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.."
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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|Tax Topics - Income Tax Act - Section 260 - Subsection 260(1) - Securities Lending Arrangement||146|