Words and Phrases - "money-lending business"
Loman Warehousing Ltd. v. Canada, 2000 DTC 6610 (FCA), aff'g 99 DTC 1113, Docket: 98-201-IT-G (TCC) infra
Noël JA, before rejecting the taxpayer's submission that the post-1993 version of s. 20(1)(p)(ii) contemplated a taxpayer whose ordinary business included the lending of money, and not the business of the lending of money, noted a concession of taxpayer's counsel that the taxpayer's sole business was that of warehousing and that it was not in the business of lending money, and then stated (in f.n. 2):
[T]his apparent concession is surprising as the business of lending money under the Act extends not only to one who lends money to all who qualify in the conventional sense (see Litchfield v. Dreyfus [1906] 1 KB 584 at 589) but would also include one who lends money on a regular and continuous basis over time to a limited group of borrowers for an arm's length consideration (see in particular the extended meaning of the word "business" in par. 248(1)).
A.P. Toldo Holding Corporation v. The Queen, 2014 DTC 1042 [at 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 dispute, it purchased for cancellation the shares of a corporate shareholder holding 12.5% of its shares in 10 tranches, each occurring on the same day. The consideration for the first five tranches was paid in cash, and for the last five tranches was paid by the issuance of an interest-bearing $20 million promissory note. The promissory note was repaid, on its maturity one year later, in cash, some of which was borrowed money.
Before going on to find that this interest also did not qualify for deduction under s. 20(1)(c) (see summary), D'Arcy J found that the taxpayer had not established that the interest on the promissory note was "paid in respect of money borrowed in the course of a money-lending business" (para. 58) which, at a minimum, would have required evidence that the taxpayer "lent money on a regular and continuous basis" (whether to its subsidiaries or third parties) (paras. 40-41). Accordingly, the interest was not deductible under s. 9. Instead, the share repurchase "represented a large non-recurring expenditure...on account of capital" (para. 61).
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | no retained earnings or stated capital | 209 |