99.99% of the units of LP were held by Mr. and Ms. X (spouses) and 0.01% of its units were held by a general partner that was a subsidiary of a corporation (Corporation B) that was owned equally by Mr. and Ms. X. In order to finance a $3M investment by her in LP so as to fund a property acquisition by LP, Ms. X borrowed $3M from Bank, which it required to be secured by a $3M term deposit with the bank that was pledged to it by Corporation B. Would the back-to-back loan rules in s. 15(2.16) et seq. apply?
In applying s. 15(2.16), CRA indicated that Ms. X had an amount outstanding ($3M) to an “immediate funder” (Bank), and that Bank held an amount (the term deposit) owing to an “ultimate funder” (Corporation B), and then stated:
We are of the view that in the scenario presented, the rules in subsection 15(2.17) would apply given that the conditions in paragraph 15(2.16) would be satisfied. Respecting paragraph 15(2.16)(c), it appears to us that, based on the facts in the hypothetical scenario, the statement in clause 15(2.16)(c)(i)(B) would be satisfied.