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)

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Subsequent Year (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 FAP…

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CRA’s interpretation of the reduction under B(c)
The reduction may apply to amounts included in computing Canco’s income under s. 91(1) in the particular year or a subsequent year.
A subsequent-year amount qualifies only if it could reasonably be attributed to interest on Loan 2 for the particular year.
CRA’s illustrative example
In Year 1, Canco has $200 of Loan 2 interest and $100 of term deposits interest included in FAPI.
Year 1 term-deposit expenses reduce the related net income to a loss of $50.
Canco’s resulting net FAPI, and therefore the B(c) reduction, is $150.
In Year 2, $50 of term-deposit interest is included in Canco’s FAPI after applicable expenses.
Canco may claim the additional $50 reduction for Year 1 by amending its return for that year.

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Un actionnaire vend un immeuble à sa société

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"CRA also addressed the reference in B(c) to a reduction for amounts included in computing Canco’s income under s. 91(1) not only in the particular year but also in a subsequent year of Canco, provided that the amount could reasonably be attributed to interest on Loan 2 for the particular year. The following example may capture CRA’s point:\n\nIn Year 1, there are inclusions in computing Canco’s FAPI for $200 of interest on Loan 2 and $100 of term deposits interest. However, expenses on the term deposits for Year 1 reduce the net income therefrom to a loss of $50. As a result, the net FAPI of Canco, and therefore the reduction under B(c), is $150.\n\nIf, in Year 2, after the deduction of applicable expenses, there is $50 of interest income earned on the term deposits that is included in Canco’s FAPI for Year 2, Canco could include this amount as a further reduction in Year 1 under B(c) by amending its return for that year."

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