Subsection 7000(1)
Paragraph 7000(1)(a)
Administrative Policy
28 September 1994 External T.I. 9416265 - INTEREST INCOME
The interest accrual rules for prescribed debt obligations generally will not apply to debt obligations (in this case, undivided interests in...
Tax Professionals Mini Round Table - Vancouver - Q. 14 (March 1993 Access Letter, p. 104)
An interest-free debt representing the amount owing for the sale of assets to another company represents a prescribed debt obligation. However,...
87 C.R. - Q.49
a shareholder loan bearing interest at a nominal rate which is purchased at a discount is not a prescribed debt obligation.
84 C.R. - Q.14
where a bond is stripped of its coupons, and the bond residue and the detached coupons are sold separately at a discount, s. 12(9) is applicable...
Articles
Holmes, "Supplemental Retirement Arrangements May Provide Deferral for Employee and Deduction for Employer", Taxation of Executive Compensation and Retirement, March 1990, p. 243
Once the amount of payments to be made to an employee under a supplemental pension arrangement are determined, the accrual rules should not apply...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(e) | 72 |
Ulmer, "Taxation of Interest Income", 1990 Conference Report, c. 8.
Paragraph 7000(1)(b)
Administrative Policy
12 April 2002 External T.I. 2002-0122495 F - PRIME PAYEE SUR OBLIGATION
Regarding whether the proportions referred to in Reg. 7000(1)(b) are determined by reference to the specific taxpayer and not on all taxpayers who...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | premium on bond acquired as capital property produces a capital loss at maturity | 132 |
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Debt/ receivables | short holding time to maturity does not preclude a bond from being capital property | 103 |
6 October 2006 Roundtable, 2006-0197031C6 F - Obligation achetée à prime
An individual acquired a bond, bearing interest at 7% and with a face value of $100, for investment purposes in the secondary market for $124. ...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | premium paid on secondary purchase of bond is part of bond ACB | 182 |
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(9.1) | purchase of bond at a premium does not engage s. 12(9.1) | 152 |
October 1992 Central Region Rulings Directorate Tax Seminar, Q. N (May 1993 Access Letter, p. 233)
A stripped bond is a prescribed debt obligation under s. 7000(1)(b).
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|---|---|---|
| Tax Topics - Income Tax Act - Section 52 - Subsection 52(1) | 30 |
15 April 1992 T.I. (Tax Window, No. 18, p. 21, ¶1864)
A taxpayer who acquires a bond whose interest coupons for the first ten years previously were stripped and sold separately will be required to...
13 June 1991 T.I. (Tax Window, No. 4, p. 14, ¶1306)
Both strip bonds and interest coupons which have been removed from them are prescribed debt obligations. When an interest coupon matures, the...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 52 - Subsection 52(1) | 29 |
Articles
Duncan Osborne, "CARS and PARS Focus on Stripping Corporate Bonds", Corporate Finance, Vol. XI, No. 1, 2003, p. 1023.
Allgood, "Recent Developments in Asset-Backed Securitization", 1993 Conference Report, c. 16
Discussion of application of interest accrual rules to arrangements creating unequal interests in personal property.
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|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 102 - Subsection 102(2) | 13 | |
| Tax Topics - Income Tax Act - Section 9 - Timing | 20 |
Paragraph 7000(1)(c)
Administrative Policy
9 September 2003 External T.I. 2003-0006645 - CALLABLE STEP-UP BOND
In response to a query as to whether callable step-up bonds are subject to the yield-to-maturity calculations in Reg. 7000(2)(c.1), CRA...
29 July 2003 External T.I. 2003-0012335 F - PLACEMENT A RENDEMENT PROGRESSIF
CCRA confirmed that its position in 5-963476 regarding the exclusion from the application of Reg. 7000 of certain debt securities was only...
19 May 1992 T.I. 920810 (C.T.O. "Deep Discount Bonds")
"It is our position that an interest in an obligation which is issued at a discount and carries a stipulated rate of interest is not a prescribed...
ATR-61, 20 April 1995 "Interest Accruals"
Where a special term deposit provided for annual interest of 2.25%, compounded annually and paid at maturity, and a bonus payment also payable at...
Articles
Kevin Kelly, "Callable and Extendible Step-Up Notes", Corporate Finance, Vol. XI, No. 4, 2004, p. 1127
Comparison of extendible and callable step-up notes (pp.1127-8)
An Extendible Step-Up Note offers essentially the same economics as a Callable...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Investment Contract | 9 |
Paragraph 7000(1)(d)
See Also
James McTamney & Co. Ltd. v. MNR, 89 DTC 194, [1989] 1 CTC 2318 (TCC)
Pawners were under no obligation to repay sums paid to them by a pawnbroker unless they redeemed the articles in question. Therefore, there were...
Administrative Policy
12 December 1996 Internal T.I. 9633886 - T-5 INFORMATION RETURN
Although a note payable for property acquired that has a contingent interest payment based on an unknown amount would be a prescribed debt...
Subsection 7000(2)
Paragraph 7000(2)(a)
See Also
Goulet v. The Queen, 2009 DTC 1875, 2009 TCC 127 (Informal Procedure), aff'd 2011 DTC 5138 [at 6120], 2011 FCA 164
In finding that the difference between the purchase price of notes and of commercial paper acquired by the taxpayer in the secondary market and...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c) | discounts not compensation for risk | 118 |
Administrative Policy
28 July 2014 External T.I. 2014-0532651E5 - Loan to charitable foundation
Canco advances the Loan to a related charitable foundation. The Loan is not issued at a discount and matures in X years. Are there any tax...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(a) | non-interest bearing term loan could trigger PDO rules | 162 |
90 C.R. - Q10
Provided that a non-interest bearing demand promissory note is redeemable for its face amount, the calculation in s. 7000(2)(a) will not result in...
88 C.R. - "Finance and Leasing" - "Inclusion in Income"
T Bills are governed by Regulation 7000 rather than s. 16(3).
Paragraph 7000(2)(b)
Administrative Policy
27 April 2001 External T.I. 2000-0057055 F - INTERETS/OBLIGATIONS A COUPONS DETACHES
In the course of the general discussion of the application of Reg. 7000(2)(b) to the acquisition of the principal component of a stripped bond,...
18 March 1993 Memorandum (Tax Window, No. 32, p. 7, ¶2599)
A numerical example illustrating the application of Regulation 7000(2)(b) to four interest coupons purchased at a discount.
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|---|---|---|
| Tax Topics - Income Tax Act - Section 52 - Subsection 52(1) | 30 |
Articles
Sabrina Wong, Sania Ilahi, "Tax Implications of Asset Securitizations", 2015 CTF Annual Conference Report
Co-ownership structure for mortgage securitizations (p. 12:14)
The securitization of mortgages has often been structured as the sale by an SPE...
Paragraph 7000(2)(c)
Administrative Policy
30 March 2005 External T.I. 2004-0102421E5 F - Placement à rendement progressif
How is interest on increasing-rate debt securities computed under Reg. 7000(2)(c) or (c.1) where the rate of interest payable is not specified for...
87 C.R. - Q.55
in calculating the accrual under Regulation 7000(2)(c), a bondholder must include a bonus which is payable by the issuer if it should choose to...
Paragraph 7000(2)(c.1)
Administrative Policy
31 May 2005 External T.I. 2005-0122641E5 F - Intérêts courus
A $1,000 escalating-rate investment certificate (that is an "investment contract") with a three-year term was issued to an individual on January 1...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Anniversary Day | anniversary day for an investment contract issued on January 1 is December 31 |
5 April 2004 External T.I. 2004-0068021E5 - Escalator term deposit
Interest on an escalating term deposit would be reported on a yield-to-maturity basis.
Paragraph 7000(2)(d)
See Also
Ludmer v. Attorney General of Canada, 2020 QCCA 697
The Canadian-resident taxpayers were shareholders of a BVI company (“SLT”) which, in turn, held notes issued by two foreign subsidiaries of...
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|---|---|---|
| Tax Topics - General Concepts - Negligence, Fiduciary Duty and Fault | abusive and wrongful CRA audit conduct did not engage punitive damages | 260 |
Ludmer v. Attorney General of Canada, 2018 QCCS 3381, aff'd 2020 QCCA 697
The Canadian-resident taxpayers were shareholders of a BVI company (“SLT”) which, in turn, held notes issued by two foreign subsidiaries of...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) | recurring fee reduction amounts received for no work were income and taxable under s. 56(2) when directed to controlled company | 289 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) | nature of the legal advice relied upon was unclear | 417 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) | improper advancing of “settlement” elements that were not sustainable | 45 |
| Tax Topics - Income Tax Act - Section 94.1 - Subsection 94.1(1) | equity-linked notes held in BVI company were portfolio investments held with a tax avoidance purpose, but were not subject to 7000(2)(d) interest accrual | 576 |
| Tax Topics - General Concepts - Negligence, Fiduciary Duty and Fault | damages awarded against CRA for inter alia making unreasonable reassessments | 260 |
| Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit | recurring fee reduction amounts received for no work were income from a source | 313 |
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...
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|---|---|---|
| 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 Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | interest on loan to acquire LP units was deductible as there was a prospect of gross income being allocated by LP in 19 years’ time | 619 |
| 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 |
William E. Thomson Associates Inc. v. Carpenter (1989), 69 OR (2d) 545 (C.A.)
Although a facility fee fell within the definition of "interest" in the Criminal Code, the trial judge properly exercised his discretion to permit...
Administrative Policy
2007 Ruling 2007-0237351R3 - Stock-link Notes
Ruling respecting a stock-linked note where no return (other than in extraordinary circumstances) was payable until maturity, that so long as any...
27 June 2001 External T.I. 2001-0079875 - EQUITY-LINKED INVESTMENT CERTIFICATE
A bank GIC has a 3 year term, interest is calculated by reference to an increase in the value of a particular stock or stock index with no...
9 August 2001 External T.I. 2001-0076265 - INCOME FROM STOCK-LINKED GIC
The amount payable on maturity on a stock-index linked GIC (which is deemed to be interest by Regulation 7000(3)) does not require any recognition...
30 November 1996 Ruling 9719753 - CONTINGENT RATE OF RETURN
The return on an index-linked note is capped at 90% of the principal amount. A representation is made that "the Return that the Holder can expect...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(4) | 82 |
28 July 1994 940615 (C.T.O. "T-5 Reporting")
In response to a query as to whether T-5 reporting was required for a stock-index linked obligation on which a contingent payment was based on the...
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| Tax Topics - Income Tax Regulations - Regulation 201 - Subsection 201(4) | 72 |