Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
loss consolidation using loans
Position:
interest deductible per ATR 44
Reasons:
ATR 44
XXXXXXXXXX
XXXXXXXXXX 980801
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1998
Dear Sirs:
Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling 973388 (the “Ruling”)
This is in response to your letter of XXXXXXXXXX, wherein you requested certain amendments to the Ruling dated XXXXXXXXXX, 1998.
The following terms have the same meanings as specified in the Ruling
"A Co" means XXXXXXXXXX.
"B Co" means XXXXXXXXXX.
"C Co" means XXXXXXXXXX.
"D Co" means XXXXXXXXXX.
The Ruling is amended as follows:
1. “D Co” is replaced with “A Co” in Paragraph 21.
2. “D Co” is replaced with “A Co” in paragraph 22.
3. The following Paragraph 23 is added after paragraph 22
23. With the proceeds from the B Co Loan, A Co will make a loan (the “A Co Loan B”) to D Co on a demand basis, and similarly, with the proceeds from the C Co Loan, A Co will make a loan (the “A Co Loan C”) to D Co on a demand basis, both of which loans will bear interest at a commercial rate of approximately XXXXXXXXXX %.
4. Existing paragraph 23 is renumbered paragraph 24 and the words “B Co Loan” are replaced with “A Co Loan B” and the words “C Co Loan “ are replaced with the words “ A Co Loan C”.
5. Existing paragraph 24 is renumbered paragraph 25 and the word “and” following the words “... B Co Loan...”in the first sentence of the paragraph is replaced with the words “A Co will demand corresponding partial repayment of the A Co Loan B, and B Co”. The words “the A Co Loan B” are added after the words “the B Co Loan” in the second sentence and in the third sentence the word “and” following the words “... B Co Loan...” is replaced by the words “A Co will demand repayment of the remaining outstanding amount of the A Co Loan B, and B Co”.
6. Existing paragraph 25 is renumbered paragraph 26 and the word “and” following the words “...C Co Loan...” is replaced with the words ” A Co will demand repayment of the A Co Loan C, and C Co”.
7. Existing paragraph 26 is renumbered paragraph 27 and the word “substantially” is added before the word “corresponding”.
Ruling A is amended to read as follows:
Interest payable by A Co to B Co and to C Co in respect of a taxation year of A Co on the B Co Loan and the C Co Loan, respectively, will be deductible by A Co, and interest payable by D Co to A Co in respect of a taxation year of D Co on the A Co Loan B and A Co Loan C will be deductible by D CO in accordance with paragraph 20(1)(c) of the Act.
We confirm that the Ruling as amended above will continue to be binding in the manner set forth therein.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Division
Policy and Legislation Branch
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