5 December 2019 Internal T.I. 2017-0683831I7 - Prescribed Rates and Undue Benefits -- summary under Subsection 189(1)

Headquarters rejected the proposition that where a registered charity that is a private foundation makes a loan at the prescribed rate of interest when the loan recipient receives the loan because of that debtor’s relationship with the private foundation or the foundation’s board of directors, the avoidance of any s. 189(1) tax on the debtor (because of the prescribed rate being used) means that there cannot be a penalty for undue benefits imposed on the private foundation under s. 188.1(4) in respect of the loan.