Canco makes a loan to a partnership that is wholly-owned by an indirect U.S. parent of Canco (the general partner) and another non-resident partner within the group and whose business it is to make loans to group entities. That loan was subsequently repaid. How do ss. 15(2) and 80.4(2) interact? CRA stated:
[P]aragraph 80.4(3)(b) provides that subsection 80.4(2) does not apply if the loan or debt is included in the debtor's income under another provision of Part I … . That would be the case if the loan or debt had already been included in the taxpayer's income under subsection 15(2). However, an assessment under subsection 15(2) is not precluded even if the taxpayer has voluntarily declared a benefit under section 80.4, as subsection 15(2) has priority over section 80.4, as stated in paragraph 10 of … IT-421R2 … .
In this case, if it should be the case that you include the loan in the taxpayer's income by virtue of subsection 15(2), then section 80.4 would not apply unless the loan is subject to repayment by virtue of subsection 227(6.1).