CRA ruled respecting a transaction for the transfer of non-capital losses from Profitco to its Lossco parent by means of Lossco lending at interest to Profitco, Profitco subscribing for pref of a newly-incorporated sister corp (Newco) and Newco lending without interest to Lossco.
Notwithstanding that the loan made to Profitco was subordinated, the ruling letter states that the interest rate is “based on a comparison to the most recent arm’s length senior secured financing issued” by Lossco.