Bifalgorithm post · Un actionnaire vend un immeuble à sa société · CRA comments on a s. 17(1) inclusion under a s. 17(2) B2B loan and the partially offsetting FAPI deduction under s. 17(1) – B(c)
Deemed Loan
Deemed Loan (Un actionnaire vend un immeuble à sa société · CRA comments on a s. 17(1) inclusion under a s. 17(2) B2B loan and the partially offsetting FAPI de…
Ideas in this flowchart
- CRA's treatment of interest under section 17 for loans involving Barbco
- Canco's Barbados subsidiary, Barbco, holds Loan 1 owing to Canco and Loan 2 owing to it by USco.
- Canco wholly owns Barbco.
- Loan 1 is a non-interest-bearing loan from Canco to Barbco and has been outstanding for more than one year.
- Loan 2 is from an arm's length U.S. borrower, has the same principal amount as Loan 1, and bears interest below a reasonable rate under section 17(1.1)(c).
- CRA assumed it was reasonable to conclude that Loan 2 was made and kept outstanding because Canco had made Loan 1 to Barbco.
- On that assumption, section 17(1) would impute interest in respect of both loans.
- Section 17(1) would impute interest on a Deemed Loan equal in amount to Loan 2.
- The imputed interest on the Deemed Loan would be in addition to the imputed interest on Loan 1.
- CRA's historical position addresses the potential application of section 248(28) to the interest inclusion for Loan 2.
- Section 248(28) would not prevent the inclusion because section 17 would not require the same particular amount to be included in income more than once.
