Cases
Imperial Oil Ltd. v. Canada, 2004 DTC 6702, 2004 FCA 361, rev'd 2006 SCC 46
Before going on to find that foreign exchange losses realized by the taxpayer on repaying its debentures were capital losses under subsection...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(26) | 171 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) | applies to capital gains | 80 |
| Tax Topics - Statutory Interpretation - Hansard, explanatory notes, etc. | 145 | |
| Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc. | 108 | |
| Tax Topics - Statutory Interpretation - Marginal Notes | 54 |
Gifford v. Canada, 2004 DTC 6120, 2004 SCC 15, [2004] 1 S.C.R. 411
In finding that interest paid by the taxpayer (an employed broker of an investment dealer) on a loan taken out by him in order to purchase the...
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, but which treated its share investments as being on capital account,...
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| Tax Topics - General Concepts - Personality | 107 | |
| Tax Topics - General Concepts - Separate Existence | 112 | |
| Tax Topics - Income Tax Act - Section 167 - Subsection 167(5) | 52 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) | 34 | |
| Tax Topics - Income Tax Act - Section 180 - Subsection 180(3) | 30 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | payment under guarantee not re borrowed money | 177 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 157 |
Bowater Mersey Paper Co. Ltd. v. The Queen, 86 DTC 6293, [1986] 1 CTC 535 (FCTD), rev'd 87 DTC 5382, [1987] 2 CTC 159 (FCA)
Interest is a capital outlay the deduction of which is prohibited by s. 18(1)(b) unless its deduction is expressly permitted by some other...
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| Tax Topics - Income Tax Act - Section 165 - Subsection 165(7) | 49 |
Emerson v. The Queen, 85 DTC 5236, [1985] 1 CTC 324 (FCTD), aff'd 86 DTC 6184, [1986] 1 CTC 422 (FCA)
Interest expenses would not be deductible in the absence of the express statutory allowance in s. 20(1)(c).
The Queen v. Marchand, 78 DTC 6507, [1978] CTC 763 (FCTD), aff'd [1979] CTC xvii (FCA)
The by-laws of a Quebec credit union required the taxpayer to pay to the credit union a non-refundable sum equal to 4 1/2% of the amount paid by...
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| Tax Topics - Income Tax Act - Section 9 - Accounting Principles | 54 |
Canada Permanent Mortgage Corp. v. MNR, 71 DTC 5409, [1971] CTC 694 (FCTD)
Finder's fees paid by the taxpayer to banks, lawyers, investment dealers and financial agents for finding numerous investors to purchase...
Silverman v. MNR, 60 DTC 1212, [1960] CTC 262 (Ex Ct)
A partnership engaged in the business of buying and selling real estate purchased two properties in 1954, mortgaged the properties and in 1955...
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| Tax Topics - Income Tax Act - Section 9 - Accounting Principles | 79 | |
| Tax Topics - Income Tax Act - Section 9 - Computation of Profit | 74 |
Canada Safeway Ltd. V. Minister of National Revenue, 57 DTC 1239, [1957] CTC 335, [1957] S.C.R. 717
Rand J. stated (p. 1244):
"It is important to remember that in the absence of an express statutory allowance, interest payable on capital...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | 128 |
Stock Exchange Building Corp. Ltd. v. Minister of National Revenue, [1955] S.C.R. 235, 55 DTC 1014, [1955] CTC 5
Interest payable on interest in default on a debenture of the taxpayer was a capital expenditure. The provision for the payment of such compound...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | 135 |
Bennett and White Construction Co. v. Minister of National Revenue, 49 DTC 514, [1949] CTC 1, [1949] S.C.R. 287, [1949-1950] DTC 514
Substantial annual fees paid by a construction company to its shareholders or related individuals in consideration for their providing guarantees...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) | 91 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | guarantee payments not interest | 56 |
Montreal Coke and Manufacturing Co. v. MNR, [1944] A.C. 126, [1944] CTC 94 (P.C.)
The taxpayers incurred various expenditures in connection with retiring existing bonds before maturity and issuing replacement bonds at a lower...
See Also
A.P. Toldo Holding Corporation v. The Queen, 2014 DTC 1042 [at 2787], 2013 TCC 416
The taxpayer was a holding company for various direct and indirect subsidiaries which carried on an operating business. To resolve a shareholder...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | no retained earnings or stated capital | 209 |
Wescast Industries Inc. v. The Queen, 2010 DTC 1364 [at 4432], 2010 TCC 538
The taxpayer and an unrelated corporation ("Linamar") captialized a joint (50/50) Ontario subsidiary with $105 million which in turn contributed...
SPG International Ltée v. R., [1998] 3 CTC 2046, 98 DTC 1706 (TCC)
The taxpayer incorporated a U.S. subsidiary to facilitate the marketing of its goods in the U.S., and sold its goods to the subsidiary for on-sale...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | 133 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(9) | 23 |
Wharf Properties Ltd. v. Commissioner of Inland Revenue (Hong Kong), [1997] BTC 173 (PC)
Interest paid by a Hong Kong property development company on short term loans that were used to fund the purchase price for property that was to...
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| Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A | wages part of cost | 44 |
Anderson v. MNR, 92 DTC 1778, [1992] 2 CTC 2113 (TCC)
Advances which the taxpayer made to a corporation controlled by her spouse's company ("DRAAL") in consideration for a right to 20% of its annual...
MNR v. Peninsular Investments Ltd., 63 DTC 1149, [1963] CTC 230 (Ex Ct)
The taxpayer, which was a non-resident-owned investment corporation that invested in shares and bonds, sought to deduct interest paid by it on a...
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| Tax Topics - Income Tax Act - Section 133 - Subsection 133(1) | "interest on bonds, debentures ... or other indebtedness" excuded only interest deductible on general principles as on indebtedness incident to and incurred in the business' day-to-day transactions | 231 |
Scottish North American Trust, Ltd. v. Farmer (1911), 5 TC 693 (HL)
In finding that the taxpayer, which borrowed money on a fluctuating overdraft to finance its business of buying and selling foreign securities,...
Gresham Life Insurance Society v. Styles (1892), 3 TC 185 (HL)
The taxpayer, which carried on a life insurance business and sold annuities to the public, was entitled to deduct the amount paid by it under the...
Administrative Policy
26 June 2020 External T.I. 2017-0688121E5 F - Déductibilité des intérêts et pénalités imposées sur les taxes foncières
Regarding interest on municipal taxes, CRA stated:
[I]nterest charged on an unpaid balance of property taxes will be deductible if the property...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | interest on municipal taxes incurred as a business expense is deductible | 49 |
| Tax Topics - Income Tax Act - Section 67.6 | tardiness “penalty” added by municipality to unpaid property taxes came within s. 67.6 | 107 |
7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 2, 2022-0936281C6 F - police d'assurance-vie & avantage
Two brothers resident in Canada each has a Holdco owning 50% of Opco. In order to fund a buy-sell agreement on the death of an ultimate...
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| Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) | taxable benefit where 2 Holdcos pay premiums on life insurance policies of which their jointly-owned sub is beneficiary unless s. 246(2) applies | 244 |
| Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement | premiums paid by parent on a sub’s life insurance policies are non-deductible even if reimbursed on income account | 192 |
S3-F6-C1 - Interest Deductibility
1.9 Money-lenders.
The CRA continues to accept that taxpayers in certain financing businesses (such as money-lenders), may consider interest...
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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| 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 |
| 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 |
19 September 2008 Internal T.I. 2008-0272441I7 - GUILT LOCK DERIVATIVE
Under a "gilt lock" hedge, the taxpayer, between the time of deciding to issue eurobonds and the time of actually issuing them, hedged against the...
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| Tax Topics - Income Tax Act - Section 9 - Timing | 83 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | hedging expense to lock in interest rate | 105 |
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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| 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 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 |
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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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e.2) | guarantee respecting another aspect of a loan by a government fund does not preclude deductibility of premiums on life policy assigned as security to bank | 285 |
2 December 2003 External T.I. 2003-0048565 - PREMIUMS PAID
Where a corporation to whom borrowed money constitutes stock in trade borrows money at a premium and then on-lends the same funds at a premium to...
18 April 2002 Internal T.I. 2002-0118827 F - DEBENTURES CONVERTIBLES
In ATR-20 dated March 31, 1987, a taxpayer carrying on a business of purchasing accounts receivable, financed by issuing debentures, was permitted...
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| 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(9.1) | straight-line or present value method may be used in amortizing premium, and must relate to interest | 203 |
1 March 2001 External T.I. 2001-0068715 - Expenses incurred aborted debt offering
Assuming that borrowed money would not have been the taxpayer's stock-in-trade (as would be the case if it were not a moneylender), borrowings by...
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| Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure | 60 |
Revenue Canada Round Table TEI, 16 May 1994, Q. 14 (C.T.O "Assumption of Debt")
A premium paid by a corporation, representing the excess of the amount paid by it to a third party to assume its debt over the principal amount of...
13 January 1993 T.I. 922191 (November 1993 Access Letter, p. 500, ¶C76-077)
Where a corporation refunds to an employee the interest paid by him on a mortgage on his principal residence, that outlay will be deductible to...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 55 | |
| Tax Topics - Income Tax Act - Section 80.4 - Subsection 80.4(1) | 33 |
93 C.P.T.J. - Q.36
Interest on accounts payable for service costs (e.g., professional accounts) are currently deductible expenses under s. 9. S.20(1)(c) does not...
92 C.M.TC - Q.4
Interest on accounts payable for service costs that are currently deductible expenses is deductible under s. 9.
10 July 1991 Decision Summary (Tax Window, No. 5, p. 2, ¶1345)
Interest on accounts payable for services (e.g., property taxes, bookkeeping services, janitorial services) are not deductible under s....
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | 126 |
10 May 1990 T.I. (October 1990 Access Letter, ¶1455)
Whether guarantee fees paid by a financial institution to its parent in respect of global guarantees of off-balance sheet commitments of the...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e.1) | NAL fee | 28 |
23 February 1990 T.I. (July 1990 Access Letter, ¶1317)
Legal expenses incurred by a corporation in financial difficulty in attempting to arrange new financing are not incurred in connection with income...
14 December 89 T.I. (May 1990 Access Letter, ¶1201)
An amount paid as pre-judgment interest on the principal amount of an award or settlement amount for wrongful dismissal of an employee will be...
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| Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business | 22 | |
| Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement | 22 |
ATR-4 (29 Nov. 85)
X Inc. swaps its variable interest rate for a fixed stream of payments under an agreement with a Schedule I bank. The fixed amounts paid to the...
84 C.R. - Q.41
The cost of a "warehouser" in making an SRTC issue is deductible from the gain realized in purchasing an SRTC security.
81 C.R. - Q.46
A taxpayer will not be permitted to deduct a portion of a whole-life insurance premium even where the taxpayer can not obtain term insurance.
A...
80 C.R. - Q.35
The Coté-Reco case does not constitute a precedent because Equitable Acceptance was decided by a more senior court.
IT-104R "Deductibility of Fines or Penalties"
A penalty paid on prepayment of a mortgage is deductible if incurred in the course of carrying on a business (e.g., that of a trader in mortgages).
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Public Policy | 0 |
Articles
Ewens, "Proposed Amendments Affecting Debt and Equity Reorganizations", 1993 Canadian Petroleum Tax Journal, Vol. 6, No. 1, p. 49
In appropriate circumstances debt rescheduling or restructuring expenses should be characterized as current expenses rather than capital outlays.