CRA was asked in the context of s. 212.3(10)(c)(i) whether it would accept FIFO as the method to track the origination and settlement of multiple debts that may arise from inter-company dealings or cash pooling; and whether it would consider a "series of loans" to arise where there are inter-company dealings or cash-pooling but each item arises for its own reasons and not in contemplation of recycling an existing item.
After stating that “the repayment rule in subparagraph 212.3(10)(c)(i) is similar to the rule in subsection 15(2.6) that applies in the shareholder debt context,” CRA stated:
(i) If a particular amount owing is made up of several amounts owing of the same nature (for example as the result of numerous individual acquisitions of product or services on credit), we would accept FIFO as the method to track the origination and settlement of multiple amounts owing. Whereas, if a particular amount owing is made up of several amounts owing of different natures (for example one amount owing may be secured and payable at maturity whereas another amount owing may be unsecured and payable in installments and/or the amounts owing may have different interest rates), we would expect the debtor to specify which amount owing is intended to be repaid by a particular payment.
(ii) Our views on whether the repayment of a particular amount owing is part of a series of loans or other transactions and repayments are set out in Interpretation Bulletin IT-119R4, Debts of Shareholders and Certain Persons Connected With Shareholders. … Specifically, however, repayments of a temporary nature (for example, certain cash pooling arrangements) may be evidence of a series of loans and repayments.