Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
TAX EXECUTIVES INSTITUTE, INC.
LIAISON MEETING - DECEMBER 9, 1997
Question VI - In-house loss utilization
At the 1994 Canadian Tax Foundation meeting, a representative from Revenue Canada [Michael A. Hiltz] indicated that, subsequent to a final decision in the appeal of Mark Resources Inc. v. The Queen, 93 DTC 1004, the Department would review its position on loss-utilization transactions involving loans between related companies. In view of the decision in Canwest Broadcasting Ltd. v. The Queen, 96 DTC 1375, and the withdrawal of the appeal in Mark Resources, has Revenue Canada reconsidered its position on the permissibility of shifting and utilizing net operating losses where effected through the use of inter-company loans within affiliated corporate groups?
Revenue Canada's Response
The taxpayer in Canwest has appealed to the Federal Court of Appeal. Consequently, the deductibility of interest expense incurred as part of an in-house loss-utilization arrangement remains uncertain. We will maintain our position with respect to the use of this type of arrangement to transfer losses between affiliated Canadian corporations (as reflected in Income Tax Ruling ATR-44 and example 5 of Information Circular 88-2, Supplement 1, and modified by Income Tax Technical News No. 9). However, we will review our position once Canwest is decided on appeal and any change in our policy will be announced in Income Tax Technical News.
File 5-973060
November 21, 1997
Mark Symes