| 19(1) | File No. 5-9497 |
| R.B. Day | |
| (613) 957-2136 |
May 22, 1990
19(1)
We are writing in reply to your letter of January 25, 1990, wherein you requested our views regarding the meaning of "within one year" in paragraph 15(2)(b) of the Income Tax Act.
Specifically, you requested our opinion as to whether "one year" refers to one 365 day period (a calender year) or the taxation year end of the lender or creditor.
Our Comments
While the expression "taxation year" is defined in subsection 249(1), the word "year" is not so defined. The word "year" is, however, defined in the Interpretation Act, R.S.C. 1970 c. I-23. In section 28 of the Interpretation Act "year" is defined to mean "any period of twelve consecutive months ..." and this definition of "year" is applicable for the purposes of the Income Tax Act. Therefore the time limit referred to in paragraph 15(2)(b) within which the loan or indebtedness must be repaid is the period of twelve consecutive months beginning with the end of the taxation year, as defined in subsection 249(1) of the lender or creditor during which the loan was made or the debt was incurred. For example , if a loan is made to a shareholder during the taxation year of a company ending on February 25, 1989, then in order for the provisions of paragraph 15(2)(b) to be applicable to that loan, it must be repaid by February 25, 1990 even if the next taxation year of the lender or creditor ends prior to February 25, 1990.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch