Regulation 404

Subsection 404(1)

Administrative Policy

30 March 2012 Internal T.I. 2012-0439931I7 - Section 404 of ITR Meaning of "loans"

In response to an inquiry as to whether an arrangement is a loan only if there is a lender-borrower relationship between the bank and the debtor (no particulars given), the Directorate stated:

[A]n amount is a loan, for the purposes of Section 404 of the ITRs, only if, there is a lender-borrower relationship between the bank and the debtor....The courts have consistently found that in order for an amount to be a "loan" there has to be a lender and borrower relationship between the taxpayers. This definition is broad enough to include most banking arrangements for the purposes of Section 404.."

5 June 2001 Internal T.I. 2000-0053047 - REVERSE REPURCHASE TRANSACTION

Cash transferred by a bank to a customer in exchange for shares under the terms of the standard-form repo agreement would not constitute a loan for purposes of Regulation 404(1)(b).

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