| 903218 | |
| 24(1) | A. Nelson |
| (613) 957-2745 |
19(1)
February 6, 1992
Dear Sirs:
Re: Subsection 17(1) of the Income Tax Act (the "Act")
This is in reply to your letter to us dated November 8, 1990, concerning the application of subsection 17(1) of the Act. We apologize for the delay in responding, but as explained in our telephone conversations, other priority workload prevented an earlier reply.
If interest is not "computed at a reasonable rate", the provisions of subsection 17(1) of the Act may apply where a corporation resident in Canada has loaned money to a arm's length non-resident taxpayer and the loan, having an interest rate specified in the loan agreement of nil, remains outstanding for one year or longer. However, the provisions of subsection 17(1) of the Act would not apply if it is determined that nil is a reasonable rate of interest in the particular situation.
It is a question of fact whether interest on loaned money has been computed at a reasonable rate.
In accordance with paragraph 21 of Information Circular 70-6R2, the above comments are not advance rulings and are not binding on the Department.
We hope the above comments are of assistance to you.
Yours truly,
Section ChiefLeasing & FinancingFinancial Industries DivisionRulings Directorate