid Expenses and Deferred Charges"
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(9.2) | 0 |
Articles
Joseph Frankovic, "The Income Tax Treatment of Prepaid Expenses and Similar Costs: A Time Value Analysis", 2000 Canadian Tax Journal, Vol. 48, No. 5, p. 1371.
Paragraph 18(9)(a)
Subparagraph 18(9)(a)(iii)
Administrative Policy
23 May 2003 External T.I. 2002-0172205 F - FIDUCIE DE BIEN-RE&S
An employer which made a commitment to its employees to provide benefits as drug reimbursement, paying for certain health services and reimbursing...
Subsection 18(9.02)
Administrative Policy
29 May 2001 External T.I. 2000-0055915 F - DEDUCTIBILITE DES COMMISSIONS - ASSURANCE
Generally, commission expenses paid before 2000 by an insurer in respect of property and casualty insurance policies were deductible in the year...
18 May 2000 Internal T.I. 2000-0006037 F - FRAIS D'ACQUISITION
Regarding life insurance policy acquisition expenses, including commissions directly related to the acquisition of the policy, incurred by an...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Timing | commissions directly related to the acquisition of a life insurance policy are generally deductible in the year incurred | 92 |
Subsection 18(9.1) - Penalties, bonuses and rate-reduction payments
Administrative Policy
27 January 2017 External T.I. 2013-0482351E5 - Clause 95(2)(a)(ii)(D)
CRA indicated that where a loan from one controlled foreign affiliate (FA Finco) of Canco to a second CFA of Canco (FA Holdco) meets the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) | s. 95(2)(a)(ii)(D) can recharacterize a loan prepayment penalty as active business income | 460 |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2.7) | loan prepayment penalty fully deducted from surplus when paid | 161 |
S4-F2-C1 - Deductibility of Fines and Penalties
Computing the deemed interest amount
1.34 For tax purposes, an amount deemed to have been paid as interest under paragraph 18(9.1)(e) will be...
11 January 2013 External T.I. 2012-0436771E5 - Sale of a business
The sole shareholder of Aco is required under the terms of the share sale agreement to repay, in full, at closing, a bank loan owing by Aco and an...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | continued deduction where debt settlement by shareholder rather than taxpayer | 24 |
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) | sale agreement required loan prepayment penalty | 68 |
30 March 2007 External T.I. 2005-0129061E5 - Payment for interest reduction
The portion of a payment made to reduce the interest rate on a loan will not be deductible to the extent that it exceeds the present value of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(9.7) | 23 |
23 November 2005 External T.I. 2005-0156071E5 - deductibility of prepayments under s. 18(9.1)
Where part way through the term of a mortgage borrowing the taxpayer prepays the mortgage upon payment of a prepayment penalty equal to six...
30 September 2003 Internal T.I. 2003-0023137 - DETERMINING THE PENALTY AMOUNT
Upon an acquistion of control of a taxable Canadian corporation (the "Debtor"), it was required to make an offer to repurchase its (Cdn.$) Class A...
15 May 2003 External T.I. 2003-0011615 - AMORTIZATION PRESENT VALUE BASIS
Discussion of proposal to switch method of amortization of penalty or bonus from straight-line method to present value method.
18 April 2002 Internal T.I. 2002-0118827 F - DEBENTURES CONVERTIBLES
Regarding the potential application of s. 18(9.1) to a premium paid on the early cash redemption of convertible debentures, the Directorate...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(f) | no s. 20(1)(f)(ii) deduction on conversion of convertible debentures notwithstanding attempt in resolution to fix the issued shares’ stated capital at their market value | 179 |
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Paid-Up Capital | PUC of shares issued on debenture conversion equal to consideration stated in debenture indenture and in financial statements, rather than the FMV of shares stated in resolution | 178 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures | premium on redemption of convertible debentures was not deductible on current account | 60 |
27 July 2001 External T.I. 2001-0090305 F - PENALITE-REMBOURSEMENT D'UN EMPRUNT
In the course of a general discussion of the deductibility of an early loan prepayment charge made to an individual, CCRA indicated:
- The penalty...
13 September 2000 External T.I. 2000-0036825 - REPURCHASE OF DEBENTURES ON OPEN MARKET
S.18(9.1)(d) would not characterize a premium paid for a bond purchased by the issuer in the open market in the normal manner as a bonus payable...
29 March 2000 Internal T.I. 2000-0001367 F - PAIEMENT POUR SE LIBERER D'UNE HYPOTHEQUE
The taxpayers were not otherwise released from their liability under a mortgage on a property on the property’s purchase. A sum paid by them to...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) | sum paid on the disposition of a property to be released from the contingent liability on the mortgage that was assumed by the purchaser, was non-deductible | 38 |
24 April 1998 External T.I. 9802565 - PENALTY PAYMENT IN RESPECT OF BORROWING
"A prepayment penalty incurred by a taxpayer who borrows money from one arm's length party to pay a pre-existing debt owing to another arm's...
1998 Ruling 98021433 - REPAYMENT OF INDEBT. 18(9.1) ON REFINANC.
A Canadian corporation (Opco) borrows under a public offering of "New Bonds"in order to to make a cash tender offer at a premium for the "Existing...
1996 Ruling 961368
With respect to a situation where a taxable Canadian corporation made an offer to purchase at a premium outstanding notes that were eligible for...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | 64 |
23 October 1995 Internal T.I. 9503766 - PV OR STRAIGHT LINE
"Both the straight line and the present value method of amortization are acceptable for the purposes of subsection 18(9.1)."
26 October 1994 Internal T.I. 9425876 - PREPAYMENT PENALTY
S.18(9.1) originally was intended as an alleviating measure for farmers who prepaid their loans but were denied a deduction for the portion of the...
21 October 1993 T.I. 932532
Where penalty payments are made in order to pay off a mortgage, or reduce the interest rate on a mortgage, prior to the sale of the mortgaged...
19 August 1992 Memorandum 922019 (Tax Window, No. 23, p. 14, ¶2156)
S.18(9.1) applies to a bonus or a penalty payment on the early redemption of debentures, provided that it was not paid to extend the term of the...
14 August 1992 Internal T.I. 7-921593
General discussion of requirements the satisfaction of which permit the deduction of a bonus payment on a straight-line basis over the period of...
4 May 1992 Tax Executive's Institute Roundtable, Q. 11, No. 92063651 (December 1992 Access Letter, p. 49)
A bonus paid on early repayment of a debt obligation should be deducted on a straight-line basis over the period during which the obligation would...
1 May 1992 T.I. 920313
With respect to a situation where a Canadian corporation repaid a bank loan out of the proceeds of a long-term debenture and incurred an early...
9 January 1992 Memorandum 9718371 (Tax Window, No. 15, p. 6, ¶1677)
Bonuses paid by borrowers in a money-lending business on the early retirement of obligations are now governed by s. 18(9.1).
Articles
Jim Samuel, Byron Beswick, "Selected Issues in Transactions Involving Debt", 2019 Conference Report (Canadian Tax Foundation), 18:1 – 27
No s. 18(9.1) deduction for penalty incurred on disposition of property (p. 18:16)
[T]he CRA’s general view is that a penalty that is incurred...
Frankovic, "Deduction of Prepaid Interest, Interest Rate Buy-Downs and Early Repayment Penalties", Tax Topics, No. 1292, December 12, 1996, p. 1.
Ulmer, "Taxation of Interest Income", 1990 Conference Report, c. 8.
Paragraph 18(9.1)(a)
Administrative Policy
31 May 2018 External T.I. 2018-0755631E5 - Substitution of debt, paragraph 18(9.1)(a)
A taxpayer who has a loan with an arm’s-length financial institution, obtains a new loan from another arm’s-length financial institution, the...
29 May 2017 Internal T.I. 2017-0689161I7 - Paragraph 18(9.1)(a) - paying debt with new debt
The “Taxpayer,” a listed public company, issued Series A Debentures (the “SAD”), and subsequently issued Series B Debentures (the...
4 December 2002 Internal T.I. 2002-0138067 F - REMPLACEMENT D'UNE CREANCE PAR UNE AUTRE
A corporation repaid an unsecured debenture with surplus cash and by drawing down on a revolving line of credit. Did the exclusion in s....
Subsection 18(9.2) - Interest on debt obligations
Administrative Policy
2 December 1992 Memorandum (Tax Window, No. 30, p. 9, ¶2484)
S.18(9.2) will not apply to a zero coupon bond issued to investors at a price equal to the net present value of the face value payable on...
IT-417R2 "Prepaid Expenses and Deferred Charges"
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(9) | 0 |
Articles
Richardson, "Tax Amendments Facilitate Issue of Synthetic Zero Coupon Debt", Corporate Finance, Vol. 1, No. 1, 1992, p. 8: Discussion of WIC and Rogers' LYONs transactions.
Novek, "Deductibility of Financing Expenses", 1992 Corporation Management Tax Conference, C.3.
Subsection 18(9.7) - Idem [Interest on debt obligations]
Administrative Policy
30 March 2007 External T.I. 2005-0129061E5 - Payment for interest reduction
S.18(9.7) does not apply where a payment is made for a reduction in the rate of interest payable on a loan.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(9.1) | PV excess | 36 |
Subsection 18(10) - Employee benefit plan
Administrative Policy
2 May 1990 Memorandum (October 1990 Access Letter)
Discussion of a plan available to both resident and non-resident athletes who play games both in Canada and the U.S.
Subsection 18(11) - Limitation
Paragraph 18(11)(c)
See Also
Walton v. MNR, 89 DTC 423, [1989] 2 CTC 2335 (TCC)
A retiring civil servant, who purchased a past service pension the cost of which was payable by him over a 20-year period in monthly payments over...
Subsection 18(12) - Work space in home
See Also
Larouche v. Agence du revenu du Québec, 2023 QCCQ 3350
In deducting his home office expenses, the taxpayer determined the portion of his home that was used in his business of providing electrical...
DiCaita v. The Queen, 2021 TCC 5 (Informal Procedure)
In denying the taxpayer’s deduction of home office expenses of around $3,500 per annum allegedly incurred in managing his two small rental...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense | reconditioning of rental unit allowed as deductible expense | 242 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | expenses of flight, at the conclusion of Las Vegas vacation followed by attending at a rental property in Phoenix, from Phoenix back home were deductible | 284 |
| Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit | rental unit was a source of income even when not rentable due to on-going renovations | 77 |
Doleman v. The Queen, 2011 DTC 1257 [at at 1474], 2011 TCC 349 (Informal Procedure)
The taxpayer carried on a bed and breakfast operation in his home. V.A. Miller J. affirmed the Minister's assessment that the taxpayer's...
Arbeau v. The Queen, 2010 DTC 1203 [at at 3526], 2010 TCC 307 (Informal Procedure)
The repairing by the taxpayer of electronic appliances primarily at his home was found to be a separate business from his contract for BC Hydro of...
Ryan v. The Queen, 2006 DTC 2738, 2006 TCC 132 (Informal Procedure)
The taxpayer, a physiotherapist, worked full time at one physiotherapy clinic, and performed primarily management and administrative functions...
Jenkins v. The Queen, 2005 DTC 384, 2005 TCC 167 (Informal Procedure)
In finding that the principal place of business for the taxpayers, who carried on through a partnership a fishing business using two boats owned...
Rudiak v. The Queen, 2000 DTC 3901 (TCC)
McArthur J. stated (at paras. 8-9):
The bed and breakfast guest premises and the Appellant's living area were physically separate. The business...
Sudbrack v. The Queen, 2000 DTC 2521 (TCC)
Extensive renovations were made to a house on the edge of a New Brunswick harbour in order that it could serve as a guest house. Five bedrooms...
Administrative Policy
27 October 2014 External T.I. 2012-0471391E5 F - Entreposage d'inventaire à domicile
A commissioned employee uses his home as his principal place of business. He has a home office as well as having inventory storage space either in...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(13) | inventory storage part of work place | 98 |
1 May 2012 External T.I. 2012-0436401E5 F - Frais de bureau à domicile
Can a self-employed worker who has a home office for meeting clients deduct a portion of the "permanent works" or "local improvements" taxes paid...
26 July 2010 External T.I. 2010-0364721E5 F - Revenus de bien et d'entreprise
Before concluding that “the operator of a bed and breakfast, who has a personal residence in which bed and breakfast rooms are rented out on a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(14) | rental property restriction rule applies to business properties as well/"principally" references over 50% of the time | 127 |
| Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit | reduction of personal expenses is not the pursuit of profit | 97 |
24 May 2007 Internal T.I. 2007-0235681I7 F - Frais de bureau à domicile
The Directorate confirmed that, notwithstanding Jha, it maintains its position that the deduction restriction in s. 18(12) apply only where the...
25 November 2004 External T.I. 2004-0079751E5 F - Dépenses d'une auberge limitées par 18(12)
Mr. A and Mr. B own a building in which their spouses, Ms. A and Ms. B, operate an inn. Ms. A and Ms. B stay at the inn on a weekday basis while...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 96 | pro rata rent received by the 2 equal partners of a partnership operating an inn jointly owned by them would not be respected as rent | 197 |
29 September 2004 Internal T.I. 2004-0067311I7 F - Bureau à domicile
A dentist lives on the first floor of his residence but uses the basement solely for his practice. Some common expenses which were incurred for...
20 September 2001 External T.I. 2001-0070705 F - ETABLISSEMNT DOMESTIQUE AUTONOME
Regarding a structure, used as an individual’s work place, attached to the individual's principal residence, CCRA indicated that the premises...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Self-Contained Domestic Establishment | self-contained domestic establishment is a living unit with restricted access containing a kitchen, bathroom, and sleeping facilities | 66 |
2 March 1994 External T.I. 9403515 - OFFICE IN HOME EXPENSES - PROPERTY TAX COMMERCIAL ASSESS.
A statutory amendment would be required before RC could require proof of a commercial assessment before permitting a business a deduction in...
Articles
Gael Melville, Lucie Champagne, Yves Plante, "Tax Considerations for the Newly-Self-Employed", 2011 Canadian Tax Journal, Vol 59, p. 843
General discussion including of issues arising from claiming CCA.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 5 - Subsection 5(1) | 27 |
Paragraph 18(12)(a)
Administrative Policy
S4-F2-C2 - Business Use of Home Expenses
Meaning of principal place of business
2.11 ... The word principal is not defined in the Act but in this context is generally understood to refer...
Subparagraph 18(12)(a)(ii)
Administrative Policy
16 August 2022 CPAC Roundtable Q. 10, 2022-0946251C6 - Home Office Expenses
S. 18(12)(a)(ii) provides that no expenses related to a work space in the home can be deducted from income from a business unless the work space...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(13) - Paragraph 8(13)(a) - Subparagraph 8(13)(a)(ii) | s. 8(13)(a)(ii) does not extend to virtual meetings | 114 |
Paragraph 18(12)(b)
Administrative Policy
S4-F2-C2 - Business Use of Home Expenses
Apportionment of expenses
2.18 The expenses should be apportioned between business and non-business use on a reasonable basis. A reasonable...
Paragraph 18(12)(c)
Administrative Policy
S4-F2-C2 - Business Use of Home Expenses
Business-by-business carryforward
2.42 ...
Example 5
... Mrs. D decides to close her nail salon business in Year 4 and replace it with a...
Subsection 18(13) - When s. (15) applies to money lenders
Administrative Policy
5 February 1990 T.I. (July 1990 Access Letter, ¶1315)
The relationship between ss.18(13) and 20(1)(l) is discussed.
Subsection 18(19)
Administrative Policy
Income Tax Mandatory Disclosure Rules Consultation: Sample Notifiable Transactions (Finance Release Webpage), 4 February 2022
Allocation of loss leg of straddle to vending partner
- A taxpayer seeks to avoid the s. 18(19) straddle-transaction rules by acquiring a...