Cases
TDL Group Co. v. Canada, 2016 FCA 67
The ultimate parent of the taxpayer's group ("Wendy's International") lent Cdn.$234 million to a US subsidiary ("Delcan") at 7% interest, which...
Swirsky v. Canada, 2014 DTC 5037 [at 6723], 2014 FCA 36, aff'g 2013 TCC 73, 2013 DTC 1078 [at 431]
The taxpayer transferred shares in a family real estate development company ("Torgan") to his wife ("Ms. Swirsky") on three occasions in 1991,...
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| Tax Topics - General Concepts - Purpose/Intention | no objectively reasonable income-producing purpose | 85 |
| Tax Topics - General Concepts - Onus | applying GAAR at confirmation stage doesn't shift onus | 73 |
Collins v. Canada, 2010 DTC 5028 [at 6625], 2010 FCA 12
The taxpayers owed approximately $2.7 million on mortgage loans including substantial amounts of interest that previously had been agreed to be...
Scragg v. Canada, 2009 DTC 6024, 2009 FCA 180
Before finding that the taxpayer had failed to discharge the onus on him to establish that money borrowed by him had been used by him to invest in...
Novopharm Ltd. v. Canada, 2003 DTC 5195, 2003 FCA 112
A profitable Canadian corporation ("Novopharm") acquired losses approximating $20 million of an arm's-length corporation ("Lossco") through a...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 390 |
Stewart v. Canada, 2002 DTC 6969, 2002 SCC 46, [2002] 2 S.C.R. 645
After finding that rental condominium properties of the taxpayer represented a source of income and that the interest expense on related...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | "business" has its broad common law definition | 95 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Personal or Living Expenses | 12 | |
| Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit | no reasonable expectation of profit test if no personal element | 86 |
| Tax Topics - Statutory Interpretation - Deference to Legislature | avoid judicial rule-making | 80 |
Dansereau v. The Queen, 2001 DTC 5642, 2001 FCA 305
The taxpayer, who was a teacher by profession, owned eight rent-producing property of which seven had to be sold, following a recession, with the...
Canada v. Milewski, 2000 DTC 6559 (FCA)
The taxpayer financed virtually all of his investment in a limited partnership carrying on the business of renting apartments with borrowed money...
Chase Manhattan Bank of Canada v. Canada, 2000 DTC 6018 (FCA)
A subsidiary ("Leasing") of the appellant (the "Bank") had been financed with loan capital received by the Bank, which subsequently had been...
Shell Canada Ltd. v. Canada, 99 DTC 5669, [1999] 3 S.C.R. 622, [1999] 4 CTC 313
The taxpayer borrowed NZ$150 million from three non-resident banks by issuing five-year debentures bearing interest at 15.40%. A comparable...
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| Tax Topics - General Concepts - Substance | legal relationships prevail over economic realities | 201 |
| Tax Topics - General Concepts - Tax Avoidance | taxpayers entitled to rely on structure of their transactions | 170 |
| Tax Topics - Income Tax Act - Section 67 | s. 67 does not apply where provisions, having their own internal limiting clauses, apply | 96 |
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange | FX hedging gain was capital gain as hedged borrowing was on capital account | 225 |
| Tax Topics - Statutory Interpretation - Specific v. General Provisions | 96 |
Singleton v. The Queen, 99 DTC 5362, [1999] 3 CTC 446 (FCA), aff'd supra.
The taxpayer, who was a partner in a small law firm, withdrew $300,000 from his capital account in order to help fund the purchase of a home....
Hudson Bay Mining & Smelting Co. Ltd. v. The Queen, 99 DTC 5269, [1999] 3 CTC 76 (FCA)
The taxpayer repurchased some of its outstanding debentures through brokers. The price negotiations with the vendor focussed on the price...
Ludco Enterprises Ltd. v. The Queen, 99 DTC 5153, [1999] 3 CTC 601 (FCA), rev'd supra
A group of Canadian investors, including the taxpayers, invested in the shares of two Panamanian corporations (collectively, "Justinian") whose...
Elmridge Country Club Inc. v. The Queen, 99 DTC 5127 (FCA)
The taxpayer, which was a country club that was found to be subject to tax on interest from the investment of surplus funds pursuant to s. 149(5),...
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| Tax Topics - Income Tax Act - Section 149 - Subsection 149(5) | 45 |
Laliberté v. Canada, 98 DTC 6604 (FCA)
The taxpayer's husband borrowed $20,000, on the security of a mortgage on a rental property, to pay legal costs in connection with a civil suit...
The Queen v. Sherway Centre Ltd., 98 DTC 6121 (FCA)
A twenty-year bond financing that was secured on a shopping centre owned by the taxpayer provided for the payment, in addition to interest at a...
Parthenon Investments Ltd. v. Canada (National Revenue), 97 DTC 5343 (FCA)
The taxpayer was not entitled to deduct interest on a promissory note that it had delivered in payment of a dividend to its parent corporation and...
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| Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Canadian-Controlled Private Corporation | control means ultimate control | 141 |
74712 Alberta Ltd. (formerly Cal-Gas & Equipment Ltd.) v. The Queen, 97 DTC 5126, [1997] 2 CTC 30 (FCA)
The taxpayer guaranteed a loan which the CIBC made to its parent corporation ("Trennd"), for on-lending to various corporations within the group...
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| Tax Topics - General Concepts - Purpose/Intention | 57 |
Brill v. The Queen, 96 DTC 6572, [1997] 1 CTC 2 (FCA)
Interest that accrued between January 1, 1987 and the date of judicial sale of a property whose purchase had been financed with borrowed money,...
Tennant v. M.N.R., 96 DTC 6121, [1996] 1 S.C.R. 305
The taxpayer used the proceeds of a $1 million bank loan to subscribe for common shares of an arm's length corporation ("Realwest"). After his...
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| Tax Topics - Statutory Interpretation - Reciprocity | 66 |
Riddell v. The Queen, 95 DTC 5526, [1995] 2 CTC 362 (FCTD)
A corporation paid the interest on a loan that had refinanced a loan received by its individual shareholder in order to finance a purchase by him...
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| Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc. | 112 |
Farn v. The Queen, 95 DTC 5426, [1996] 1 CTC 19, [1995] 1 CTC 152 (FCTD)
Interest on mortgages owing by the taxpayers in their 1987 taxation years was found to be non-deductible given that they had defaulted on the...
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| Tax Topics - Income Tax Act - Section 79 | 120 | |
| Tax Topics - Other Legislation/Constitution - Federal - Official Languages Act - Section 13 | 32 |
Canassurance, Compagnie d'Assurance-Vie Inc. v. The Queen, 94 DTC 6186, [1994] 2 CTC 37 (FCA)
The taxpayer, which was a mutual life insurance company without share capital, received subscriptions to its reserve fund from the Quebec Hospital...
The Queen v. Mandryk, 92 DTC 6329, [1992] 1 CTC 317 (FCA)
Interest paid by the taxpayer on loans which were used to make advances to an insolvent corporation was non-deductible. In response to a...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss | guarantee made qua shareholder | 104 |
Edward Bowes v. Minister of National Revenue, 91 D.T.C 5310, [1991] 1 CTC 68 (FCTD)
The taxpayer was unable to establish that interest on money which initially had been borrowed to acquire a personal residence later was used to...
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| Tax Topics - General Concepts - Evidence | 52 |
Livingston International Inc. v. The Queen, 91 DTC 5066 (FCTD), aff'd 92 DTC 6197 (FCA)
The taxpayer borrowed money from its parent in order to redeem high-low preference shares which had been issued on the amalgamation of the two...
Haro Pacific Enterprises Ltd. v. The Queen, 90 DTC 6583, [1990] 2 CTC 493 (FCTD)
Amounts styled as "interest" which were paid pursuant to a promissory note which provided that the interest was to be paid "at such times and such...
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| Tax Topics - Income Tax Act - Section 97 - Subsection 97(2) | capital distribution part of consideration for land contribution | 149 |
The Queen v. Attaie, 90 DTC 6413 (FCA)
The taxpayer took out a mortgage loan to help finance the acquisition of a Toronto house. The Minister allowed the deduction of interest for the...
Kalthoff v. The Queen, 90 DTC 6378, [1990] 1 CTC 336 (FCTD), aff'd 92 DTC 6001 (FCA)
On March 26, 1980 the taxpayer entered into an agreement for the purchase of land for a purchase price of $525,000. The agreement provided that...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 37 |
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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| 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 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures | guarantee fees paid respecting bank loans made to subsidiaries were capital expenditures | 207 |
| Tax Topics - Income Tax Act - Section 180 - Subsection 180(3) | 30 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 157 |
The Queen v. Malik, 89 DTC 5141, [1989] 1 CTC 316 (FCTD)
Interest on loans which remained outstanding after the taxpayer sold a rental property at a loss was found, following Emerson, to be non-deductible.
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| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(f) | 95 |
Holotnak v. The Queen, 87 DTC 5443, [1987] 2 CTC 217 (FCTD), aff'd 89 DTC 5527 (FCA)
The direct use of the proceeds of a loan secured by the taxpayer's rental property was the purchase of his residence, and the interest accordingly...
Bowater Canadian Ltd. v. The Queen, 87 DTC 5287, [1987] 2 CTC 47 (FCA)
After a company (Bulkley") in which the taxpayer and another corporation ("Bathurst") had substantial loan and share investments began...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Loans and Financing Charges | 236 |
Bronfman Trust v. The Queen, [1987] 1 S.C.R. 32, 87 DTC 5059, [1987] 1 CTC 117
Interest on money borrowed by trustees in order to make discretionary capital allocations to beneficiaries was non-deductible. Although the...
Emerson v. The Queen, 86 DTC 6184, [1986] 1 CTC 422 (FCA)
The taxpayer sought to deduct interest charged on borrowed money that was used to repay a previous loan that had financed the purchase of shares....
Toolsie v. The Queen, 86 DTC 6117, [1986] 1 CTC 216 (FCTD)
The taxpayer was found to have borrowed $37,500 to acquire his residence, with the loan being secured by mortgages on two rental properties. The...
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| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate | 67 |
The Queen v. Terra Mining & Exploration Ltd. (N.P.L.), 84 DTC 6185, [1984] CTC 176 (FCTD)
The parenthetical expression refers to the method regularly followed by the taxpayer for financial statement purposes. Thus, where the taxpayer...
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| Tax Topics - General Concepts - Accounting Principles | 68 | |
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c) | 62 | |
| Tax Topics - Statutory Interpretation - Scheme | 36 |
Alberta and Southern Gas Co. Ltd. v. The Queen, 76 DTC 6362, [1976] CTC 639 (FCTD), aff'd 77 DTC 5244 [1977] CTC 388 (FCA), aff'd 78 DTC 6566, [1978] CTC 780, [1979] 1 S.C.R. 36
The taxpayer borrowed $4 million (apparently at a commercial rate of interest) from its banker and paid that sum to Amoco in consideration of...
R. v. Balmoral Holdings Ltd., 75 DTC 5296, [1975] C.T.C. 397 #2, [1975] C.T.C. 397 (FCTD)
The taxpayer, one of whose objects was to provide management services to controlled corporations and which was prohibited by its objects from...
Sternthal v. The Queen, 74 DTC 6646, [1974] CTC 851 (FCTD)
The taxpayer, who had a large excess of assets over liabilities, borrowed $246,800 from three private companies in which he had investments and on...
Byke Estate v. The Queen, 74 DTC 6585, [1974] CTC 763 (FCTD)
A company purchased by the taxpayers paid interest on money borrowed by the taxpayers to acquire its shares. The taxpayers were not permitted to...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 102 |
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 to pay interest on the borrowed money at a rate of 9% plus 1% of...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 177 |
Matheson v. The Queen, 74 DTC 6176, [1974] CTC 186 (FCTD)
Interest paid by the taxpayer on a bank loan the proceeds of which had been used to refinance an interest-free loan to a controlled company...
Lakeview Gardens Corp. v. MNR, 73 DTC 5437, [1973] CTC 586 (FCTD)
In 1954 the taxpayer borrowed money to acquire land inventory, and in 1962 acquired shares (generating exempt dividend income). The Minister was...
MNR v. Mid-West Abrasive Co. of Canada Ltd., 73 DTC 5429, [1973] CTC 548 (FCTD)
The taxpayer during its 1960 and 1961 taxation years borrowed $210,000 from its U.S. parent. The promissory notes stated "interest will be paid if...
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| Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) | indefinite payment arrangements for interest | 76 |
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(5) | 76 |
McLaws v. Minister of National Revenue, 72 DTC 6149, [1972] CTC 165, [1974] S.C.R. 887
The taxpayer provided his personal guarantee to the bank when it was threatening to call the loans it had made to a corporation owned by the...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss | 104 |
Trans-Prairie Pipelines Ltd. v. MNR, 70 DTC 6351, [1970] CTC 537 (Ex Ct)
When the taxpayer started business in 1954 it raised the capital required for its business by issuing common shares for $140,006 and preferred...
D.W.S. Corp. v. MNR, 68 DTC 5045, [1968] CTC 65 (Ex Ct), briefly aff'd 69 DTC 5203 (SCC)
The taxpayer (a distilling company) borrowed $3,485,000 from a U.S. subsidiary at 6% interest and on-lent those funds to another subsidiary...
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| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange | 142 |
Société Coopérative Agricole du Canton de Granby v. The Minister of National Revenue, 61 DTC 1205, [1961] CTC 326, [1961] S.C.R. 671
In finding that a purported issuance of preference shares was in fact a loan, with the result that the interest thereon was deductible, Cartwright...
Canada Safeway Ltd. V. Minister of National Revenue, 57 DTC 1239, [1957] CTC 335, [1957] S.C.R. 717
The taxpayer, which carried on a retail chain grocery business, used the proceeds of a debenture issue to purchase the shares of a sister company...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures | interest expense generally on capital account | 59 |
Interior Breweries Ltd. v. MNR, 55 DTC 1090, [1955] CTC 143 (Ex Ct)
The taxpayer used money which it had borrowed under temporary bridge financing from a bank to acquire the shares of other brewing...
Stock Exchange Building Corp. Ltd. v. Minister of National Revenue, [1955] S.C.R. 235, 55 DTC 1014, [1955] CTC 5
The taxpayer realized $90 for each $100 bond issued by it in 1929 and invested the net proceeds in an office building. The taxpayer was only...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures | compound interest payable on capital account | 42 |
Minister of National Revenue v. McCool, 49 DTC 700, [1949] CTC 395, [1950] S.C.R. 80
An individual transferred the assets of his business to the taxpayer in consideration for the assumption of his business liabilities, the issuance...
Montreal Coke and Manufacturing Co. v. MNR, [1944] A.C. 126, [1944] CTC 94 (P.C.)
In connection with the retirement of old bonds and the issuance of replacement bonds, the taxpayer had to pay interest on both the old bonds and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Loans and Financing Charges | 79 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures | refinancing fees not incurred in the course of earning income | 163 |
See Also
Gervais Auto Inc. v. Agence du revenu du Québec, 2021 QCCA 459
The taxpayer financed its inventory of used automobiles held for resale through unsecured loans of $2 million (for a total of $6 million) from its...
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| Tax Topics - General Concepts - Onus | Court of Appeal free to re-weigh the evidence once the failure of the trial judge to apply onus correctly was established | 318 |
| Tax Topics - Income Tax Act - Section 67 | interest rate fell within a reasonable range | 263 |
Gervais Auto Inc. v. Agence du revenu du Québec, 2019 QCCQ 5894, rev'd 2021 QCCA 459
The taxpayer financed its inventory of used automobiles held for resale through unsecured loans from its shareholders, who were the three...
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| Tax Topics - Income Tax Act - Section 67 | taxpayer could not displace ARQ assessment of interest on basis of low point in interest-rate range provided by taxpayer's expert | 208 |
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 16 - Subsection 16(1) | s. 16(1) can only apply to a debtor if it equally applies to the creditor | 398 |
Solar Power Network Inc. v. ClearFlow Energy Finance Corp., 2018 ONCA 727
The typical loan agreement for a loan (a “Loan”) by ClearFlow to Solar Power Network (“SPN”) provided for a base interest rate of 12% p.a....
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| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (f) | additional discount fee, but not admin fee, was interest rather than fee | 226 |
Solar Power Network Inc. v. ClearFlow Energy Finance Corp., 2018 ONSC 7286, rev'd 2018 ONCA 727
The typical loan agreement for a loan (a “Loan”) by the respondent (“ClearFlow”) to the applicant (“SPN”) provided for a base interest...
R. v. Golini, 2016 TCC 174
A family corporation (“Ontario”) used proceeds of a daylight loan to redeem shares of Holdco, which used those proceeds to purchase a life...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | a loan to a shareholder with recourse limited to an asset pledged by the corporation was a shareholder benefit | 589 |
| Tax Topics - General Concepts - Sham | sham doctrine did not apply to a "minor pretence" | 338 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | use of corporate asset to create PUC was abuse of s. 84(1) | 250 |
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(1) | policy of 84(1) | 219 |
ENMAX Energy Corp. v. Alberta, 2016 ABQB 334, rev'd 2018 ABCA 147
Enmax Energy Corporation (“EEC”) was a wholly owned subsidiary of Enmax Corporation (“EC”), which in turn was wholly-owned by the City of...
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| Tax Topics - Income Tax Act - Section 67 | Gabco test implies a range | 122 |
| Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) | arm's length comparables for intercompany interest rate not dispositive | 308 |
Re Nortel Networks Corporation, 2015 ONCA 681
Nortel proceedings under the Companies’ Creditors Arrangement Act (Canada) and Chapter 11 of the U.S. Bankruptcy Code had been on-going since...
The TDL Group Co. v. The Queen, 2015 DTC 1098 [at 567], 2015 TCC 60, rev'd supra.
The ultimate parent of the taxpayer's group ("Wendy's International") made a US$147,654,000 loan to a US subsidiary ("Delcan") at 7% interest,...
McLarty v. The Queen, 2014 DTC 1162 [at 3556], 2014 TCC 30
On December 31, 1993, the taxpayer and other parties to a joint venture acquired rights to exploit seismic data in consideration for $975,000 cash...
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| Tax Topics - General Concepts - Agency | participations contrary to agreement were disregarded | 111 |
| Tax Topics - General Concepts - Illegality | participations contrary to agreement were disregarded | 113 |
| Tax Topics - General Concepts - Sham | sham cannot apply to just part of transaction | 145 |
| Tax Topics - General Concepts - Tax Avoidance | sham cannot apply to just part of transaction | 145 |
| Tax Topics - Income Tax Act - Section 67 | leveraged purchase of seismic data at arm's length was presumptively reasonable | 296 |
Doulis v. The Queen, 2014 DTC 1054 [at 2933], 2014 TCC 26 (Informal Procedure)
Lamarre J dismissed the taxpayer's arguments that he should be able to deduct interest on tax arrears as a business expense. Such deductions were...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(t) | tax arrears interest is not a business expense | 86 |
| Tax Topics - Income Tax Act - Section 9 - Interest Income | tax arrears interest is not a business expense | 86 |
Garber v. The Queen, 2014 DTC 1045 [at 2812], 2014 TCC 1
The taxpayers bought units in limited partnerships, each of which was to acquire a large yacht to be used for catered vacation charters. The...
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| Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property | title not held by GP on behalf of partnership | 122 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | expenses mere window-dressing | 135 |
| Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit | fraudulent scheme not a source | 240 |
| Tax Topics - Income Tax Act - Section 96 | GP had fraudulent intention | 241 |
| Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) | asset was mere window-dressing | 146 |
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 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures | no retained earnings or stated capital | 200 |
Collins v. The Queen, 2009 DTC 286, 2009 TCC 56, rev'd supra
The taxpayers owed approximately $2.7 million on mortgage loans including substantial amounts of interest that previously had been agreed to be...
Estate of Mary Rizak c/o George Jehn v. The Queen, 2008 DTC 4460, 2008 TCC 434 (Informal Procedure)
The taxpayer was unable to deduct interest on an alleged deferred obligation to subscribe for further shares in a company in which it had made an...
Tesainer v. The Queen, 2008 DTC 2807, 2008 TCC 101
Interest on money borrowed by the taxpayers to invest in a real estate partnership was found, in reliance on the decision in Moufarrège v. Quebec...
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| Tax Topics - Income Tax Act - Section 53 - Subsection 53(2) - Paragraph 53(2)(c) - Subparagraph 53(2)(c)(v) | 49 |
Lipson v. The Queen, 2006 DTC 2687, 2006 TCC 148, aff'd supra.
The taxpayer's wife ("Jordanna") borrowed $562,500 from the Bank of Montreal to fund the purchase of shares of a family company from the taxpayer...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 235 |
Crown Forest Industries Ltd. v. The Queen, 2006 DTC 2321, 2006 TCC 47
The taxpayer, which consistently had filed for income tax purposes using the cash basis for computing its deductible interest, was permitted to...
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| Tax Topics - General Concepts - Stare Decisis | 110 |
Moufarrège v. Quebec (Deputy Minister of Revenue), 2005 DTC 5605, [2005] 2 S.C.R. 598, 2005 SCC 53
Interest on loans incurred to purchase real property and shares of a company was not deductible under s. 160(a) of the Taxation Act (Quebec)...
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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|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | finding an acquirer to maximize shareholder value | 168 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Shareholder Assistance | 141 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 183 |
Hill v. The Queen, 2002 DTC 1749 (TCC)
Under a non-recourse loan owing by the taxpayer and other tenants of an office building to the non-resident landlord, 90% of the cash flow was...
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| Tax Topics - General Concepts - Payment & Receipt | funds to support cheques | 143 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | no Crown explanation of different treatment of simple interest | 241 |
722540 Ontario Inc. v. The Queen, 2002 DTC 1307 (TCC)
A profitable Canadian corporation ("Novopharm") acquired losses approximating $20 million of an arm's-length corporation ("Lossco") through a...
Canada v. Confederation Life Insurance Co., [2001] OJ No. 2610 (Ont SCJ)
Two financial institutions purchased commercial paper in the form of discount notes which had a maturity date subsequent to the date of a...
Sudbrack v. The Queen, 2000 DTC 2521, Docket: 98-2386-IT-G (TCC)
Bowman A.C.J. affirmed a reassessment of the Minister which denied 15% of the interest on a loan used to renovate a tourist guest home based on...
Dansereau v. The Queen, 2000 DTC 1559 (TCC) (Informal Procedure)
A number of properties of the taxpayer were sold by the mortgagees under power of sale for less than the amounts owing. The mortgagees required...
Meggitt v. The Queen, 2000 DTC 1448 (TCC) (Informal Procedure)
The taxpayer argued that by borrowing to purchase her home, she was able to retain a rental property. In rejecting this argument and finding that...
Gagnon v. The Queen, 99 DTC 845, [1999] 4 CTC 2426 (TCC)
Bowman TCJ. indicated (at p. 849) that the fact that interest payments were made on money borrowed through non-recourse loans that were secured by...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | 80 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) | software receipt amortized | 39 |
| Tax Topics - Income Tax Act - Section 67 | 70 |
C.R.B. Logging Co. Ltd. v. The Queen, 99 DTC 840, 1998 CanLII 185 (TCC), aff'd , 2000 DTC 6547, Docket: A-242-99 (FCA)
The taxpayer borrowed approximately $1.9 million from a Canadian bank and used the proceeds to subscribe for preferred shares of a company...
Lewisport Holdings v. The Queen, 99 DTC 253, 1998 CanLII 185 (TCC)
After a bank crystallized two floating debentures for debts owing by a land development company and its parent, the taxpayer used borrowed money...
Chisholm v. The Queen, 99 DTC 150, [1999] 1 CTC 2498 (TCC)
The taxpayer gifted a portion of his common shares of a family small business corporation to a trust for his children utilizing the rollover...
Aitchison v. The Queen, 98 DTC 1956, [1995] 2 CTC 2558 (TCC)
The taxpayer borrowed money in order to acquire shares of a private mortgage investment corporation which, some years later, redeemed the shares,...
Canadian Pacific Ltd. v. The Queen, docket 95-3534-IT-G (TCC)
Although he would have decided the appeal on a different basis if not bound by authority, Bonner TCJ. applied the finding in the Shell Canada case...
Mohammad v. R., 97 DTC 5503, [1997] 3 C.T.C. 321 (FCA)
After finding that it was not proper of the Tax Court Judge to apply s. 67 to disallow a portion of the interest expense incurred by the taxpayer...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Reasonable Expectation of Profit | 158 | |
| Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit | 160 | |
| Tax Topics - Income Tax Act - Section 67 | s. 67 does not embed a reasonable expectation of profit requirement | 104 |
Integrated Wood Research Inc. v. The Queen, 98 DTC 1258, [1998] 1 CTC 2681 (TCC)
Before going on to find that interest accrued by the taxpayer was an expenditure for purposes of ss.194 and 37, Bonner TCJ. stated (at p....
Robitaille v. The Queen, 97 DTC 1286 (TCC)
During a three-day period in 1985 the taxpayer, who was a partner in a law firm, withdrew $100,000 from his capital account, purchased a private...
Barbican Properties Inc. v. The Queen, 97 DTC 122, [1996] 2 CTC 2615 (TCC), briefly aff'd 97 DTC 5008 (FCA)
The taxpayer financed the purchase of "distressed" properties from the Royal Bank through non-recourse loans received from the Royal Bank which...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(e) | 138 |
WP Graphics Inc. v. The Queen, [1996] TCJ. No. 146 (TCC)
The taxpayer borrowed money in order to pay a dividend to a recent corporate purchaser of its shares which, in turn, used those monies to pay the...
Canwest Broadcasting Ltd. v. The Queen, 96 DTC 1375, [1995] 2 CTC 2780 (TCC)
The taxpayer accessed the non-capital losses of a group of arm's length corporations in financial difficulty ("FCPL") by engaging in a series of...
Redclay Holdings Ltd. v. The Queen, 96 DTC 1207, [1996] 2 CTC 2347 (TCC)
Part of the consideration given by the taxpayer for the purchase by it of a partnership interest was the assumption by it of a portion of the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 78 - Subsection 78(1) | 83 |
Joy v. The Queen, 96 DTC 2026 (TCC)
The pleadings of the taxpayer, which referred to the retroactivity of the December 21, 1991 draft legislation on interest to 1972 and "submitted...
Vander Nurseries Inc. v. The Queen, 95 DTC 91, [1994] 2 CTC 2347 (TCC)
The taxpayer was found to have advanced money to an associated corporation as an interest-free loan rather than as proceeds for the redemption of...
Plawiuk v. The Queen, 94 DTC 1050 (TCC)
In 1987, the taxpayer borrowed a substantial sum from a supplier of a Canadian company ("Seven-Up") to acquire 100 common shares of Seven-Up under...
Mutual Life Assurance Co. of Canada v. 837690 Ontario Ltd. (1993), 36 RPR (2d) 159 (Ont Ct J (GD))
The plaintiff held a mortgage which, in addition to providing for blended payments of principal and interest, also provided for the payment after...
Spectron Computer Corp. v. MNR, 93 DTC 1473, [1993] 2 CTC 3148 (TCC)
In finding that interest costs incurred by the taxpayer to finance the payroll cost of its R & D personnel were described in s. 20(1)(c), Kempo,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 2902 | 184 | |
| Tax Topics - Statutory Interpretation - Resolving Ambiguity | 112 |
Mark Resources Inc. v. The Queen, 93 DTC 1004, [1993] 2 CTC 2259 (TCC)
In order to utilize the losses of its U.S. subsidiary, the taxpayer borrowed funds in Canada from an arm's length bank and made a capital...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) | 106 |
Lessard v. MNR, 93 DTC 680, [1993] 1 CTC 2176 (TCC)
The taxpayer was given the opportunity to purchase 10.25% of the shares of a private company ("Choisy") for which he worked. He accomplished this...
Morscher v. MNR, 92 DTC 2214, [1992] 2 CTC 2534 (TCC)
The taxpayer, who carried on a commercial litigation practice in partnership with another lawyer, was denied the deduction of interest which...
Glass v. MNR, 92 DTC 1759 (TCC)
The taxpayer borrowed money at prime plus 1/2% to acquire a mortgage in default which, after negotiation with the controlling shareholders of the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii) | 86 | |
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | 104 |
Goulard v. MNR, 92 DTC 1244, [1992] 1 CTC 2396 (TCC)
In a number of instances the taxpayer incorporated a real estate principal business corporation, arranged long-term construction bank financing...
Brown v. The Queen, 92 DTC 1105, [1992] 1 CTC 2152 (TCC)
Interest on money borrowed by the taxpayer to honour his personal guarantee of his corporation's indebtedness was non-deductible. "Paying off a...
Sutherland v. The Queen, 91 DTC 5318 (FCTD)
Unpaid management fees owing to the taxpayer by a company in which he had an interest were found not to be a loan by him to the company in the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(p) - Subparagraph 20(1)(p)(i) | unpaid fees not loans | 71 |
| Tax Topics - Income Tax Act - Section 5 - Subsection 5(1) | 103 |
Ronald Michael Kornelow v. Minister of National Revenue, 91 DTC 431, [1991] 1 CTC 2403 (TCC)
Interest on money which the taxpayer had borrowed in order to invest in a corporation was non-deductible given that the corporation had been...
Tor-Guelph Holdings Limited v. Minister of National Revenue and 309901 Ontario Limited v. Minister of National Revenue, 91 DTC 355, [1991] 1 CTC 2252 (TCC)
The partners of a partnership were denied the deduction of interest on money borrowed in order to make an interest-free advance to a corporation...
Gruyich Services Inc. (formerly Gru-Reco Limited) v. Minister of National Revenue, 91 DTC 159, [1991] 1 CTC 2139 (TCC)
Notwithstanding a comingling of funds, the taxpayer was able to establish that only a portion of borrowed money was used to pay dividends, and...
Dockman v. MNR, 90 DTC 1804, [1990] 2 CTC 2229 (TCC)
The taxpayer was entitled to deduct interest on a $40,000 bank loan which he on-lent to his brother for the period of time that there was a...
Wilson v. MNR, 90 DTC 1744, [1990] 2 CTC 2325 (TCC)
Under a divorce settlement, the taxpayer's wife otherwise would have been entitled to shares of a company ("Taja") and other income-producing...
Lee v. MNR, 89 DTC 443 (TCC)
Only 1/8 of the interest on a vendor take-back mortgage used to finance the taxpayer's acquisition of a motel, 15.38% of the total available...
Scott v. MNR, 89 DTC 218, [1989] 1 CTC 2305 (TCC)
The taxpayer was not entitled to deduct interest on borrowed money which he had on-lent on a non-interest bearing basis to two corporations of...
Bowes & Cocks Ltd. v. MNR, 89 DTC 341, [1989] 2 CTC 2043 (TCC)
The taxpayer used borrowed money to acquire additional shares of its subsidiary, which the taxpayer immediately wound-up in the process of which a...
Wilson v. MNR, 88 DTC 1418, [1988] 2 CTC 2053 (TCC)
Christie A.C.J. stated (p. 1419) that "the fact that repayment of money that is borrowed is secured by a mortgage on the borrower's personal...
Marine Management Ltd. v. Dep. Cmmer. of Inland Rev. (Fiji), [1986] BTC 184 (PC)
It was held that borrowed money was paid by the taxpayer for the purchase of shares of a company rather than for the acquisition of a management...
Gilmour v. The Queen, 81 DTC 5322, [1981] CTC 401 (FCTD)
A corporation issued 3% and 3.5% debentures at discounts which resulted in effecte rates of 4.765 and 5.02% at a time whnen the prime rate of teh...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) | 147 |
Re Balaji Apartments Ltd. and Manufacturers Life Insurance Co. (1979), 100 DLR (3d) 695 (Ont HC)
A mortgage provided for blended payments of principal and interest at 8.5%, and provided that "it is further covenanted and agreed" that until the...
Re Euro Hotel (Belgravia) Ltd. (1975), 51 TC 293 (Ch D)
The taxpayer, which was entitled to a long lease of land in consideration of developing the land, assigned its ultimate rights to the lands to a...
Attorney General (Ontario) v. Barfried Enterprises, [1963] S.C.R. 570
The pith and substance of The Unconscionable Transactions Relief Act (Ontario), which permitted a court to re-open a money-lending transaction...
C.I.R. v. Pullman Car Co., Ltd. (1954), 35 TC 221 (Ch D)
In 1938, the taxpayer, which was in financial difficulty, replaced 70% of its preference shares by income stock which stipulated for the payment...
Bennett and White v. The King, 49 DTC 514, [1949] CTC 1, [1949] S.C.R. 287
In finding that annual amounts described in various resolutions of the taxpayer as "interest" in fact were guarantee payments, Locke J. stated (p....
| 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 | guarantee fees paid on construction financing were on capital account | 82 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) | 91 |
Inland Revenue Commissioners v. Rowntree & Co. Ltd., [1948] 1 All ER 482 (CA)
The taxpayer drew sight bills on an acceptance house which, after accepting the bills, discounted them in the market as agent for the taxpayer and...
Reference as to the Validity of Section 6 of the Farm Security Act, 1944 of Saskatchewan, [1947] S.C.R. 394, aff'd [1949] AC 110
Section 6 of the Farm Security Act 1944 (Saskatchewan) provided that in the event of a crop failure, the principal of a mortgage on a farm would...
Dupuis Frères Ltd. v. Minister of Customs and Excise (1927), 1 DTC 104 (Ex Ct)
A holder of preferred shares of the taxpayer was entitled to fixed dividends and to have the shares redeemed 15 years after the date of their...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Investment Contract | 170 |
A. W. Walker & Co. v. C.I.R. (1920), 12 TC 297 (KBD)
A partnership borrowed £4,000 from the executors of an estate pursuant to a loan agreement which provided that the consideration for the loan...
Administrative Policy
2020 Ruling 2020-0854741R3 - Subordinated Notes without Maturity
CRA ruled that “interest” paid by a resident corporation (Aco)on subordinated notes would not be subject to Part XIII tax based on the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b) | interest that could be cancelled in issuer's discretion was interest for Pt. XIII purposes | 337 |
2018 Ruling 2017-0732001R3 - XXXXXXXXXX
A public company (ACo) will issue unsecured subordinated Notes, whose terms will be conventional except that:
- ACo may in its discretion elect by...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b) | “interest” that could be cancelled at cost of foregoing dividends was interest | 339 |
1 June 2016 External T.I. 2015-0601211E5 - Mortgage loan from RRSP to make a shareholder loan
An individual, who is an RRSP annuitant, borrows the “Mortgage Loan” from the RRSP, with a principal residence mortgage granted in favour of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(j.1) | use of qualified mortgage loan proceeds of no import | 184 |
| Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Advantage - Paragraph (a) | 4900(1)(j.1) insurance requirements generally arm's length/potential advantage on default | 247 |
| Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Registered Plan Strip | 4900(1)(j.1) mortgage loan unlikely to be acquired at less than FMV | 225 |
29 January 2016 Internal T.I. 2015-0621401I7 - interest deductibility and share repurchases
Canco, a listed corporation, repurchased for cancellation (the “Repurchases”) significant numbers of its Common Shares on the open market...
24 August 2015 External T.I. 2015-0589841E5 - Financial instrument as a debt obligation
Unsecured notes of Canco carry a fixed rate of interest, have a term of up to 60 years and upon the occurrence of default by reason of Canco's...
9 October 2015 APFF Roundtable Q. 11, 2015-0595771C6 F - Deductibility of interest in a leveraged buyout
When asked about interest deductibility where, in the context of a leveraged buy-out, the Bank lends to Target under a secured loan bearing...
9 October 2015 APFF Financial Strategies and Instruments Roundtable Q. 3, 2015-0588951C6 F - Deductibility of interest – ss. 20.1(1)
The sole shareholder of a CCPC uses borrowed funds to make an interest-free advance to the CCPC, and the CCPC then makes a proposal under the BIA,...
11 September 2015 Internal T.I. 2015-0586301I7 - Premiums received on re-opening of debt
The Taxpayer, a corporation whose business was not that of borrowing or lending money re-opened (i.e., extended the maturity of) notes on a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Cumulative Eligible Capital - Element E | premium received on note re-opening subject to eligible capital amount treatment if not otherwise taxable | 162 |
25 May 2015 External T.I. 2014-0563351E5 - Mandatory conversions and interest deductibility
Notes of a Canadian corporation ("Canco") with an investment grade rating would carry a fixed rate of interest, be denominated in Canadian...
2014 Ruling 2014-0523691R3 - Non-Viable Contingent Capital
Aco, a public corporation, will issue (at no discount or only a shallow discount) the "Notes" which: will rank equally with its other unsecured...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(3) - Participating debt interest | non-viable contingent capital sub debt of bank respected as non-participating interest debt | 138 |
20 January 2015 Internal T.I. 2014-0551121I7 F - Interest deductibility
Canco 2, 3 and 4 were wholly-owned by Canco 1. Cancos 3 and 4 used the proceeds of loans from Canco 2 in 2010 for an income-producing purpose. In...
S3-F6-C1 - Interest Deductibility
1.1 "Interest". "Interest" accrues daily, is calculated on principal and is compensation for its use.
1.2-1.4 Participating interest. Subject to...
2 December 2014 CTF Roundtable, Q2(a)
In a loss consolidation arrangement, "Lossco," which has non-capital losses, lends money to Profitco at a reasonable stated rate of interest and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) | positive spread/independent servicing source in loss consolidations | 165 |
10 October 2014 APFF Roundtable, 2014-0538261C6 F - Disposition of capital interest/personal trust
In order to settle the capital interest in a discretionary family trust of a beneficiary who is related to the trustees, that beneficiary agrees...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2) | issuance of note by trust is not distribution of trust property | 81 |
| Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(1) - Cost Amount | note issuance is not trust property distribution to a beneficiary | 217 |
9 April 2014 Internal T.I. 2014-0519231I7 - Debt forgiveness and guarantees
Forco, a wholly-owned subsidiary of Canco, borrowed under a secured "Borrowing" from a lending syndicate, with Canco providing a guarantee"...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Commercial Debt Obligation | guarantee obligation not a commercial debt obligation | 153 |
12 February 2014 Internal T.I. 2012-0443391I7 - cross-border loans and deductibility of interest
Canco purchased common shares of Foreign Sub (a subsidiary of Parentco) from its foreign parent (Parentco) in consideration for treasury shares....
2013 Ruling 2013-0490341R3 - No-type of property spin-off butterfly
Preliminary/butterfly reorg
The shareholders of Old Pubco (a Canadian public corporation dealing at arm's length with each shareholder) will...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution | s. 55(3.02) public spin-off of CFAs to new sister TC with post butterfly FX loan by TC to DC; new public corp inserted above DC before b/f | 449 |
2013 Ruling 2011-0395091R3 - MFC to MFT Conversion
underline;">: Background. Taxpayer, which is a listed mutual fund corporation, wishes to convert to a mutual fund trust (so that following the...
3 June 2013 Internal T.I. 2012-0468131I7 - Participating debt interest
The Canadian taxpayer issued Contracts to its wholly-owning non-resident parent ("ForParent") as consideration for its purchase from ForParent of...
27 February 2013 External T.I. 2013-0477601E5 - Interest Deductibility on Restructured Borrowings
When asked us for clarification as to why in The Queen v. Singleton, 2001 SCC 61, the interest deduction was allowed whereas in the Lipson v. The...
12 June 2012 June STEP Roundtable, 2012-0449811C6 - Application of 20(1)(c) if 75(2) applies
An individual (the "Borrower") uses borrowed money to purchase an income producing property and later settles this property on an inter vivos...
2012 Ruling 2011-0431101R3 - Cross-border spin-off butterfly
On a butterfly reorganization, the non-resident parent of the distributing corporation (DC) exchange its common shares of DC for new common shares...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution | cross-border b/f as part of double Code s. 355 spin-off | 1540 |
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Permitted Exchange | 429 | |
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.1) - Paragraph 55(3.1)(b) - Subparagraph 55(3.1)(b)(i) | 604 |
13 August 2012 Internal T.I. 2012-0453481I7 - Accumulated Profits
A subsidiary of Canco ("Subco") declared a dividend payable to Canco immediately following a time at which it accumulated profits ("AP") were $X,...
15 August 2012 External T.I. 2012-0446741E5 - Interest Deductibility
An individual who is the shareholder of a corporation borrows money from a financial institution to acquire preferred shares of the corporation...
12 March 2012 Internal T.I. 2011-0398721I7 - Interest expense deduction
Two creditors provided financing for the purchase and development of land and building held by nominee corporations, with the beneficial ownership...
2011 Ruling 2011-0411821R3 - Interest deductibility and loss carry backs
a limited partnership ("BForLP") owns substantially all of the membership interests in a (presumably Netherlands) holding cooperative which owns...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.11) | 227 |
29 October 2010 Internal T.I. 2010-0357241I7 - Exchangeable Debenture
In response to a query as to the deductibility of interest on a note which was exchangeable into "Underlying Shares," CRA indicated that interest...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(f) | 242 |
27 May 2009 External T.I. 2008-0296731E5 F - Rachat d'actions: 20(1)c)
A corporation finances the purchase for cancellation (“redemption”) of shares in its capital for $1,000 with $500 borrowed from a financial...
5 June 2008 TI 2007 - 025221 [partial sale/partial disappearing source]
In indicating that there would be partial loss of interest deductibility on money borrowed in order to acquire mutual fund units, where a portion...
14 May 2005 Internal T.I. 2008-0304841I7 - Interest deductibility
"CanOpco" is a 100% subsidiary of "NRHoldco,” a US based corporation, which filed for protection under Chapter 11 of the U.S. Bankruptcy Code....
2008 IFA Round Table, Q. 10.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(3) | 0 |
15 November 2007 External T.I. 2007-0254941E5 - Interest Deductibility - Second Loan
Where a taxpayer borrows money in order to acquire shares of a corporation and then borrows under a second loan to pay the interest under the...
2007 Ruling 2007-0245281R3 - windup of income trust on sale of assets:3rd party
A corporation ("Bidco") assumes the third-party debt of an income fund (the "Fund") whose units it has acquired as consideration for the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.3) | capital loss on redemption of trust units following distribution of most of its assets including as capital gains distribution | 110 |
| Tax Topics - Income Tax Act - Section 53 - Subsection 53(2) - Paragraph 53(2)(h) - Subparagraph 53(2)(h)(i.1) | no ACB reduction for capital gains distribution by unit trust to bidco | 86 |
| Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(21) | trustees making filings on behalf of terminated fund | 48 |
| Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(6) | realization and distribution of target MFT gain | 101 |
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) | 90 | |
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(5) | 90 |
29 June 2006 Internal T.I. 2006-0190791I7 F - Dépense d'intérêts - obligation légale
Parentco made advances to its Subsidiary. In a year subsequent to the advances the Subsidiary recorded a journal entry to adjust its retained...
Income Tax Technical News, No. 34, 27 April 2006 under Income Trusts and Interest Deductibility".
[W]here a corporation has borrowed to repurchase shares, the deductibility of the interest is related to the amount of the debt required to...
IT-533 "Interest Deductibility and Related Issues" 31 October 2003
Exceptions to the direct use test - borrowed money used by a corporation to redeem shares, return capital or pay dividends
23. Interest expense...
2005 Ruling 2005-0130541R3 - Participating Interest
Interest deduction rulings given with respect to debt on which there is base interest, plus additional interest equal to the lesser of the taxable...
3 May 2005 CALU Roundtable Q. 5, 2005-0116661C6 - Interest deductibility on second loan - Gifford
Where a taxpayer borrows money to use in its business and in order to pay interest on this loan the taxpayer borrows money under a second loan,...
8 October 2004 APFF Roundtable Q. 30, 2004-0086981C6 F - Déduction des intérêts - détermination du capital
Respecting a question as to how CRA would view the capital of preferred shares that are redeemed with the proceeds of borrowed money, where the...
14 January 2005 Internal T.I. 2004-009814
The interest on debt previously owing by the taxpayer's shareholder that the taxpayer assumed in consideration for the forgiveness of a...
17 December 2004 External T.I. 2004-0084881E5 - Deductibility of interest on assumed debt
Respecting a question whether the assumption by a trust of another person's indebtedness (a loan payable by a corporation to "Finco") as part of...
2004 Ruling 2004-007680
//www.bci.ca/">www.bci.ca): Non-capital losses of BCI are transferred to its affiliate, Bell Canada, pursuant to transactions under which a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) | contributions of capital | 205 |
2004 Ruling 2004-0061951R3 - Interest deductibility
A Canadian holding company ("MCo") for a foreign parent is no longer able to earn sufficient income to service its long-term debt, whereas its...
16 October 2003 External T.I. 2003-0038315 F - CONVENTION DE RETRAITE
An RCA trust created for the benefit of a managing shareholder and to which the employer contributed $100,000 lends the amount of the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Retirement Compensation Arrangement | loan back to employer may negate RCA status | 98 |
10 October 2003 External T.I. 2003-0035685 F - DEDUCTION INTERETS MONTANT RAISON
What factors would the CCRA consider in determining whether the amount of interest payable under a particular loan agreement exceeds a "reasonable...
7 May 2003 External T.I. 2003-0184005 - ACCUMULATED PROFITS CONSOLIDATED
Given that the determination of accumulated profits must respect the legal relationships that exist, accumulated profits should be determined on a...
2003 Ruling 2003-0032993 - AMALGAMATION INTEREST EXPENSE
Dco incurs a promissory note in acquiring all the common shares of Eco with Eco then amalgamating with a subsidiary (Rco). Cco, the parent of Dco...
2001 Ruling 2001-0097283 - double d's with U.S. parent
XCo (a Canadian corporation that for U.S. purposes is regarded as being a branch of its U.S.-resident parent ("NR Subco")) uses borrowed money to...
4 January 2001 External T.I. 2000-0055475 - REDUCTION OF STATED CAPITAL
In the case of a share redemption,
"a corporation may borrow to the extent that the stated capital of those shares and the accumulated profits or...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | 139 |
26 May 2003 External T.I. 2003-001242
On the sale of a home, the taxpayer is required by the lender to repay a loan that had financed mutual fund investments out of the sale proceeds,...
15 May 2003 External T.I. 2003-00626
Where a taxpayer satisfied the purchase price for an income-producing property by assuming a debt owing by the vendor to a third party and, at a...
13 May 2003 External T.I. 2003-0000825 - INTEREST DEDUCTIBILITY
Where an investor purchases a unit of a real estate investment trust for $10, receives a cash distribution of $0.80 and the REIT's income for tax...
30 April 2003 External T.I. 2002-0156045 - Debt assumed as part/distribution from trust
Where a trust distributes shares of a Canadian corporation to a beneficiary on the condition that the beneficiary assume indebtedness owing by the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2) | 55 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Personal Trust | 50 |
25 March 2003 External T.I. 2002-0176945 - INTEREST DEDUCTION DIVIDENDS
In the situation where dividends, whose ultimate aggregate amount eventually exceeded the corporation's accumulated profit, were funded out of a...
2003 Ruling 2002-0177363 - Loss Utilization in a Related Group
"It is no longer necessary for the dividend rate on the preferred shares to be greater than the interest rate on the loan (a so-called 'positive'...
18 December 2002 Internal T.I. 2002-0161747 - INTEREST EQUITY ACCOUNTING
Equity accounting may not be used to determine accumulated profits for the purpose of establishing interest deductibility on the payment of...
16 July 2002 External T.I. 2002-0142475 - INTEREST DEDUCTIBILITY INCOME TRUST
Where an individual borrows $10,000 at 4% interest and invests it in an income trust and receives, in the first year $1,400, of which $500 is...
15 May 2002 External T.I. 2001-0103605 F - Prêt par un Associé à une Société
Is the interest on a loan made to a partnership by a partner deductible under s. 20(1)(c)? CRA responsed (TaxInterpretations translation):
The...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(g) | 129 |
2002 Ruling 2002-0160913 - INTEREST
A foreign corporation ("ForeignCo") acquires a Canadian company ("Opco"): a wholly-owned newly-incorporated subsidiary of ForeignCo ("Holdco")...
Income Tax Technical News, No. 18, 16 June 2000
Discussion of the extension of the "ultimate purpose test" in Byram, 99 DTC 5117 (FCA) to s. 20(1)(c).
31 May 2001 Internal T.I. 2000-0062337 - prepaid forward sales contract - bifurcation
An agreement provided for the immediate receipt of a cash payment by the purchaser (a trust) from the vendor and obliged the vendor (a company in...
29 January 2001 External T.I. 2000-0063185 - Interest deductibility
In response to a question on the deductibility of interest on borrowed money used for the purpose of investing in common shares of a technology...
4 January 2001 External T.I. 2000-0057915 - BORROWED MONEY TO REDUCE STATED CAPITAL
"Where there has been an accounting write-down in assets and a corresponding shareholder's deficit for accounting purposes but there is no...
4 January 2001 External T.I. 2000-0055475 - REDUCTION OF STATED CAPITAL
"Accumulated profits or retained earnings, for the purpose of determining eligible borrowing, do not include appraisal surpluses or profits...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | 122 |
6 December 2000 External T.I. 2000-0056275 - LEVERAGED BUYOUTS
The finding in the CRB Logging case that the closed nature of the income flow made it virtually impossible for CRB to receive dividends that did...
29 November 2000 Internal T.I. 2000-0051367 - INTEREST ON REDEMPTION OF SHARES
Prejudgment and post judgment interest that was paid by a corporation in respect of the lapse of time between the departure of a shareholder and...
24 October 2000 Internal T.I. 2000-0048177 - DEDUCTIBILITY OF INTEREST ON ASSUMED DEBT
Where a corporation redeems its preferred shares and, as consideration, assumes a bank loan that the shareholder had previously incurred to...
29 March 2000 External T.I. 2000-0008315 - INTEREST
Where a target corporation borrowed money from a bank in order to make an interest-free loan to a holding company for management that would be...
22 March 2000 External T.I. 2000-0002705 - INTEREST DEDUCTIBILITY - INTEREST FREE LOAN
Interest on money borrowed to make an interest-free loan to a subsidiary would not be deductible because the subsidiary was not resident in Canada.
23 February 2000 External T.I. 2000-0000205 - INTEREST DEDUCTIBILITY
"In a situation where a taxpayer purchases a property from another taxpayer and assumes that taxpayer's mortgage liability in respect of the...
1999 Ruling 9931713 - PARTNERSHIP REORGANIZATION
Interest on debts used by a partnership to acquire fixed assets would still be deductible by the partnership after a transfer of those assets to a...
1999 APFF Round Table, Q. 2 (No. 9M19190)
Where a Canadian public corporation borrows money in order to acquire units of a corporation that is an LLC, the interest will be deductible...
5 October 1999 External T.I. 9924775 - INNOVATIVE INSTRUMENTS INTEREST DEDUCTIBILITY
Interest would not be deductible on a debenture with a mandatory conversion feature that permitted the borrower to repay holders with less than...
16 September 1999 External T.I. 9916715 - INTEREST DEDUCTIBILITY - IT 315\
A corporation (the "Target") borrows money to lend to an unrelated corporation which uses those funds to purchase shares of the Target from a...
Income Tax Technical News, No. 16, 8 March 1999
"We think the Sherway decision helps distinguish between those financial arrangements where the participation payments are intended to be...
27 January 1999 Internal T.I. 9830747 - INTEREST EXPENSE TO REDUCE CAPITAL
RC's policy that interest is deductible to the extent that the borrowing is not in excess of the paid-up capital reduction which the borrowing...
14 October 1998 External T.I. 9732475 - INTEREST DEDUCTIBILITY
Where a corporate taxpayer borrows $10 million from a bank at 6%, and uses the borrowed funds to buy a business asset which, later, is sold giving...
May 1998 Advanced Life Underwriting Round Table, Q. 4, No. 9807000
"The fact that paragraph 149(1)(q.1) exempts an RCA from being taxed under Part I of the Act on its taxable income does not, in and by itself,...
1998 APFF Congress, Q. 19
A corporation X wishes to buy back the shares of one of its shareholders (corporation Y), and corporation B wishes to acquires shares of...
30 November 1997 Ruling 9732433 F - UTILISATION DE PERTES LOSS UTILIZATION
Consideration of the reasonableness of an interest rate (8.7%) before giving favourable rulings on an arrangement respecting the deductibility of...
8 December 1997 External T.I. 9730565 - INTEREST EXPENSE DEDUCTION
The position in Question 5 of the 1996 Corporate Management Tax Conference Round Table would also extend to a public corporation.
17 July 1997 External T.I. 9718765 - INTEREST DEDUCTIBILITY - BORROWING TO MAKE DISTRIBUTION
"Interest on money borrowed by a corporation to repay capital on the redemption, acquisition or cancellation of a share is generally deductible...
14 July 1997 External T.I. 9716025 - INTEREST DEDUCTION - NON-RESIDENT
Because interest paid in respect of a partnership interest is not deductible at the partnership level, interest payable by a non-resident...
1997 Tax Executives Institute Round Table, Q. VIII, No. 9729670
In the Barbican situation (where interest is not deductible on an accrual basis because it is contingent in amount), the interest also would not...
13 November 1996 External T.I. 9636395 - RESP INTEREST ON MONEY BORROWED TO CONTRIBUTE
When a contributor has an unrestricted right to receive all educational assistance payments available under the terms of an RESP, the contributor...
29 October 1996 External T.I. 9626325 - BOND OPTIONS
Where a corporation has issued an option giving the holder the right to acquire interest-bearing bonds of the issuer at a future date for an...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) | option premium | 32 |
8 October 1996 Memorandum 962852 (C.T.O. "Interest Deductibility")
Non-arm's length transactions that had the effect of converting equity into debt were required to comply with RC's position on accumulated profits...
5 January 1996 CTF Roundtable Q. 31, 9523976 - GROSS-UP PAYMENTS
Where a gross-up on interest paid to a non-resident meets the legal definition of interest, it will be deductible by the taxpayer under s....
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Payment & Receipt | 56 | |
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c) | 56 | |
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) | 74 |
30 November 1995 Ruling 9638023 - XXXXXXXXXX
An interest deduction was available on a loan received in order to retire existing corporate indebtedness where the obligation to pay interest was...
1996 Corporate Management Tax Conference Round Table, Q. 7
Until RC completes its review of the subject, interest on excess debt assumed by a transferee corporation in an s. 85(1) rollover transaction will...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) - Paragraph 85(1)(b) | 47 |
1996 Corporate Management Tax Conference Round Table, Q. 5
Interest on a promissory note owing by a corporation to its shareholders will be deductible to the same extent that interest would have been...
1996 Corporate Management Tax Conference Round Table, Q. 1
Affirmation of administrative positions set out in former IT-80.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20.2 - Subsection 20.2(1) | 54 |
30 November 1995 Ruling 9608123 - LOSS CONSOLIDATION
Interest on a loan from a subsidiary to a parent that was funded by a common share subscription by the parent, will be deductible to the parent...
28 July 1995 External T.I. 9519555 - IT-315
"The policy expressed in IT-315 is applicable not only to interest on funds borrowed by a taxpayer to finance a share acquisition ... but also to...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(a) - Revising Claims | 65 |
17 July 1995 External T.I. 9429715 - DISAPPEARING SOURCE RULES
"Where money is borrowed to permit withdrawals by the partner, the interest on such loans would not be deductible since the borrowed money is not...
May 1995 Tax Executive Institute Round Table, Q. 16 (C.T.O. "Interest Deductibility - Preferred Shares")
Where the interest on a loan is received by a corporation to acquire preferred shares exceeds the dividends return on the preferred shares, the...
2 February 1995 Internal T.I. 9430557 - INTEREST ON MONEY BORROWED TO PAY INTEREST
Interest on money borrowed to pay interest is deductible "provided the reason for the predicament in which the individual finds himself is bona...
Income Tax Regulation News, Release No. 3, 30 January, 1995 under "Interest-Bearing Note issued in Consideration for the Redemption or Repurchase of Shares"
Interest payable on a promissory note issued as consideration for the redemption or purchase for cancellation of a corporation's capital stock is...
Income Tax Regulation News, Release No. 3, 30 January, 1995 under "Use of a Partner's Assets by a Partnership"
Where a property is acquired by a partner for the purpose of making it available to the partnership to be used in carrying on the business of the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 97 - Subsection 97(1) | 36 | |
| Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) | 70 |
9 September 1994 Internal T.I. 9421957 - DEDUCTIBILITY OF DEEP DISCOUNTS AS INTEREST AND IT-114
A shallow original-issue discount on a debenture would be subject to the application of ss.18(1)(f) and 20(1)(f), and would not be viewed as...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business | 29 | |
| Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement | 29 |
6 September 1994 External T.I. 9419955 - INTEREST DEDUCTIBILITY
In response to a query as to whether interest would be deductible on borrowed money that is used to acquire a mutual fund investment which...
3 June 1994 Internal T.I. 9405427 - DEDUCTIBILITY OF INTEREST UNDER 20(1)(C)
Consideration of interest deductibility in a situation where a loan is used to purchase preferred shares which are exchanged for common shares of...
Revenue Canada Round Table TEI, 16 May 1994, Q. 14 9410430
Where a debt obligation of Co. A owing to an arm's length creditor ("Co. B") bearing an above-market rate of interest is irrevocably assumed by...
1994 A.P.F.F. Round Table, Q. 32
Where a corporation redeems its shares in consideration for issuing an interest-bearing note, interest on the note will not be deductible under...
1993 A.P.F.F. Round Table, Q.3
Where an individual has borrowed $100,000 to acquire common shares for that amount and the shares then appreciate in value to $500,000, there will...
93 C.R. - Q. 8 (File 932812)
Interest payable on funds borrowed to purchase newly-issued preferred shares that provide for dividends on the board's discretion and that are...
29 July 1993 Internal T.I. 9320007 F - Investment By Way of Contributed Surplus
"The deduction of interest should not be denied to a Canadian corporation that borrows funds to invest in a subsidiary, by way of contributed...
28 June 1993 T.I. (Tax Window, No. 32, p. 19, ¶2619)
Where there is a repayment of a portion of debt which has partly been used for an income-producing purpose and partly to acquire non-income...
17 June 1993 T.I. (Tax Window, No. 32, p. 18, ¶2616)
Interest expense will continue to be deductible where an individual has borrowed to acquire common shares and there is a reduction in the paid-up...
December 1992 B.C. Tax Executives Institute Round Table, Q. 1, 923039 (C.T.O. "Options"), (October 1993 Access Letter, p.475)
Where a corporation grants investors an option to acquire a debenture with terms identical to those of an existing callable debenture, RC will...
17 December 1992 Memorandum (Tax Window, No. 27, p. 10, ¶2357)
Where preferred shares acquired in an arm's length situation can be converted into common shares on a free and unrestricted basis, any related...
October 1992 Central Region Rulings Directorate Tax Seminar, Q. P (May 1993 Access Letter, p. 233)
Re: deductibility under s. 20(1)(c)(iv) of interest under a reverse mortgage arrangement.
1992 Tax Executives Institute Round Table, Q.14 (C.T.O. "Premiums on Debt Obligations")
"Paragraph 29 of IT-114 was drafted to address a situation where interest rates had fluctuated between the date the financing contract was...
92 C.R. - Q.8
Interest will not be deductible on borrowed money used to acquire common share purchase warrants where the purchaser is not in the business of...
92 C.R. - Q.3
Interest on indebtedness of another person assumed by a taxpayer will be deductible to the extent provided in s. 20(1)(c)(ii) where the...
4 August 1992 External T.I. 5-911257
Purchasers of condominiums are able to deduct the interest on money borrowed by them to fund interest-bearing deposits made with the developer...
26 March 1992 External T.I. 5-913338
Where a holding company assumes all of the debt associated with a property acquired by it from its subsidiary, interest on that debt will be...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) | 76 |
27 March 1992 External T.I. 5-920466
Discussion of the requirements for the effect of transfer of losses from a subsidiary to its parent including a requirement that the transactions...
1992 A.P.F.F. Annual Conference, Q. 21 (January - February 1993 Access Letter, p. 58)
RC will consider the interest on mortgage debt assumed by a transferee corporation to be deductible, provided that the acquired property is used...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) - Paragraph 85(1)(b) | 72 |
92 C.M.TC - Q.9
RC has not adopted the position that interest is non-deductible simply because the lender has limited recourse.
92 C.M.TC - Q.3
Interest will be deductible on indebtedness which has been assumed by a purchaser in satisfaction of the purchase price, or that is assumed by the...
92 C.M.TC - Q.1
RC is maintaining its policy respecting when participation payments are deductible as interest.
14 April 1992 Memorandum (Tax Window, No. 18, p. 12, ¶1845)
Adjustments to the principal amount of a loan based on changes in the consumer price index are not interest and, therefore, are not deductible.
27 March 1992 T.I. (Tax Window, No. 18, p. 12, ¶1838)
Where a corporation borrows money from a related corporation at a commercial rate of interest to acquire cumulative preferred shares of another...
26 March 1992 T.I. (Tax Window, No. 18, p. 2, ¶1831)
Where, in connection with the transfer by Opco to its parent, Holdco, of property subject to debt in excess of the property's ACB, Holdco first...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) - Paragraph 85(1)(b) | 107 |
91 C.R. - Q.18
Where a corporation uses the proceeds of a share issuance in its business for an income-producing purpose and then, in a subsequent year, reduces...
15 October 1991 T.I. (Tax Window, No. 11, p. 18, ¶1526)
The maximum amount of interest that a cash-basis farmer may deduct under s. 20(1)(c) is the interest paid in the year which is not refundable.
September 1991 Memorandum (Tax Window, No. 9, p. 19, ¶1467)
S.20(1)(c) does not permit a shareholder to deduct interest on borrowed money used to make a contribution of capital to the corporation.
26 July 1991 T.I. (Tax Window, No. 7, p. 2, ¶1376)
Whether the interest rate on commercial paper, which is issued at a premium, is reasonable is a question of fact.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) | 28 |
10 July 1991 Decision Summary (Tax Window, No. 5, p. 2, ¶1345)
If A Co. were to borrow money from B Co. and B Co. were to assign the loan to a bank, A Co. will continue to be entitled to deduct the interest...
| 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 | 25 |
25 April 1991 T.I. (Tax Window, No. 2, p. 5, ¶1213)
Exclusion from accumulated profits of accounting gain realized by Canadian corporation on the transfer of shares of foreign affiliate to a related...
24 April 1991 T.I. (Tax Window, No. 2, p. 4, ¶1213)
The determination of the amount of capital returned to a shareholder on the redemption of shares issued on a rollover will not be affected by the...
11 March 1991 T.I. (Tax Window, No. 1, p. 5, ¶1155)
Where a partnership has agreed to pay out the capital account of a partner which has withdrawn over a period of time plus interest thereon, the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(i) | 53 |
1 February 1991 T.I. (Tax Window, Prelim. No. 3, p. 27, ¶1115)
An individual, who holds the preference shares of a holding company whose common shares are held by his children, borrows money at 13% and lends...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 56 |
16 November 1990 T.I. (Tax Window, Prelim. No. 2, p. 21, ¶1076)
Where Corporation A borrows money to acquire the shares of Corporation B and the two corporations are amalgamated or Corporation B is wound-up...
13 September 1990 Deputy Minister's Office Letter (Tax Window, Prelim. No. 1, p. 19, ¶1007)
Where under a reverse mortgage plan the homeowner borrows money on the security of his home on terms which defer the obligation to pay interest on...
90 C.R. - Q11
Description of circumstances in which interest deduction will be available where a parent company incurs interest expense on borrowed funds used...
90 C.R. - Q12
The simple interest will be deductible on a paid or payable basis under s. 20(1)(c) on a five-year debenture whose principal and accrued but...
28 June 1990 T.I. (November 1990 Access Letter, ¶1511)
Interest was not deductible where the source of income - namely, preferred shares-disappeared upon redemption.
15 June 1990 T.I. 900645
"A shareholder who transfers borrowed funds to a Canadian or foreign corporation as contributed surplus would not directly acquire any property....
15 June 1990 T.I. (November 1990 Access Letter, ¶1510)
Interest on money borrowed by a corporate shareholder to make a contribution of capital to a wholly-owned subsidiary will not be deductible.
30 April 1990 T.I. 91042-4 [debt not assumed for income-producing property]
A B.C. corporation ("A") borrows money in order to acquire all the common shares of Opco, the shareholders of A transfer their shares of A to Opco...
26 February 1990 T.I. 5-9484 [non-deductible where debt assumed in repayment of money previously borrowed]
In a hypothetical situation, a debt of a company (B Co.) to an arm's length person would be assumed by a related company (A Co.) in repayment of...
8 December 1989 T.I. (May 1990 Access Letter, ¶1210)
The reference in subparagraph 7(a) of IT-445 to a requirement that business or property income be subject to Part I tax includes a situation where...
1990 Answers of Scarborough District Office (May 1990 Access Letter, ¶1200, Q. 8)
Where borrowed funds have been used for an ineligible purpose, RC will analyze the information derived from the taxpayer's books and records....
8 November 89 Decision Summary (April 90 Access Letter, ¶1170)
A discussion of the guidelines employed with respect to arrangements whereby losses are shifted within a corporate group through the issuance of...
19 September 89 T.I. (February 1990 Access Letter, ¶1100)
A partner's capital is generally his equity account (determined in accordance with GAAP but excluding appraisal surpluses) immediately before the...
5 September 89 T.I. (February 1990 Access Letter, ¶1101)
A payment of interest by a Quebec cooperative on a preferred share is not payment of interest on borrowed money, and therefore is not deductible.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Dividend | 36 |
89 C.M.T.C - "Participating Loans"
general discussion of participating loans. Where a borrower pays an above-market rate of interest corresponding with a strong likelihood that the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 17 |
89 C.M.TC - Q.1
interest on money borrowed by a partnership to distribute appraisal surplus is non-deductible regardless of the use made by the partner of the...
88 CPTJ - Q.3
A taxpayer is precluded from deducting interest charges on PIP/CDIP overpayments, the rationale being that interest exigible under such...
88 C.R. - "Finance and Leasing" - "Leasing"
The providing of a lease does not constitute the lending of money by the lessor to the lessee.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Substance | 21 | |
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property | 65 |
88 C.R. - "Finance and Leasing" - "Interest" - "Purchase of Common Shares"
Interest on money borrowed in order to purchase common shares normally is considered to be deductible on the basis that the potential return to...
88 C.R. - "Finance and Leasing" - "Interest" - "Deep Discount and Zero Coupon Bonds"
A true discount does not meet the requirement for day-to-day accrual (cf. a discount which by reference to all the supporting documents is truly...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(d) | 25 |
88 C.R. - "Finance and Leasing" - "Interest" - Leveraged Buy-Out"
Where Targetco borrows to pay a dividend to allow Purchaseco to retire its acquisition debt, then the interest is only deductible to the extent...
88 C.R. - "Finance and Leasing" - "Interest" - "Appraisal Surplus"
Accumulated profits does not give effect to any non-arm's length transactions which transform appraisal surplus into accumulated profits.
88 C.R. - "Finance and Leasing" - "Interest" - "Decline in Value of Assets"
A decline in the value of assets will not preclude the deductibility of interest, provided the source of income (i.e., the relevant business, or...
88 C.R. - "Finance and Leasing" - "Interest" - "Loans to Non-Arm's Length Persons"
The essence of a transaction, and not merely the formality, is relevant in determining the use of borrowed money.
88 C.R. - "Finance and Leasing" - "Interest" - "Bonus on Early Redemption of Debt"
Usually an amount paid on the early redemption of a debenture is not regarded as interest as it does not accrue day to day.
88 C.R. - "Finance and Leasing" - "Interest" - "Amounts Paid on Redemption of Bonds or Purchase of Bonds in the Open Market"
Where an issuer purchases a bond on the open market (as opposed to redeeming it) the accrued interest will never be deductible by it.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 214 - Subsection 214(7) | 37 |
88 C.R. - "Finance and Leasing" - "Interest" - "Participating Loans"
Where participating payments are limited to a percentage of the principal amount reflecting commercial interest rates, then the amounts can be...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 20 |
Hiltz, "Tax Treatment of Interest: Bronfman Trust and the June 2, 1987 Release", 1987 Corporate Management Tax Conference Report, C. 10.
87 C.R. - Q.52
Deductibility of participating interest payments.
87 C.R. - Q.54
Discussion of three disappearing source issues.
85 C.R. - Q.22
Interest on money borrowed for the purpose of purchasing property will cease to be deductible if the property subsequently becomes worthless.
84 C.R. - Q.18
Where one income source is disposed of and the proceeds are used to acquire another, the interest will continue to be deductible to the extent...
84 C.R. - Q.41
On an SRTC "quick flip", assuming $100 was borrowed and $55 received on redemption and used for the purpose of earning income from business or...
84 C.R. - Q.59
Interest on money borrowed to acquire shares on which the taxpayer has the option of receiving cash or stock dividends, is deductible.
84 C.R. - Q. 60
Where a Canadian corporation with debt denominated in currency X on which interest is deductible borrows funds in currency Y under a currency...
81 C.R. - Q.39
Interest that exceeds the grossed-up amount of dividends on preference shares as a result of escalating interest rates will nonetheless be...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 12 |
80 C.R. - Q.3
Discussion of the circumstances in which RC will permit a deduction for the full interest expense incurred in order to acquire preferred shares...
80 C.R. - Q.7
If an interest-free loan is received by an employee in order to acquire shares of his employer, then interest on money borrowed by his employer to...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(2) | 24 |
79 C.R. - Q.3
Interest is deductible on loans used to acquire preference shares convertible into common shares, on prime-rate loans where there is a reasonable...
79 C.R. - Q.6
Since an investor in a MURB is not allowed by RC to use the cash method, interest expense incurred by him with respect to a MURB is deductible...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | 33 | |
| Tax Topics - Income Tax Act - Section 67 | 13 |
ATR-44
Where a parent company borrows money from a bank at prime plus 1%, uses the borrowed funds to invest in common shares of a newly-incorporated...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 37 |
IT-80 "Interest on Money Borrowed to Redeem Shares, or to Pay Dividends".
IT-346R "Commodity Futures and Certain Commodities"
interest on borrowings used to finance futures or commodity transactions that are given capital treatment will not be deductible (unlike the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Commodities, and commodities futures and derivatives | 243 |
Articles
John Tobin, "Infrastructure and P3 Projects", 2017 Conference Report (Canadian Tax Foundation), 10:1-31
Inapplicability of transfer-pricing arm’s length standard to s. 20(1)(c) reasonable amount test (pp. 10:26-27)
GlaxoSmithKline…emphasized the...
Jack Bernstein, Francesco Gucciardo, "Canada-U.S. Hybrid Financing – A Canadian Perspective on the U.S. Debt-Equity Regs", 26 September 2016, p. 1151
Description of financing by U.S. lender of Canadian real estate company (Canadian RealCo) through hybrid debt (pp. 1158-1159)
[I]nstead of [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)(B) | 828 |
Marie-Andrée Beaudry, Dean Kraus, "Selected Income Tax Considerations in the Court-Approved Debt Restructurings and Liquidations", 2015 Annual CTF Conference paper
Non-deductibility of post-CCAA-stay interest (p. 13:29)
[C]reditors are only prevented under the CCAA stay from enforcing the debtor company's...
Marie-Eve Gosselin, Paul Lynch, "A Review of Interest Deductibility Since Ludco", 2015 CTF Annual Conference paper
Purpose test not an anti-avoidance tool (p.7:10)
Novopharm can be seen as confirmation that the purpose test in subparagraph 20(l)(c)(i) cannot be...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 3.1 | 51 | |
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c) | 139 |
Nathan Boidman, Héléné Gagné, Michael Kandev, "Interest Deductibility in Canada: What's the Fuss?", Tax Notes International, July 13, 2015, p. 16.
TDL applied indirect use test (p. 165)
[T]he Tax Court looked at the indirect se of the borrowed funds; namely, the direct use of them...
Jack Bernstein, Francesco Gucciardo, "Update on Canada-U.S. Merges and Acquisitions", Tax Notes International, March 16, 2015, p. 993.
Joseph Frankovic, "Supreme Court to Consider GAAR in Lipson Appeal", CCH Tax Topics, April 10, 2008, No. 1883, p. 1
Charles Taylor, "Hybrid Instruments and Linked Instruments", 2005 Conference Report, c. 16.
Dominic Belley, "Interest Deductible Notwithstanding Form of Contract", Tax for the Owner-Manager, Vol. I, No. 2, April 2001, p. 7
Discussion of Vanier case of the Cour du Québec.
Tim Edgar, "The Concept of Interest under the Income Tax Act", 1996 Canadian Tax Journal (Vol. 44), p. 277.
Larry F. Chapman, John M. Ulmer, "Canada", Tax Treatment of Hybrid Financial Instruments in Cross-Border Transactions, International Fiscal Association, Vol. LXXXVa, p. 207.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(a) | 0 |
Lewis, "The Taxation of Structured Settlements", British Tax Review, 1994, No. 1, p. 19
A discussion of authorities supporting the position of Inland Revenue that the full amount of payments under a structured settlement are...
Leslie Morgan, Chris Van Loan, "Recent Developments Involving Tier One Capital Innovative Instruments", Corporate Finance, Vol. VIII, No. 1, 2000, p. 705
K. Penny, "The Toronto-Dominion Bank/Templeton Growth Fund Linked Notes", Corporate Finance, Vol. 6, No. 2, 1998, p. 494.
Edgar, "The Concept of Interest Under the Income Tax Act", 1996 Canadian Tax Journal, Vol. 44, No. 2, p. 277.
Tax Management Financial Products Report
, "Lack of Time, Resources Stem Overhaul of Canadian Tax Legislation, Official Says", Vol. 1, No. 1, 15...
Smith, "Recent Transactions: Debt", 1993 Conference Report, C. 19
Discussion of Hollinger LYONS and WIC Transactions; and interest deductibility issues respecting special debenture warrants and debenture...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | 14 |
Tremblay, "Foreign Tax Credit Planning", 1993 Corporate Management Tax Conference Report, c. 3, pp. 3:29-3:31
Discussion of the situation where a Canadian parent borrows funds used to capitalize its U.S. lending subsidiary and the U.S. withholding tax on...
Richardson, "New Financial Instruments: A Canadian Tax Perspective", 1992 Corporate Management Tax Conference Report, c. 9
Discussion of the jurisprudence on the deductibility of interest.
Arnold, "Is Interest A Capital Expense?", 1992 Canadian Tax Journal, No. 3, p. 533.
Flatters, "Assumption of Debt Obligations", 1992 Canadian Tax Journal, Issue No. 2, p. 469.
Dickson, Arnold, "Rubbing Salt into the Wound: The Denial of the Interest Deduction after the Loss of a Source of Income", 1991 Canadian Tax Journal, p. 1473.
Ewens, "Debt-For-Debt Exchanges", 1991 Canadian Tax Journal, p. 1615.
Arnold, Edgar, "Reflections on the Submission of the CBA-CICA Joint Committee on Taxation Concerning the Deductibility of Interest", 1990 Canadian Tax Journal, p. 847.
Brussa, "Strategies for Troubled Times", 1990 Conference Report, c. 9
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Term Preferred Share | 5 |
Crawford, "The Deductibility of Interest", 1990 Conference Report, p. 4:10
Discussion of interest deductibility issues respecting the assumption of debt.
Subparagraph 20(1)(c)(i)
Cases
Keybrand Foods Inc. v. Canada, 2020 FCA 201
The taxpayer (“Keybrand”) and its wholly-owning parent (“BWS”) were guarantors of loans made to a start-up company (“Vidabode”) by GE...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | a transaction with a financially subordinate company was a non-arm’s length transaction | 466 |
| Tax Topics - General Concepts - Purpose/Intention | regard can be had to subsequent steps as confirmatory of the intent at the relevant time | 187 |
Van Steenis v. Canada, 2019 FCA 107
The taxpayer borrowed $300,000 to purchase units of a mutual fund trust (the “Fund”) in 2007, and over the subsequent period to 2015 received...
Canada v. Canadian Helicopters Ltd., 2002 DTC 6805, 2002 FCA 30
The taxpayer borrowed money from a financial institution. It on-lent $8.95 million of the borrowed funds on an interest-free basis to its parent...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Evidence | 112 |
Ludco Enterprises Ltd. v. Canada, 2001 DTC 5505, [2001] 2 S.C.R. 1082, 2001 SCC 62
A group of Canadian investors, including the taxpayers, invested in the shares of two Panamanian corporations (collectively, "Justinian") whose...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Purpose/Intention | objective and subjective manifestations of purpose | 104 |
| Tax Topics - General Concepts - Tax Avoidance | right to structure for tax avoidance | 129 |
| Tax Topics - Statutory Interpretation - Certainty | 103 |
Singleton v. Canada, 2001 DTC 5533, 2001 SCC 61, [2001] 2 S.C.R. 1046
The taxpayer borrowed approximately $300,000 and deposited this sum with his law firm. On the same day, he put almost exactly the same amount,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Tax Avoidance | 51 |
See Also
Brown v. The Queen, 2020 TCC 84 (Informal Procedure)
The taxpayer owned and operated two commercial properties in Alberta through two numbered companies (1049304 and 1364383 – terms also used by...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(3) | interest on funds borrowed to repay non-interest bearing advances from friends and family, that had been used in construction ventures, were deductible under s. 20(3) | 240 |
Keybrand Foods Inc. v. The Queen, 2019 TCC 161, aff'd 2020 FCA 201
The taxpayer (“Keybrand”), its wholly-owning parent (“BWS”), and another Strassburger-family company were guarantors of loans made to a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | taxpayer had de facto control of investee through terms of its parent's shareholders agreement re the board of the investee | 325 |
| Tax Topics - Income Tax Act - Section 39 - Subsection 39(1) - Paragraph 39(1)(c) - Subparagraph 39(1)(c)(ii) | right of parent of taxpayer to elect majority of board of investee of X through chair’s casting vote entailed de facto control by taxpayer of X | 227 |
Black v. The Queen, 2019 TCC 135
The taxpayer (“Black”) was the principal and controlling shareholder, as well as officer and director, of Hollinger Inc. (“Inc.”) and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Effective Date | loan was effective even though never documented and ultimately repudiated | 380 |
| Tax Topics - General Concepts - Payment & Receipt | advance on another party’s behalf established a loan | 141 |
Alberta v ENMAX Energy Corporation, 2018 ABCA 147
A corporation (“ENMAX”) that was wholly-owned by the City of Calgary and thus, exempt from income tax, made a subordinated loan of $497M with...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) | arm’s length interest rate to sub could not be manipulated by structuring the loan as a junk bond without implicit parental credit support | 293 |
| Tax Topics - General Concepts - Tax Avoidance | right to structure affairs to reduce taxes (or, here, payments in lieu) inapplicable where consumer assistance purpose defeated | 189 |
| Tax Topics - Statutory Interpretation - Hansard, explanatory notes, etc. | purpose inferred in part from Legislative Assembly statement of Minister | 83 |
| Tax Topics - Income Tax Act - Section 67 | test of whether the amount was objectively reasonable | 293 |
Van Steenis v. The Queen, 2018 TCC 78 (Informal Procedure), aff'd 2019 FCA 107
The taxpayer borrowed $300,000 to purchase units of a mutual fund trust (the “Fund”) in 2007, and over the subsequent period to 2015 received...
Giguère v. Agence du revenu du Québec, 2018 QCCQ 874
The wife of the manager of a corporation (Groupe Norbourg) received fraudulent advances from the corporation, which she used to purchase two...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) | interest demanded by a receiver on a fraudulent advance did not qualify as a disposition expense on the property sold to repay the advance | 286 |
Cassan v. The Queen, 2017 TCC 174
In December 2009, the taxpayers participated in a program that had both an investment and gifting component. Under the investment component:
- The...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts | common law gift was vitiated by loan to donor at unreasonably low rate | 793 |
| Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(12) | although borrowing by taxpayers had a term of 9.3 years, they had a reasonable expectation of refinancing with the promoter’s assistance | 478 |
| Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(7) - Paragraph 143.2(7)(a) | loans were not bona fide in that not handled with commerciality | 701 |
| Tax Topics - Income Tax Regulations - Regulation 7000 - Subsection 7000(2) - Paragraph 7000(2)(d) | no requirement to accrue interest on index-linked note in a year when the return thereon was not determinable | 605 |
| Tax Topics - Statutory Interpretation - Realization Principle | amount should not be recognized until ascertainable | 73 |
| Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(c) | gratuitous transfer is gift irresepctive of absence of benevolent intent | 56 |
Administrative Policy
10 October 2003 External T.I. 2003-0035645 F - DEDUCTIBILITE DES INTERETS
CCRA accepted that, under Ludco, the income-earning test referenced amounts added in computing income rather than net income, and indicated that,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 16 - Subsection 16(1) | interest imputed on a non-interest-bearing note issued at a discount consists of simple interest (annually deductible) and compound interest (deductible only at maturity) | 127 |
10 February 2022 External T.I. 2021-0912581E5 F - Borrowing to make interest-free loans
The 0.1% general partner interest in some LPs carrying on business is held by a corporation (Eco) at the bottom of a stack of wholly-owning...
2017 Ruling 2017-0696791R3 F - Reduction of PUC/capital
Background
Aco, a public corporation, wholly owns Xco and Yco, and all three corporations hold shares of Bco, which holds all the shares of Cco....
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 51 - Subsection 51(1) | s. 51(1) will apply where convertible note, that was issued as boot, will be converted to shares | 97 |
2019 Ruling 2018-0789911R3 F - Post-mortem Pipeline
Realco will pay a stock dividend consisting of Class F preferred shares, thereby reducing its accumulated profits and safe income attributable to...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) | pipeline where immediate receipt of cash to pay taxes payable under s. 70(5) | 546 |
2017 Ruling 2017-0706211R3 - Standard Loss Consolidation
CRA provided standard loss-shifting rulings under transactions in which three losscos in the group annually shift losses to a single...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) | annual transfer of losses from losscos to a new Lossco, which is then sold at FMV to Profitco for s. 88(1.1) wind-up | 441 |
2018 Ruling 2018-0740931R3 F - deductibility of interest – convertible debentures
Proposed transactions
- ACo, a listed Canadian public company, whose outstanding convertible debentures (the “Debentures”) are about to mature,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(3) | s. 20(3) applicable to borrowed money used to redeem principal of convertible debentures | 202 |
2018 Ruling 2018-0742641R3 - Loss consolidation arrangement
CRA ruled respecting a transaction for the transfer of non-capital losses from Profitco to its Lossco parent by means of Lossco lending at...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) | triangular loss shift with reps re independent financial capacity to pay the annual interest payments (at a senior secured financing rate) and annual pref dividends contributions | 330 |
27 November 2018 CTF Roundtable Q. 13, 2018-0779991C6 - 20(1)(c) & Triangular Amalgamation
In a triangular amalgamation, is the interest on a third party loan obtained by ParentCo to redeem preferred shares issued by TargetCo as part of...
3 November 2017 External T.I. 2017-0712141E5 F - Borrowing to make interest-free loans
The common shares of XY Inc. (with an active business) are held equally by the two holding companies for X and Y (namely, X Inc. and Y Inc.), and...
2017 Ruling 2016-0649061R3 - Part XIII tax on payments on Notes
A public company (ACo) issued unsecured subordinated Notes, whose more unusual terms were that:
- ACo may in its discretion elect by notice in...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b) | a perpetual note whose interest payments were optional had withholding-exempt interest | 379 |
2016 Ruling 2015-0602711R3 - Interest on Notes to Non-Residents
Note terms with contingent mandatory conversion event
ACo will issue pursuant to the Trust Indenture subordinated indebtedness (“Notes”) in...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(3) - Participating debt interest | interest ceasing after insolvency event not problematic | 94 |
14 June 2017 External T.I. 2016-0666411E5 - Negative returns on investments
CRA was asked whether a negative interest rate borne on a deposit with a financial institution would be deductible by the depositor. It was...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Loans and Financing Charges | negative interest is deductible under s. 9 if there is a reasonable expectation of receiving (positive) interest | 152 |
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii) | capital loss on loan with nil interest rate may be denied by s. 40(2)(g)(ii) | 119 |
26 May 2016 Internal T.I. 2016-0628741I7 - Interaction of s. 80 and s. 143.4
The Taxpayer, which for a number of years had gone without paying interest on its Notes, mostly had not deducted the amounts of the accrued but...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(2) - Paragraph 80(2)(a) | no settlement of debt under Plan before conditions precedent fulfilled | 162 |
| Tax Topics - Income Tax Act - Section 143.4 - Subsection 143.4(1) - Right to reduce | right to reduce notwithstanding that conditions precedent to interest forgiveness not yet satisfied | 329 |
| Tax Topics - Income Tax Act - Section 143.4 - Subsection 143.4(4) | s. 143.4(4) caused an immediate income inclusion of prior years’ interest that was to be forgiven at a later date under an approved Plan of Compromise | 185 |
14 March 2016 Internal T.I. 2015-0609671I7 - Earnout, Amalgamation, Cost of Shares and ECE
A Canadian Acquisitionco acquired Canadian Targetco for a cash base price plus earnout obligations, and then immediately merged with Targetco...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) | post-amalgamation earnout payment could be applied to increase an s. 88(1)(d) bump of capital property (but not ECP) of the amalgamated target | 317 |
| Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure | payments made by Amalco in satisfaction of earnout obligation for acquisition of one precedessor by the other were not ECE | 224 |
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | earnout payments an addition to cost of shares which had since disappeared | 90 |
| Tax Topics - General Concepts - Purpose/Intention | attribution of predecessor's intention to Amalco | 140 |
10 October 2014 APFF Roundtable, 2014-0534811C6 F - Interest deductibility
(a) Could CRA confirm its position in IT-533, para. 31 notwithstanding certain comments in Swirsky? (b) Does CRA recognize that numerous years may...
26 November 2012 External T.I. 2012-0432831E5 F - Dépenses - Immeuble locatif
A building was acquired as a rental property and financed with the proceeds of a mortgage on it and a personal residence, and then subsequently it...
| 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 | major repairs required to be capitalized | 82 |
13 June 2012 External T.I. 2011-0416781E5 F - Entente contractuelle particulière
A cash pooling agreement (the “first contract”) stipulates that no interest is payable to a financial institution when the combined bank...
26 March 2012 External T.I. 2010-0367351E5 F - Emprunt pour faire prêt sans intérêt à une fiducie
A trust which is the sole beneficiary of a second trust (Trust B) is entitled to an interest deduction on money borrowed by it to make an...
7 October 2011 Roundtable, 2011-0412041C6 F - Accumulated Profits for 20(1)(c)
As retained earnings do not include a surplus resulting from a revaluation, an amount added to retained earnings as a result of fair value...
8 October 2010 Roundtable, 2010-0373541C6 F - Mise à part de l'argent après Lipson
Is the position on cash damming in IT-533 still valid following the Supreme Court’s Lipson decision? CRA responded:
Following the Lipson case,...
28 April 2010 External T.I. 2010-0362101E5 F - Déductibilité des intérêts
A three-unit rental property, whose purchase was financed with a mortgage loan (Loan #1), was used 46% (one of the three units) as the...
25 November 2008 External T.I. 2008-0297631E5 F - Déductibilité des intérêts dans une compagnie
In indicating that interest on money borrowed by an Opco to make an interest-free loan to another corporation to fund the acquisition of Opco’s...
24 September 2008 External T.I. 2008-0268511E5 F - Déductibilité des intérêts
Would interest on a loan used by an individual to acquire mutual fund units be deductible?
In the first situation (regarding “Loan #1”), the...
18 March 2008 External T.I. 2007-0249601E5 F - Déductibilité des intérêts
A corporation uses proceeds of an arm's length borrowing to pay an amount equaling its retained earnings ("RE") for the purpose of paying a...
14 January 2008 External T.I. 2007-0263241E5 F - Mise à part de l'argent
Is a sole proprietor still permitted to use the cash damming technique? After referring to its acceptance of cash damming in IT-533, para. 16, CRA...
11 May 2007 External T.I. 2005-0156891E5 F - Déductibilité des intérêts - retour de capital
First situation
An individual borrowed $100,000 from a financial institution to subscribe for 50 new common shares of Opco, as a result of which...
11 May 2007 External T.I. 2006-0191681E5 F - Déductibilité des intérêts - retour de capital
An individual uses proceeds of $100,000 to subscribe for additional common shares of his wholly-owned small business corporation (having retained...
7 June 2005 External T.I. 2005-0121551E5 F - Déduction des intérêts - co-emprunteurs
Regarding whether interest on money borrowed under a line of credit granted by the taxpayer’s spouse and secured on their residence was...
6 June 2005 External T.I. 2005-0114481E5 F - Division 149(1)o.2)(ii)(C)
A corporation intended to qualify under s. 149(1)(o.2)(ii) had used borrowed money to fund part of its acquisition of a rental-property portfolio,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(o.2) - Subparagraph 149(1)(o.2)(ii) - Clause 149(1)(o.2)(ii)(B) | deferred proceeds receivable for real estate sale do not qualify as real property | 107 |
| Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(o.2) - Subparagraph 149(1)(o.2)(ii) - Clause 149(1)(o.2)(ii)(C) | loan that funded rental property acquisition may still qualify after partial sale of portfolio/replacement borrowing can also qualify | 165 |
3 February 2005 External T.I. 2005-0111871E5 F - Intérêts / mise à part de l'argent
Regarding the deductibility of interest on borrowed money used for current business expenses in a cash damming context, CRA stated:
Where the...
16 December 2004 External T.I. 2004-0070341E5 F - Déduction des intérêts sur un deuxième emprunt
In finding that interest on money borrowed in order to pay interest on an interest-deductible loan was itself deductible, CRA stated:
[I]nterest...
17 December 2004 External T.I. 2004-0095331E5 F - Déductibilité des intérêts
The taxpayer uses $200,000 borrowed from a bank to acquire mutual fund units. After they have appreciated to $300,000, $100,000 of units is sold,...
30 November 2004 External T.I. 2004-0092941E5 F - Déductibilité des intérêt
Would interest accruing at a 6% rate on a bank borrowing used to acquire preferred shares or debentures of a controlled corporation yielding a...
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 structure that resulted in a loan generating an interest deduction in both the US and Canada, the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(6) | thin cap rules not engaged by parent guarantee | 70 |
31 May 2004 External T.I. 2003-0051971E5 F - Notion de capital aux fins de 20(1)c) de la Loi
What is the measure of capital for s. 20(1)(c) purposes where shares issued as consideration for other shares on a s. 85(1) share-for-share...
1 March 2004 External T.I. 2004-0059151E5 F - Déduction des intérêts
In the course of a general discussion of interest deductibility on money borrowed from a US bank to acquire shares in a private US corporation,...
23 February 2004 External T.I. 2003-0051371E5 F - Déduction des intérêts
The spouse (Ms. A) of Mr. A will acquired a rental property using proceeds of borrowed money equaling the property’s fair market value, with Mr....
2 February 2004 External T.I. 2003-0050241E5 F - Déductibilité des intérêts
Regarding a taxpayer who borrows money to acquire common shares of a Quebec Business Investment Company (QBIC), CCRA was informed that section 22...
27 January 2004 External T.I. 2003-0048891E5 F
On January 1 of Year 1, an individual borrowed $150,000 to finance part of the $200,000 purchase price of a rental property generating $6,000 of...
19 December 2002 External T.I. 2002-0148705 - Interest Deduction by a Non-Res Partner
A non-resident partner is permitted to deduct interest expense on money borrowed to acquire an interest in a partnership that earns rental income...
Articles
Janette Pantry, Carrie Smit, "Tax Considerations in Restructuring under the Companies’ Creditors Arrangement Act", draft 2020 CTF Annual Conference paper
Interest stops rule applicable to unsecured debt (pp. 21-23)
- Under the interest stops rule, interest on unsecured provable claims stops accruing...
Ian Caines, "Very-Short-Term Crypto Loans", Canadian Tax Focus, Vol. 11, No. 2, May 2021, p.3
Instantaneous nature of flash crypto loan
- In flash loans of cryptocurrency (which may occur in order for the borrower to arbitrage between...
Nik Diksic, Sabrina Wong, "Cross-Border Lending Practices", 2017 CTF Annual Conference draft paper
Interest deductibility where co-borrower arrangements (p. 20)
U.S.-styled credit agreements involving both U.S. and Canadian borrowers within the...
Subparagraph 20(1)(c)(ii)
See Also
Lee v. Agence du revenu du Québec, 2020 QCCQ 780, aff'd sub nomine Seica v. Agence du revenu du Québec, 2021 QCCA 1401
For their 2005 and 2006 taxation years, the taxpayers purchased franchises for the non-exclusive right to distribute the software licences in...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 237.1 - Subsection 237.1(1) - Tax Shelter | tax shelter definition applied on a property-by-property basis, and cost excluded interest | 579 |
| Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(6) | limited recourse debt eliminated CCA claims | 151 |
Penn Ventilator Canada Ltd. v. The Queen, 2002 DTC 1498 (TCC)
In order to effect a settlement of litigation brought by some of its shareholders, the taxpayer purchased for cancellation a portion of its common...
Administrative Policy
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 18 - Subsection 18(3.1) | interest paid pursuant to a judgment requiring payment of construction fees would be capitalized to the construction costs to the extent of accrual during construction period | 165 |
17 February 2021 External T.I. 2018-0768051E5 F - Contrat de crédit-bail
Regarding a query as to whether a lease under a leasing agreement (“contrat de crédit-bail”) for a truck tractor with a term of 48 months and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 68 | lease payments for vehicle lease with bargain purchase option are allocated between ACB of option and deductible lease payments | 301 |
| Tax Topics - Income Tax Act - Section 49 - Subsection 49(3) | a portion of the lease payments under a lease with a bargain purchase option recharacterized as consideration for the option | 146 |
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.2) | acquisition of leased vehicle pursuant to bargain purchase option followed by sale of vehicle could engage s. 13(5.2) | 131 |
| Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) | truck tractor is prescribed property | 26 |
| Tax Topics - General Concepts - Substance | lease payments, but not the lease itself, could be recharacterized | 93 |
26 May 2016 External T.I. 2014-0527251E5 F - Interest Deductibility
Opco wishes to distribute its accumulated profits of $500,000 to its parent (Holdco) without using cash and so as to generate an interest...
2016 Ruling 2016-0635051R3 - rollout property to beneficiary non-resident trust
CRA ruled that the s. 107(2) rollover applied to the distribution by a non-resident trust, to which s. 94(8.2) (or s. 75(2)) no longer applied...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2) | s. 107(2) rollout of taxable Canadian property by a non-resident former s. 75(2) trust to its corporate beneficiary | 412 |
| Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(4.1) | rollout under s. 107(2) available following dissolution of settlor of s. 94(8.2) trust | 72 |
31 May 2016 Internal T.I. 2016-0638241I7 - interest deductibility
Canco repurchased common shares held by a non-resident. Has the affirmation in S3-F6-C1, para. 1.65 of Penn Ventilator been changed by A.P....
5 February 2016 Internal T.I. 2014-0555291I7 - Interest deductibility
Canco 2 acquires all of the shares of Canco 3 from its parent, Canco 1, in exchange for common shares of $600 and the assumption of $400 of Canco...
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) | 98(5) wind-up through s. 85 transfer of partnership interest of one partner to the other and preceded by debt assumptions | 292 |
| Tax Topics - Income Tax Act - Section 34.2 - Subsection 34.2(11) | continuation of s. 34.2(11) reserve following partnership wind-up | 339 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) | continued availability of s. 20(1)(m) reserve following s. 98(5) wind-up | 296 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) | flow-through of s. 20(1)(n) reserve on s. 98(5) wind-up | 289 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(24) | s. 20(24) election on s. 98(5) wind-up | 307 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(9) | s. 18(9) deduction claimable by transferee former partner following s. 98(5) wind-up | 241 |
| Tax Topics - Income Tax Act - Section 147.2 - Subsection 147.2(8) | s. 147.2 continuity following s. 98(5) wind-up | 368 |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(i) | no income inclusion on assumption on s. 98(5) wind-up of DSUs and RSUs | 356 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Salary Deferral Arrangement - Paragraph (k) | no income on RSU/DSU assumption | 22 |
10 October 2014 APFF Roundtable, 2014-0538141C6 F - Interest deductibility
Situation 1
In Situation 1, a trust borrows money under a hypothec to acquire a rental property. The trust distributes the rental property to one...
8 October 2010 Roundtable, 2010-0373551C6 F - Transfert entre conjoints et dette assumée
Two spouses are the equal owners their residence, and each is subject to 50% of the mortgage. Madame sells some of her shares of her corporation,...
2 November 2009 External T.I. 2009-0317541E5 F - Transfer to Corporations Owned by Brothers
After a portion of the restaurant business of corporation (Corporation A) was spun off to a second corporation (Newco) in reliance on the s....
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(5) - Paragraph 55(5)(e) - Subparagraph 55(5)(e)(ii) | s. 55(3)(a) exemption turned on s. 55(5)(e)(ii) | 398 |
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(4) | use of special voting shares by father questioned where most of the economic interest in the split-up business goes to the children | 747 |
12 January 2009 External T.I. 2008-0293901E5 F - Article 80
A small business corporation with nominal accumulated profits purchased for cancellation shares in its capital having nominal capital in...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Commercial Debt Obligation | de minimis interest deductibility on a debt could cause it to be a commercial debt obligation | 247 |
18 May 2006 Internal T.I. 2006-0182321I7 F - Déduction des intérêts
In confirming that interest on notes issued to pay dividends was non-deductible, as was interest on loans received from the shareholders to pay...
3 March 2006 Internal T.I. 2005-0151871I7 F - Déduction des intérêts
According to the TSO, the taxpayer paid a dividend by issuing interest-free notes, and then refinanced those notes with interest-bearing notes. ...
2001 Ruling 2001-0108873 - LEVERAGED BUY-OUT
After Acquisitionco acquires Target, Acquisitionco transfers all the shares of Target to a newly incorporated sub ("Newco") in consideration for...