Subsection 78(1) - Unpaid amounts
Cases
Canada v. Dow Chemical Canada Inc., 2008 DTC 6544, 2008 FCA 231
The taxpayer ("Amalco") was formed on the amalgamation of two corporations, one of which ("UCCI") had previously incurred interest-bearing...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 87 - Subsection 87(7) | 197 |
Minister of National Revenue v. Shofar Investment Corporation, 79 DTC 5347, [1979] CTC 433, [1980] 1 S.C.R. 350
The cost of an item of inventory is not "a deductible outlay or expense" within the meaning of what now is s. 78(1). The predecessor of s. 78(1)...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 10 - Subsection 10(1) | 67 |
See Also
Dow Chemical Canada Inc. v. The Queen, 2007 DTC 1701, 2007 TCC 668
The taxpayer was formed on the amalgamation of two corporations, one of which ("UCCI") had previously incurred interest-bearing indebtedness to a...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(3.1) | 128 |
Redclay Holdings Ltd. v. The Queen, 96 DTC 1207, [1996] 2 CTC 2347 (TCC)
In rejecting a submission that s. 78(1) should be interpreted as applying to deny an expense (in this case, alleged interest expense) to a...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | interest not payable if contingent cash flow | 194 |
Administrative Policy
30 August 1995 External T.I. 9520115 - APPLICATION OF 78(1) AND 18(4)
"An amount not deducted by virtue of subsection 18(2) or 18(3.1) of the Act, would not be considered to be a 'deductible' outlay."
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|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(4) | 40 |
IT-109R2 "Unpaid Amounts" 23 April 1993
15. (a) Debtor and Creditor on the Accrual Basis
Generally, where an unpaid amount exists between a debtor and creditor who are not dealing at...
27 March 1992 External T.I. 5-920554
S.78(1) does not apply to amounts that are non-deductible by virtue of s. 18(2).
17 January 1992 T.I. (Tax Window, No. 15, p. 11, ¶1704)
The application of s. 80 to a prior year would not be a technical impediment to the application of s. 78 to a later year.
91 CPTJ - Q.31
RC is no longer of the view that section 78 applies to unpaid interest which has been capitalized as CEE.
17 September 1991 T.I. (Tax Window, No. 9, p. 3, ¶1453)
Where a corporation defers payment of interest payable to a controlling shareholder and no agreement was filed, s. 78(1) requires the interest to...
28 May 1991 T.I. (Tax Window, No. 3, p. 29, ¶1267)
Because compound interest is not eductible until paid, s. 78 does not apply to compound interest.
90 C.P.T.J. - Q.37
Where a taxpayer has elected under s. 21 to include interest expense otherwise incurred as CEE and the interest remains unpaid at the end of the...
2 May 1990 T.I. (October 1990 Access Letter, ¶1467)
s. 78 can apply to a deductible outlay or expense incurred by a partnership. The agreement under s. 78(1)(b) which is filed on behalf of the...
11 April 1990 T.I. (September 1990 Access Letter, ¶1422)
Where on December 1984, the taxpayer accrues $10,000 in interest owing to a non-arm's length creditor, the amount is still owing at the end of...
89 C.P.T.J. - Q26
The phrase "in respect of" has a wide meaning. Accordingly, subsection 78(1) applies to interest which has been capitalized under s. 21.
88 C.R. - Q.3
Where the filing of a prescribed agreement on the due date of December 31, 1989 gives rise to a deemed payment of interest to a non-resident on...
81 C.R. - Q.11
RC will apply s. 78(1) to deductible amounts owing to a non-resident even where such amounts would not be subject to withholding tax when paid and...
Articles
Brahmst, "Non-Arm's Length Expenses and Section 78", Practice Notes, Canadian Current Tax, April 1991, p. P33
Discussion of application of s. 78 where there have been back-to-back loans within a financial institution group before the loan to the ultimate...
Paragraph 78(1)(a)
Administrative Policy
28 November 2002 Internal T.I. 2002-0153837 F - SOMMES IMPAYEES
Two corporations (the "debtor" and the "creditor") that did not deal at arm's length reported their income using the accrual method. During the...
Paragraph 78(1)(b)
Subparagraph 78(1)(b)(ii)
Administrative Policy
15 May 2019 IFA Roundtable Q. 4, 2019-0798721C6 - 78(1)(b)(ii) deemed loan & thin capitalization
The thin cap rules apply to “outstanding debts to specified non-residents”, whose definition specifies that there is deductible interest paid...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(5) - Outstanding Debts to Specified Non-Residents - Paragraph (a) - Subparagraph (a)(ii) | unpaid simple interest that is deemed to be a loan by s. 78(1)(b)(ii) generally is not outstanding debts to specified non-residents | 172 |
Subsection 78(4) - Unpaid remuneration and other amounts
See Also
WPH Mechanical Services Ltd. v. The Queen, 2007 DTC 263, 2006 TCC 677
It was found that bonuses declared payable by the taxpayer to its two directors were paid by it within the 180 day period referred to in s. 78(4)...
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|---|---|---|
| Tax Topics - General Concepts - Payment & Receipt | payment by demand loan | 64 |
Administrative Policy
28 January 2021 Internal T.I. 2019-0817641I7 - Acquisition of rights to pension surplus
A portion of the purchase price paid for the acquisition of a business of the Seller by the Purchaser was allocated to the actuarial surplus in a...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Actuarial Surplus | CRA finds that the purchase price of a business allocated to the actuarial surplus for a defined benefit plan was a non-deductible capital expenditure | 517 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(e) | purchased actuarial surplus was a reserve | 195 |
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(35) | purchased actuarial surplus was not deemed goodwill under s. 13(35) | 222 |
6 November 2012 External T.I. 2012-0452531E5 - Satisfactory Evidence of Payment
In response to a question as to whether "a demand note payable, which is accepted as absolute payment of salary owing to an employee, constitutes...
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| Tax Topics - General Concepts - Payment & Receipt | promissory note accepted as payment | 104 |
2 October 2012 External T.I. 2012-0446671E5 F - Subsection 78(4)
In response to a query as to whether the repayment deadline in s. 78(4) is satisfied when the repayment is made on the 180th day, CRA stated...
7 August 1992 T.I. 921752 (May 1993 Access Letter, p. 198, ¶C76-066, (Tax Window, No. 23, p. 5, ¶2140)
Because the function of a journal entry is to record a transaction rather than to make it legally effective, the reclassification of a...
87 C.R. - Q.19
"Other remuneration" refers to amounts which would be included under s. 5, and does not include a retiring allowance.
87 C.R. - Q.32
The best evidence of payment is that the related payroll withholdings were remitted on time.