Subsection 16(1) - Income and capital combined
Cases
Plains Midstream Canada ULC v. Canada, 2019 FCA 57
As part of a complex set of transactions, a predecessor of the taxpayer agreed to assume a $225M loan that was due in perhaps 43-years’ time and...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | interest by its nature is symmetrical | 247 |
The Queen v. Shaw, 93 DTC 5121, [1993] 1 CTC 221 (F.C.A.)
The farm lands of the taxpayer were expropriated pursuant to the Expropriation Act (Alberta) in 1977. Following the settlement in 1986 of an...
West Hill Redevelopment Co. Ltd. v. The Queen, 91 DTC 5430, [1991] 2 CTC 83 (FCTD)
The taxpayer, which was a real estate developer, received mortgages from the purchasers of its condominiums which had a fair market value lower...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(b) | mortgages included in proceeds at their principal amount rather than lower FMV | 55 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Inventory | 44 |
Alepin v. The Queen, 79 DTC 5259, [1979] CTC 360 (FCTD)
The taxpayer was paid $1,000,000 of the sale price of land which previously had been sold by it, at a time when the purchaser was in arrears in...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c) | Civil Code required repayment to be applied first to interest | 89 |
Rodman Construction Inc. v. The Queen, 75 DTC 5038, [1975] CTC 73 (FCTD)
An owner of Canadian land mortgaged his land on a non-interest bearing basis and then sold the land to the taxpayer, a non-resident, which assumed...
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| Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) | 79 |
Vanwest Logging Co. Ltd. v. MNR, 71 DTC 5120, [1971] CTC 199 (Ex Ct)
The taxpayer sold some of its timber limits for $7.5 million: $1.5 million payable up front; and the balance in five equal annual instalments,...
Groulx v. MNR, 67 DTC 5284, [1967] CTC 422, [1968] R.C.S. 6
A farmer, after initially being offered $350,000 for his farm, negotiated its sale for $395,000, of which $310,000 was payable in non-interest...
MNR v. Mandelbaum, 62 DTC 1093 (Ex Ct)
The taxpayers, who were shareholders of a company that was being pressured by its bank to dispose of non-interest bearing conditional sales...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | individuals purchased mortgages in similar manner to dealers, so that an adventure | 111 |
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Debt/ receivables | 243 |
See Also
Plains Midstream Canada ULC v. The Queen, 2017 TCC 207, aff'd 2019 FCA 57
The taxpayer (“Amoco”) acquired Dome Petroleum in 1988 for $5.2B pursuant to a Plan of Arrangement. Prior to this acquisition, Dome Petroleum...
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| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | ACB addition based on future amount payable rather than much lower FMV | 237 |
FLSmidth Ltd. v. The Queen, 2012 DTC 1052 [at 2745], 2012 TCC 3, aff'd 2013 DTC 5118 [at 6147], 2013 FCA 160
Paris J rejected the taxpayer's submission (to the effect that the phrase "can reasonably be regarded" in s. 20(12) did not permit the Minister to...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(12) | 303 | |
| Tax Topics - Income Tax Act - Section 68 | 138 | |
| Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc. | 42 | |
| Tax Topics - Treaties - Income Tax Conventions - Article 24 | no double taxation engaging Art.2(a) of U.S. Treaty | 258 |
Lehigh Cement Limited v. The Queen, 2009 DTC 776, 2009 TCC 237, rev'd 2010 DTC 6844, 2010 FCA 124
In finding that the taxpayer was entitled to deduct the full amount of the interest coupon payments made by it on a periodic basis to a Belgian...
Gestion Guy Ménard Inc. v. MNR, 93 DTC 1058, [1993] 2 CTC 2793 (TCC)
In the taxation years in question, the taxpayer purchased significant quantities of treasury bills through its broker and sold them one day prior...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c) | sale one day prior to maturity | 68 |
| Tax Topics - Statutory Interpretation - Specific v. General Provisions | 34 |
O'Neil v. MNR, 91 DTC 692 (TCC)
The difference between the purchase price and the face amount of treasury bills was included in the taxpayer's income when they matured.
Administrative Policy
7 October 2020 APFF Roundtable Q. 16, 2020-0867071C6 F - APFF Q.16 - Withholding tax on swap payment
In Q.60 at the 1984 CTF Roundtable, the Department suggested that where swap payments are not made contemporaneously, for example, payments under...
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| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Swaps | all amounts payable or receivable under a swap are on income account | 124 |
S3-F6-C1 - Interest Deductibility
1.95 Recharacterization of discounts. Where there is no interest stipulated to be payable, s. 16(1) may apply, e.g., for commercial paper...
18 April 2013 Internal T.I. 2013-0485481I7 F - Balance of sale price without interest
A corporation sells its business, with there being a non-interest bearing balance of the sale price which it considers to be referable to the...
10 October 2003 Roundtable, 2003-0035645 F - DEDUCTIBILITE DES INTERETS
Regarding the deduction of interest on a non-interest bearing debt issued at a discount, CCRA stated:
Where there is no stipulated interest...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | Ludco and Singleton accepted/ description of how and why cash damming works | 191 |
9 September 2002 Internal T.I. 2002-0149007 - BLENDED PAYMENT, INTEREST
Where payment of interest charged by a U.S. parent to its Canadian subsidiary was deferred and it was agreed that payments by the subsidiary to...
IT-233R "Lease-Option Agreements; Sale-Leaseback Agreements"
Where it is determined that a lease agreement is, in substance, a sale agreement, the vendor will be required to include an amount under s. 16(1)...
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| Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.2) | 4 | |
| Tax Topics - Income Tax Act - Section 16 - Subsection 16(1) | 33 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | 21 |
3 December 1992 T.I. 921655 (C.T.O. "Factoring Accounts Receivable Whether Sale or Loan"; Tax Window, No. 26, p. 5, ¶2315)
Discussion of whether an arrangement between a taxable Canadian corporation and its U.S. wholly-owned subsidiary should be characterized as...
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| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b) - Subparagraph 212(1)(b)(i) | non-arm’s length terms on sale of trade receivables to sub would indicate that it in fact was a non-arm’s length loan | 328 |
IT-265R3 "Payments of Income and Capital Combined" - cancelled in 1991.
1. Subsection 16(1) deals with those situations where, under a contract or arrangement, a payment of income and capital combined is received or...
IT-233R "Lease-Option Agreements; Sale-Leaseback Agreements"
Discussion of the application of s. 16(1) to a sale-leaseback arrangement which is characterized as a sale, where the fair market value of the...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.2) | 4 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | 21 | |
| Tax Topics - Income Tax Act - Section 16 - Subsection 16(1) | 50 |
Articles
Mike Vantil, Greg C. Boehmer, "Caveat Venditor: Let the Seller Beware", Corporate Structures and Groups, Vol VII, No. 3, 2002, p. 372: Discussion of Application of s. 16(1)(a) to Sale Transactions.
Richardson, "Purchase and Sale of a Business: Income Tax Aspects of Warranties, Price Adjustments, and Earn-Outs", 1990 Corporate Management Tax Conference, pp. 10:8-10:9
Discussion of instalment sales.