(d)-(l)

Paragraph 20(1)(d) - Compound interest

See Also

MacNiven v. Westmoreland Investments Ltd., [2001] 1 All ER 865 (HL)

In order to generate an interest deduction for accrued interest owing by an insolvent company ("WIL") to its shareholder (a pension fund) pursuant...

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Administrative Policy

29 September 2020 External T.I. 2018-0757501E5 F - Crédit pour intérêts sur les prêts étudiants

CRA indicated that the capitalization of unpaid interest on a student loan would constitute the payment of such interest if there was a concurrent...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.62 capitalization of interest on a novation would constitute its payment – but novated loan would be a new non-student loan 221
Tax Topics - General Concepts - Payment & Receipt capitalization of interest on a novation under Quebec law would constitute its payment 214

21 April 2008 Internal T.I. 2007-0251761I7 F - Billet à payer

Debt owing to the taxpayer following an asset sale provided that interest may be added to the principal of the debt, which is what occurred. The...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) addition of unpaid interest to principal was not a payment or crediting of the interest so as to engage Pt. XIII tax 109
Tax Topics - General Concepts - Payment & Receipt addition of unpaid interest to principal was not a loan of money, nor a payment or crediting of interest 159

88 C.R. - "Finance and Leasing" - "Interest" - "Deep Discount and Zero Coupon Bonds"

If by reference to all the supporting documents it is determined that an apparent discount is interest, the compound element is only deductible...

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Articles

R. Couzin, "Income Tax Treatment of Financing Charges", 1980 Conference Report, p. 191.

Paragraph 20(1)(e) - Expenses re financing

Cases

Besse v. Canada, 99 DTC 5275, [1999] 3 CTC 52 (FCA)

In finding that the taxpayer and other investors who made an investment in a building were a syndicate for purposes of s. 20(1)(e), Rothstein J.A....

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Words and Phrases
syndicate

Kalthoff v. The Queen, 90 DTC 6378, [1990] 1 CTC 336 (FCTD), aff'd 92 DTC 6001 (FCA)

A finder's fee and a commitment fee paid by the taxpayer in respect of a loan were non-deductible because the loan was made to a corporation which...

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Words and Phrases
syndicate

Macmillan Bloedel Ltd. v. The Queen, 90 DTC 6219, [1990] 1 CTC 468 (FCTD)

After the taxpayer had arranged to borrow U.S. $75 million through an issuance of debentures, it entered into forward hedging contracts for the...

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Words and Phrases
expense

The Queen v. MerBan Capital Corp. Ltd., 89 DTC 5404, [1989] 2 CTC 246 (FCA)

The taxpayer, which was engaged in the business of merchant banking, incorporated a subsidiary ("MKH") which in turn incorporated another...

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The Queen v. Antoine Guertin Ltée, 87 DTC 5458, 88 DTC 6126, [1988] 1 CTC 360, [1988] 1 CTC 117 (FCA)

As collateral security required for a bank loan, the taxpayer purchased two whole life policies on the lives of its president and manager. The...

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Neonex International Ltd. v. The Queen, 78 DTC 6339, [1978] CTC 485 (FCA)

The taxpayer company used part of the proceeds of a $15 million (U.S.) loan made to it to prepay a $4 million loan which had been made to it 2...

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MNR v. Yonge-Eglinton Building Ltd., 74 DTC 6180, [1974] CTC 209 (FCA)

In connection with the interim construction of a building, the taxpayer agreed in 1962 to pay interest on the borrowed money at a rate of 9%, plus...

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Words and Phrases
commission in the course of

Riviera Hotel Co. Ltd. v. MNR, 72 DTC 6142, [1972] CTC 157 (FCTD)

The taxpayer required further funds for the expansion of its hotel, which the existing first mortgagee was unwilling to provide. The taxpayer...

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Consumers' Gas Co. v. MNR, 65 DTC 5138, [1965] CTC 225 (Ex Ct), briefly aff'd 67 DTC 5196 (SCC)

In connection with a rights offering the taxpayer, in addition to paying a commission to the underwriters in consideration for their services as...

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Words and Phrases
commission

See Also

Banque Laurentienne du Canada v. The Queen, 2020 CCI 73

In order to finance an acquisition, the taxpayer (a resident bank) issued subscription receipts on a private placement basis to two investors (the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 67 Crown failed to bring expert evidence as to the reasonableness of the fees 277

Emjo Holdings Ltd. v. The Queen, 2018 TCC 97 (Informal Procedure)

Loans made to the taxpayer in 2002 by a credit union to help finance its purchase of shares of a home building company and in 2012 by the...

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Rio Tinto Alcan Inc. v. The Queen, 2016 TCC 172, aff'd 2018 FCA 124

The taxpayer (“Alcan”) incurred various investment dealer, legal and other fees in connection with its successful hostile bid for most of the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Legal and other Professional Fees investment dealer fees incurred respecting the advisability of making hostile takeover were fully deductible under s. 9 417
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(bb) investment dealer fees re advisability of making hostile takeover were fully deductible 529
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(cc) legal fees incurred in securing regulatory approval for a hostile bid related to the bidder's business of earning income from shares and interaffiliate sales 182
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(g) takeover bid circular costs did not qualify 102
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure fees incurred in order to acquire shares were excluded/butterfly expenses excluded as taxpayer was not in the business of implementing corporate reorganizations 365
Tax Topics - Income Tax Act - Section 169 - Subsection 169(2.1) raising general question of deductibility of fees and listing s. 20(1)(e) did not satisfy s. 165(1.11) 246
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) expenses incurred in butterfly spin-off recognized as disposition expenses 63
Tax Topics - Statutory Interpretation - French and English Version finding common meaning of 2 versions of s. 20(1)(bb) 108

International Colin Energy Corp. v. The Queen, 2002 DTC 2185, 2002 CanLII 47015 (TCC)

The taxpayer paid a fee to a financial advisor, calculated as 0.7% of the market value of its equity and of the amount of its long-term debt net...

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Sherway Centre Ltd. v. The Queen, 96 DTC 1640, [1996] 3 CTC 2687 (TCC), aff'd 98 DTC 6121 (FCA)

In order to lend money to the taxpayer at a fixed interest rate of 9.75% per annum, the lenders also required the taxpayer to covenant to pay...

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212535 Oil & Gas Ltd. v. MNR, 96 DTC 1263, [1996] 1 CTC 2416 (TCC)

Each taxpayer closed the purchase of a 10% interest in a resource property by giving the vendor an interest-bearing demand promissory note for...

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The Queen v. Royal Trust Corp. of Canada, 83 DTC 5172, [1983] CTC 159 (FCA)

The Court did not reverse a finding of the trial judge that an underwriting commission paid by the taxpayer to an investment dealer in connection...

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Burrard Dry Dock Co. Ltd. v. MNR, 75 DTC 22, [1975] CTC 2011 (T.R.B.)

The Class A and Class B shares of the taxpayer were held by the public and the Wallace family, respectively. In order to accomplish a...

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BACM Industries Ltd. v. MNR, 73 DTC 90, [1973] CTC 2093 (T.R.B.)

In February of 1968 the taxpayer filed a registered statement with a view to the issuance of convertible debentures in the American markets. In...

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Terry v. MNR, 74 DTC 6017, [1973] CTC 837 (FCA)

When the taxpayer sold its right to receive proceeds of disposition at a discount, the discount did not constitute an "expense".

Les Laiteries Leclerc Inc. v. MNR, 71 DTC 702, [1971] Tax ABC 1061

Professional fees that were incurred for the purpose of a bond issue which did not take place and which was to have been a means of acquiring the...

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Enterprise Foundry Co. Ltd. v. MNR, 59 DTC 318, 22 Tax ABC 137

The taxpayer wished to create additional preferred shares for the purpose of a stock dividend, to cancel its unissued common shares and to...

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Administrative Policy

7 October 2022 APFF Financial Strategies and Instruments Roundtable, Q.5

An individual, a sole shareholder of a corporation, borrows money in order to earn business or property income. To secure his personal loan, his...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e.1) one-time fee to subsidiary for mortgaging its property as security for a bank loan to the shareholder would not qualify under s. 20(1)(e.1) 139
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business guarantee or pledge fee is from a service and, therefore, is from an undertaking of any kind whatever 160
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) no shareholder benefit where corporation receives a reasonable pledge (or “guarantee”) fee from its shareholder 124

9 October 2015 APFF Roundtable Q. 1, 2015-0595751C6 F - Deductibility of financing fees and 20(1)(e)(v)

The exclusion in s. 20(1)(v)(v) for settlement occurring "as part of a series of borrowings or other transactions and repayments" applies where...

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21 January 2015 Internal T.I. 2014-0547431I7 - "Excluded amount" under clause 20(1)(e)(iv.1)(C)

Canco along with a joint obligor as guarantor (collectively, the “Obligors”), entered into a Credit Agreement which provided that on the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 212 - Subsection 212(3) - Participating debt interest payment to creditor excluded under s. 20(1)(e)(iv.1) as based on negotiated estimate of formula approximating equity value 144

9 December 2013 External T.I. 2013-0507931E5 F - Financing fees

Question

Three related corporations (Aco, Bco and Cco) are obligated to pay interest at 10% to a financial institution (the "bank") on the net...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures intragroup cash pool utilization fees are capital expenditures 224
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e.1) annual internal cash pool utilization fees likely are deductible under s. 20(1)(e.1) 253

12 December 2012 Internal T.I. 2012-0464411I7 - Indirect Benefit

The expenses claimed by a partnership in respect of bank borrowings used to make a distribution to its partners include banker's acceptance fees,...

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11 January 2013 External T.I. 2012-0436771E5 - Sale of a business

The unamortized amount of approximately $20 would be deductible in future periods by Aco in accordance with the formula in s. 20(1)(e)(iii).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(9.1) penalty paid by shareholder 85
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

Income Tax Technical News No. 44 13 April 2011 [archived]

In finding that the appreciated amount of an exchangeable debenture when paid on maturity could not be recognized under s. 20(1)(e), CRA...

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19 September 2008 Internal T.I. 2008-0272441I7 - GUILT LOCK DERIVATIVE

In order to effectively lock in the interest rate on bonds to be issued by the corporation at a future date, it enters into a hedging arrangement...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Timing 83
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures derivative that effectively locked in effective interest rate on proposed bond issuance on income account 115

14 March 2007 External T.I. 2005-0161661E5 - Indirect Use of Funds

Position in 2005-01512117 reversed - financing costs will be deductible under s. 20(1)(e) where the indirect use of the funds test under s....

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19 October 2005 Internal T.I. 2005-0151211I7 - Financing expenses

Can a subsidiary corporation, D Co, deduct, under s. 20(1)(e), reimbursement payments paid to its indirect parent corporation, A Co, respecting...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e.1) indirect use test inapplicable to s. 20(1)(e) or (e.1), and “relate solely to … year” test not satisfied by lump sum issue fee reimbursement to parent 243

8 October 2004 APFF Roundtable Q. 34, 2004-0087021C6 F - Remboursement de frais de financement

Where a borrower borrows money from an unrelated lender and on-lends to corporations within the group, the reimbursement by those other...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) - Subparagraph 12(1)(x)(iv) reimbursement of financing expenses 99

4 March 2003 External T.I. 2002-0175705 - LOAN GUARANTEE

A borrows funds on a long-term basis from an arm' s length Lender at commercial rates of interest negotiated on the assumption that A's...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e.1) up-front guarantee fee deductible under s. 20(1)(e) rather than s. 20(1)(e.1) 181

5 June 1997 Internal T.I. 9704727 - SPECIAL WARRANT ISSUE COSTS

Issue expenses for special warrants to acquire common shares are deductible under s. 20(1)(e).

26 September 1997 External T.I. 9725115 - DEDUCTION OF PRE-SYNDICATION COSTS

"The deduction under subparagraph 20(1)(e)(i) of the Act is clearly only available with respect to costs incurred 'by the syndicate' taxpayer. It...

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26 July 1996 Internal T.I. 9615787 - PROFESSIONAL FEES AND THEIR DEDUCTIBILITY

The fact that costs may have been incurred in order to benefit the shareholders of a corporation rather than for the purpose of earning income...

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10 July 1996 Internal T.I. 9618807 - DEDUCTIBILITY OF BORROWING COSTS - MONEY LENDERS

"There is nothing that would restrict the use of paragraph 20(1)(e) of the Act to non-moneylenders. Accordingly, where some moneylenders have...

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30 August 1995 External T.I. 9520955 - DEDUCTIBILITY OF AN EXCHANGE LOSS

A foreign exchange loss realized on the repayment of a U.S.-dollar loan would not be deductible under s. 20(1)(e)(ii). "The losses are really...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange borrowing for capital purpose on capital account 40

4 October 1994 External T.I. 9423355 - UNDERWRITER'S DISCOUNT

"In a 'bought' deal where the amount paid is clearly not a non-deductible discount, in order for an expense to be deductible under paragraph...

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Revenue Canada Round Table TEI, 16 May 1994, Q. 11 (C.T.O. "Foreign Exchange Gains and Losses")

RC is generally not prepared to accept that foreign currency losses arising as the consequence of the sale of a currency pursuant to the exercise...

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Revenue Canada Round Table TEI, May 16, 1994, Q. XIII 9411060

"Rescheduling or restructuring of a debt obligation" in s. 20(1)(e)(ii.2) generally describes changes to the rights and obligations of the parties...

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1 April 1993 T.I. (Tax Window, No. 30, p. 20, ¶2500)

Where there is an acquisition of control of a debtor and of its debt followed in the same day by an amalgamation of the debtor and the purchaser,...

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92 C.R. - Q.2

The facts of an arrangement with an underwriter must be examined to ensure that the amount paid to the underwriter is in substance for the...

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89 C.M.TC - Q.2

Costs relating to an assumption of debt are not deductible under s. 20(1)(e).

10 January 1992 Memorandum (Tax Window, No. 17, p. 14, ¶1773)

Expenses relating to a refinancing which do not involve borrowing money are not deductible pursuant to s. 20(1)(e). Generally, such expenses are...

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28 March 1991 T.I. (Tax Window, No. 1, p. 19, ¶1174)

S.20(1)(e)(v) does not apply to permit the deduction of unamortized financing costs where only part of the debt is settled or extinguished, e.g.,...

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23 February 1990 T.I. (July 1990 Access Letter)

Where a company experiencing financial difficulties has incurred legal fees to arrange new financing or otherwise restructure its affairs, it will...

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2 November 89 T.I. (April 90 Access Letter, ¶1191)

Expenses involved in negotiating and evaluating a B.C. employee share ownership plan or B.C. employee venture capital plan seem to constitute mere...

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20 October 89 T.I. (March 1990 Access Letter, ¶1143)

Expenses incurred by a corporation in the course of issuing warrants of the corporation are not deductible under s. 20(1)(e).

19 September 89 T.I. (February 1990 Access Letter, ¶1102)

RC now extends the policy expressed in IT-309R to disability insurance premiums. However, where the disability policy is offered by the lender,...

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9 Aug. 89 T.I. (Jan. 90 Access Letter, ¶1077)

Because of the decision in Antoine Guertin, RC is in the process of reviewing its position on the deductibility of life insurance premiums.

89 C.M.T.C - "Participating Loans"

s. 20(1)(e) does not authorize a deduction for payments made as compensation for the use of money.

88 C.R. - "Finance and Leasing" - "Interest" - "Participating Loans"

S.20(1)(e) generally does not provide a deduction for compensation paid for the use of borrowed money, regardless of form.

88 C.R. - F.Q.3

RC's position on the deductibility of life insurance premiums currently is under review.

87 C.R. - Q.50

Commitment fees paid to a bank may be deductible notwithstanding that the loan ultimately was made by a different bank in substitution for the...

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85 C.R. - Q. 19

Financing fees for renegotiating an existing bank loan or line of credit are deductible.

81 C.R. - Q. 21

Underwriting fees paid to an underwriter acting as principal rather than agent are not deductible under s. 20(1)(e) but instead are...

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81 C.R. - Q.39

Yonge-Eglinton does not support the deductibility under s. 20(1)(e) of participating interest.

79 C.R. - Q.6

Where the bank insists that the promoter guarantee the loan and the guaranteed loan is advanced in full, then the guarantee fee charged by the...

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Articles

R. Ian Crosbie, "Embedded Options: The Controversy as to Character", Corporate Finance, Vol VI, No. 4, p. 552.

Finance

1999 APFF Round Table, Q. 6 (No. 9M19190): Finance's analysis of the Sherway is affected by the fact that in that case both parties were taxable.

Subparagraph 20(1)(e)(i)

See Also

Devon Canada Corporation v. The Queen, 2018 TCC 170

Two public-companies made cash payments for the surrender by employees of their options previously granted to them under employee stock option...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure payments made to target’s employees for surrendering their options on target’s acquisition were mostly deductible by it 309
Tax Topics - Income Tax Act - Section 111 - Subsection 111(5.2) stock option surrender payments of target deductible under s. 111(5.2) 62
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition disposition of surrendered stock options occurred under doctrine of merger 318
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base "cost" implies the acquisition of an asset 172

Administrative Policy

7 October 2011 Roundtable, 2011-0412061C6 F - Financing Expenses

If an issuer does not expect to earn income from property, but rather intends to only realize capital gains (or losses) from the disposition of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) property that is source only of capital gains cannot support a s. 20 deduction 82

Subparagraph 20(1)(e)(ii)

Administrative Policy

23 December 2009 External T.I. 2009-0341951E5 F - Déductibilité des frais d'emprunt

In the context of a mortgage loan used to acquire investments that generate different types of property income, are expenses incurred as a result...

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Subparagraph 20(1)(e)(ii.2)

Administrative Policy

7 October 2011 Roundtable, 2011-0412021C6 F - Financing Expenses

As part of the restructuring of the financing of its corporate group, Corporation A borrowed from a financial institution in order to make a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(2.2) s. 12(2.2) might apply to on-charge, to ultimate group recipient of financing, of the financing expenses 158

Paragraph 20(1)(e.1) - Annual fees, etc.

Administrative Policy

7 October 2022 APFF Financial Strategies and Instruments Roundtable, Q.6

A corporation has a critical illness insurance policy ("CII policy") that it purchased for its sole shareholder. This policy was assigned as...

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7 October 2022 APFF Financial Strategies and Instruments Roundtable, Q.5

An individual, a sole shareholder of a corporation, borrows money in order to earn business or property income. To secure his personal loan, his...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) one-time fee to subsidiary for mortgaging its property as security for a bank loan to the shareholder could qualify under s. 20(1)(e) 175
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business guarantee or pledge fee is from a service and, therefore, is from an undertaking of any kind whatever 160
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) no shareholder benefit where corporation receives a reasonable pledge (or “guarantee”) fee from its shareholder 124

9 December 2013 External T.I. 2013-0507931E5 F - Financing fees

Question

Three related corporations (Aco, Bco and Cco) are obligated to pay interest at 10% to a financial institution (the "bank") on the net...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures intragroup cash pool utilization fees are capital expenditures 224
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) cash pool utilization fees could be deductible under s. 20(1)(e) 206

12 August 2010 Internal T.I. 2009-0328671I7 - Deduction pursuant to paragraph 20(1)(e)

Significant legal and consulting fees related to a CCAA restructuring which involved debt restructuring. In response to a query as to whether,...

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30 November 2006 External T.I. 2006-0191541E5 F - Primes d'assurance-vie et d'assurance-invalidité

A business receives a loan from a financial institution that requires the borrower to take out a disability insurance policy to secure the loan. ...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e.2) premiums on life insurance policy required by lender deductible even though loan government-guaranteed, but premiums on lender-required disability policy not deductible 163
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures premiums on disability policy required by lender are capital expenditures 80
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Disposition - Paragraph (j) tax free receipt of life insurance proceeds by lender on policy required by it of the borrower 44
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Disposition - Paragraph (h) tax free receipt of disability insurance proceeds by lender on policy required by it of the borrower 44

19 October 2005 Internal T.I. 2005-0151211I7 - Financing expenses

A Co, a public company, issued interest-bearing debentures to arm's length parties, and on-lent the borrowed money to its "great-grandchild"...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) reimbursement by sub 153

4 March 2003 External T.I. 2002-0175705 - LOAN GUARANTEE

A borrows funds on a long-term basis from an arm' s length Lender at commercial rates of interest negotiated on the assumption that A's...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) up-front guarantee fee within scope of s. 20(1)(e) 144

September 1990 T.I. 1990-101

In response to a query as to the application of s. 20(1)(e.1) to loan placement fees or loan structuring fees, the Directorate stated:

It is our...

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10 May 1990 T.I. (October 1990 Access Letter, ¶1455)

Guarantee fees paid by a financial institution to its parent corporation in respect of loans made to the taxpayer could qualify for deduction...

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88 C.R. - "Finance and Leasing" - "Standby Charge, Guarantee Fee etc."

If particular expenses relate to other than the year they are payable, then they are deductible in accordance with the provisions of s. 20(1)(e)...

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Articles

Shane Onufrechuk, Warren Pashkowick, "Tax Considerations of Major Construction Projects", 2014 Conference Report, Canadian Tax Foundation, 10:1-35.

Treatment of fees as s. 20(1)(e.1) deductions (pp. 10:22-3)

It is unlikely that the initial professional fees related to the financing of a major...

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Boulton, "Bankers' Acceptances Smooth Canadian-U.S. Cross-Border Credit", International Financial Law Review, November 1996, p. 32.

Paragraph 20(1)(e.2) - Premiums on life insurance used as collateral

Administrative Policy

22 December 2005 External T.I. 2005-0162001E5 F - Déductibilité police d'assurance-vie

CRA indicated that a corporation cannot deduct the life insurance premiums it pays to a financial institution on life insurance to secure a line...

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31 March 2005 External T.I. 2004-0093651E5 F - Primes d'assurance-vie et d'assurance-invalidité

A taxpayer, who received a loan from a financial institution under a Quebec farm assistance program, acquired a life insurance policy to guarantee...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures premiums on disability policy required by lender are capital expenditures 109

26 November 2013 External T.I. 2012-0449631E5 F - Amount deductible under paragraph 20(1)(e.2)

A corporation transferred an interest in a life insurance policy to a restricted financial institution to secure a line of credit, that was only...

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14 March 2007 External T.I. 2007-0219601E5 F - Police d'assurance-vie cédée en garantie

Premiums paid by a parent corporation on a life insurance policy owned by it and assigned as security for a loan made to its subsidiary by a...

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30 November 2006 External T.I. 2006-0191541E5 F - Primes d'assurance-vie et d'assurance-invalidité

A business receives a loan from a financial institution that is 100% guaranteed under a government program, but the lender nonetheless requires...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures premiums on disability policy required by lender are capital expenditures 80
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e.1) guarantee fee does not include premiums on lender-required insurance policy 75
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Disposition - Paragraph (j) tax free receipt of life insurance proceeds by lender on policy required by it of the borrower 44
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Disposition - Paragraph (h) tax free receipt of disability insurance proceeds by lender on policy required by it of the borrower 44

May 1999 CALU Conference No. 9908430 Q.10

The premiums under universal life insurance policy paid in a year are considered to be in respect of that year.

30 September 1994 Internal T.I. 9414527 - BORROWINGS & EXCESS INSURANCE COLLATERAL

Where the life insurance coverage under an assigned policy is $500,000 and the average balance owing under the borrowing is $200,000, the amount...

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1 August 1991 Memorandum (Tax Window, No. 7, p. 3, ¶1381)

Among the factors which RC would consider relevant to whether the amount of the premium may reasonably be considered to relate to the outstanding...

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IT-309R2 "Premiums on Life Insurance used as Collateral"

Subparagraph 20(1)(e.2)(i)

Clause 20(1)(e.2)(i)(B)

Administrative Policy

25 October 2004 External T.I. 2004-0077031E5 F - Application de la division 20(1)e.2)(i)(B)

A corporation borrowed money from a financial institution to acquire an interest in a life annuity contract on the life of its shareholder and was...

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Paragraph 20(1)(f) - Discount on certain obligations

Cases

Provigo Inc. v. Canada, 2009 DTC 5877, 2008 FCA 205

The taxpayer, which pursuant to a right accorded to it in debentures, repaid the debentures by issuing shares with a fair market value greater...

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Imperial Oil Ltd. v. Canada; Inco Ltd. v. Canada, 2006 DTC 6639, 2006 SCC 46, [2006] 2 S.C.R. 447

In finding that the taxpayers were not entitled to recognize deductions under s. 20(1)(f)(ii) at the time they repaid U.S.-dollar denominated...

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Administrative Policy

Income Tax Technical News No. 44 13 April 2011 [archived]

Before the decision in Imperial Oil Ltd. and Inco Ltd....CRA's position with respect to exchangeable debentures issued with or without an ...

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29 October 2010 Internal T.I. 2010-0357241I7 - Exchangeable Debenture

In response to a query as to whether the taxpayer would be entitled to a deduction under s. 20(1)(f)(ii) on the partial redemption of a Note that...

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14 January 2010 Internal T.I. 2009-0323991I7 F - Débenture échangeable et opération à terme

A predecessor of the taxpayer had issued an exchangeable debenture exchangeable into share of a corporation (“Corporation 2”) of which the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Futures/Forwards/Hedges premium was paid on capital account in closing out a cash-settled forward entered into in order to monetize a shareholding 221
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) CRA position of applying changes in published policy prospectively 105
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) full deduction of amounts only partly, or not, deductible under s. 20(1)(f) would have caught the eye of a wise and prudent person reviewing the return 134

Income Tax Technical News-41, 23 December 2009

Under "Exchangeable Debentures - paragraph 20(1)(f)".

23 October 2002 Internal T.I. 2002-0135797 - FOREIGN EXCHANGE LOSSES

A foreign exchange loss realized on the settlement of a foreign currency debt of the taxpayer would be recognized under s. 39(2) rather than under...

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17 April 1997 Internal T.I. 9703377 - CONSUMER BASED LOAN

Where existing mortgage loans made to farmers had their terms changed so that the principal was linked to a commodity price, a payment in excess...

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30 July 1990 Decision Summary 90063 (Tax Window, Prelim. No. 1, p. 9, ¶1000)

The issuer of an exchangeable debenture will be entitled to a deduction under s. 20(1)(f) equal to the difference between the fair market value of...

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Articles

Jim Samuel, Byron Beswick, "Selected Issues in Transactions Involving Debt", 2019 Conference Report (Canadian Tax Foundation), 18:1 – 27

S. 20(1)(f) deduction unavailable where debt assumed (unless s. 248(26) available) (p. 18:12)

[P]aragraph 20(1)(f ) permits a deduction only to...

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Smith, "Recent Transactions: Debt", 1993 Conference Report, p. 19:14

Discussion of whether a debenture that is payable in shares valued at a 5% discount is eligible for the deduction.

Paragraph 20(1)(g) - Share transfer and other fees

Cases

Canada v. Rio Tinto Alcan Inc., 2018 FCA 124

The taxpayer, a Canadian public company listed on the TSX and NYSE and in London, made a hostile bid for a French public company (“Pechiney”)....

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Words and Phrases
financial report
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Oversight or Investment Management dealer and professional fees incurred by a public board in determining to make a bid, as contrasted to implementation, were currently deductible 348
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(bb) deduction was available for advisory fees respecting proposed acquisitin or divestiture of a whole company 492

See Also

Rio Tinto Alcan Inc. v. The Queen, 2016 TCC 172, aff'd 2018 FCA 124

The taxpayer, a Canadian public company listed on the TSX and NYSE and in London, made a hostile bid for a French public company (“Pechiney”)....

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Legal and other Professional Fees investment dealer fees incurred respecting the advisability of making hostile takeover were fully deductible under s. 9 417
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(bb) investment dealer fees re advisability of making hostile takeover were fully deductible 529
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(cc) legal fees incurred in securing regulatory approval for a hostile bid related to the bidder's business of earning income from shares and interaffiliate sales 182
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure fees incurred in order to acquire shares were excluded/butterfly expenses excluded as taxpayer was not in the business of implementing corporate reorganizations 365
Tax Topics - Income Tax Act - Section 169 - Subsection 169(2.1) raising general question of deductibility of fees and listing s. 20(1)(e) did not satisfy s. 165(1.11) 246
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) failure to advance evidence showing allocation of fees to share consideration 139
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) expenses incurred in butterfly spin-off recognized as disposition expenses 63
Tax Topics - Statutory Interpretation - French and English Version finding common meaning of 2 versions of s. 20(1)(bb) 108

Boulangerie St-Augustin Inc. v. The Queen, 95 DTC 164 (TCC), briefly aff'd 97 DTC 5012 (FCA)

Information circulars mailed by a corporation to its shareholders in response to three takeover bids provided information for their decision...

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Administrative Policy

30 November 1991 Round Table (4M0462), Q. 5.2 - Fees for an Impartial Opinion (C.T.O. September 1994)

The circular that the board of directors of a target corporation is required to submit to shareholders containing a recommendation that the...

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Paragraph 20(1)(j) - Repayment of loan by shareholder

Administrative Policy

25 November 2021 CTF Roundtable Q. 2, 2021-0911831C6

An amount, which is included in the income of an individual (X) under s. 15(2) is also subject in the individual’s hands to the tax on split...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(ww) s.20(1)(ww) deduction regarding s.15(2) inclusion subject to TOSI does not preclude subsequent s.20(1)(j) deduction 107

12 June 2012 STEP Roundtable, 2012-0442911C6 - STEP CRA Round Table - June 2012

A shareholder loan repaid by the executors of the shareholder within one year after the end of the creditor's taxation year in which the loan was...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.6) repayment by executors 140

92 C.R. - Q.44

Although there is no statutory relief to a non-resident where a particular loan, that previously was subject to s. 15(2) and s. 214(3)(a), is...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.6) 56

92 C.R. - Q.43

Where a shareholder maintains an open running loan account with a corporation, any repayment is part of a series of loans where the transactions...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2) 29

Articles

Wilson, "Repayment of Shareholder Loans", 1995 Canadian Tax Journal, Vol. 43, No. 3, p. 746.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt 10

Paragraph 20(1)(l) - Doubtful or impaired debts

Cases

Groscki v. Canada, 2011 DTC 5097 [at 5886], 2011 FCA 174

The taxpayer made a $12,000 deduction under s. 20(1)(l) for a doubtful debt in 2002 but did not report the amount deducted as income in the...

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Langdon v. Canada, 2000 DTC 6203 (FCA)

The taxpayer was not entitled to claim a deduction under s. 20(1)(l) because the sale giving rise to the receivable had not been reported in his...

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Words and Phrases
included

Bell v. The Queen, 92 DTC 6064, [1992] 1 CTC 35 (FCTD)

The taxpayer was unable to deduct accrued interest on an uncollectible loan because the loan was included in the property that vested in the...

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Coppley Noyes & Randall Ltd. v. The Queen, 91 DTC 5291 (FCTD), varied on appeal 93 DTC 5196, 5508 (FCA).

The taxpayer for tax and financial statements purposes claimed reserves for doubtful accounts which were significantly in excess of its actual bad...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Accounting Principles 94
Tax Topics - General Concepts - Payment & Receipt presumed application to oldest debt 103
Tax Topics - Income Tax Act - Section 10 - Subsection 10(1) consistent LIFO use generally is acceptable 99

Gibraltar Mines Ltd. v. The Queen, 83 DTC 5294, [1983] CTC 261 (FCA)

The "debt" need not be for the price of merchandise sold or services rendered in the course of business, but may also represent business expenses...

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Words and Phrases
debt

Picadilly Hotels Ltd. v. The Queen, 78 DTC 6444, [1978] CTC 658 (FCTD)

It was found that some default in payments by a purchase of depreciable property, and some doubts by the taxpayer-vendor as to the purchaser's...

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Harlequin Enterprises Ltd. v. The Queen, 77 DTC 5164, [1977] CTC 208 (FCA)

Sales of books were made each year by the taxpayer to a distributor. The taxpayer was obliged to repurchase any books which the distributor might...

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Simpson v. The Queen, 76 DTC 6350, [1976] CTC 600 (FCTD)

Addy, J. stated, obiter, that "all accounting for taxation purposes must be in accordance with proper accepted accounting principles" and that it...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 98 - Subsection 98(1) 31

See Also

Delle Donne v. The Queen, 2015 TCC 150

The taxpayer made a loan, bearing interest at 25%, to a corporation ("SA") owned by his brother-in-law, which in turn lent the funds, at the same...

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Words and Phrases
included
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Investment Contract "debt" exists irrespective of demand 99
Tax Topics - Income Tax Act - Section 171 - Subsection 171(1) reserve could be claimed on appeal 90
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(p) - Subparagraph 20(1)(p)(i) bad debt deduction taken as at Dec. 31 in light of information available at April 30, and could be claimed implicitly or on appeal 478

Cloverdale Paint Inc. v. The Queen, 2007 DTC 243, 2006 TCC 628

The wholly-owned U.S. subsidiary of the taxpayer accumulated a large balance owing to the taxpayer as a result of its purchase of paint inventory...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Onus 112

92735 Canada Ltd. v. The Queen, 99 DTC 771, [1999] 2 CTC 2661 (TCC)

Advances totalling approximately $4.9 million that the taxpayer made to a corporation over the course of nine years were found to be doubtful from...

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Administrative Policy

26 July 1995 External T.I. 9515735 - BAD DEBTS - FINANCIAL INSTITUTIONS

RC will not follow the accounting standard for "Impaired Loans" that was recently approved by the CICA, nor the guidelines for federally regulated...

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19 March 1992 Memorandum 920775 (April 1993 Access Letter, p. 134, ¶C20-1140; Tax Window, No. 18, p. 6, ¶1820)

Discussion of the reserve by an account holder or investment certificate holder of a financial institution in bankruptcy.

2 July 1991 T.I. (Tax Window, No. 5, p. 18, ¶1325)

The principal factors to be considered respecting the presence of a money-lending business are whether loans have been made or debts created, the...

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Subparagraph 20(1)(l)(ii)

Articles

Arthur Driedger, Stephen Wong, "IFRS 9: Financial Instruments", Canadian Tax Highlights, Vol. 26, No. 6, June 2018, p.6

Replacement for publicly reportable entities of IAS 39 by IFRS 9 (p. 6)

Effective after 2017 (November 1, 2017 for certain FIs), IFRS 9,...

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Clause 20(1)(l)(ii)(D)

Administrative Policy

19 July 2021 External T.I. 2020-0869172E5 - Reserve for impaired loans

The correspondent described IFRS 9 as introducing an “expected credit loss” (ECL) framework for the recognition by financial institutions of...

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