Bifalgorithm post · Un actionnaire vend un immeuble à sa société · CRA finds that an indemnity given by a Canadian NRT beneficiary regarding a trust distribution received from the trustee did not cause s. 94(2)(d) to apply

Indebtedness

Indebtedness (Un actionnaire vend un immeuble à sa société · CRA finds that an indemnity given by a Canadian NRT beneficiary regarding a trust distribution rec…

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  • Applicability of paragraph 94(2)(d) to the NRT indemnity
  • The undertaking must ensure repayment of a loan or indebtedness incurred by the other person at the relevant time.
  • The relevant other person would be the trustee of the NRT.
  • The indemnity must relate to repayment of a loan or other indebtedness incurred by the trustee.
  • Until the relevant challenge succeeds, no loan or other indebtedness appears to have been incurred for paragraph 94(2)(d).
  • A successful challenge by another beneficiary concerning the NRT distribution would be required.
  • The challenge would require the trustee to repay the distribution amount to the NRT.
  • Therefore, paragraph 94(2)(d) does not apply before such a repayment obligation arises.
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Indebtedness

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Un actionnaire vend un immeuble à sa société

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USR292600b83e2a
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"[I]n order for paragraph 94(2)(d) to be applicable, inter alia, the undertaking must be given to ensure the repayment of a loan or indebtedness incurred by the other person at the relevant time. In the situation described, the other person would be the trustee of the NRT, which means that in order for paragraph 94(2)(d) to apply, the indemnity must relate to the repayment of a loan or other indebtedness incurred by the trustee. It would appear that until there is a successful challenge against the trustee by another beneficiary in respect of the distribution by the NRT to the Canadian Beneficiary, which requires the trustee to repay the amount of the distribution to the NRT, there is no loan or other indebtedness incurred for purposes of paragraph 94(2)(d)."

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