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.
Principal Issues:
Whether the exception in subsection 15(2.6) of the Act can apply to a loan that is part of a series of loans and other transactions and repayments but the series is terminated within one year.
Position: Question of fact.
Reasons: Where there are bona fide repayments of the loans or other indebtedness, the exception in subsection 15(2.6) of the Act would apply.
Question #25 --- Shareholder's Debt
Would the CCRA confirm that the exception to the application of subsection 15(2) of the Act in subsection 15(2.6) of the Act will apply where loans are repaid as part of a series of loans and repayments, provided the series of loans and repayments is terminated within one year after the end of the taxation year of the lender or creditor in which the loan was made?
CCRA's Position
In general terms, the CCRA will not apply subsection 15(2) of the Act in those situations where the original loan or indebtedness is in fact settled within the one year specified in subsection 15(2.6) of the Act. However, as stated in paragraph 34 of Interpretation Bulletin IT-119R4, in the situation where there is a series of loans or other transactions and repayments, the exception in subsection 15(2.6) of the Act will not apply unless bona fide repayments have been made within one year after the end of the taxation year of the lender or creditor in which the loan was made or the indebtedness arose.
A detailed analysis of a shareholder's loan account will determine whether there has been a bona fide repayment of a loan or other indebtedness and whether the series of loans or other transactions and repayments has terminated. Loans which do not meet this test, and which are not included in the exceptions in subsections 15(2.3) to (2.5) of the Act, are included in income in the year the loan is made pursuant to the opening words of subsection 15(2) of the Act.
A. Seidel
December 6, 2000
File 2000-005603