| 24(1) | 911837 |
| B.G. Dodd | |
| (613) 957-8953 |
Attention: 19(1)
January 9, 1992
Dear Sirs:
Re: 24(1)
This is in reply to your letter dated January 6, 1992 advising that you are withdrawing the request for an advance income tax ruling (dated April 24, 1991) in respect of a proposed payment on the early redemption of certain notes issued by 24(1) Our account for time expended to date on the ruling request will be issued in due course.
It is our understanding that your decision to withdraw the ruling request is based on the recent enactment into law of subsection 18(9.1) of the Income Tax Act (the "Act"). Among other things, this provision deals with penalties or bonuses paid on the early redemption of debt obligations.
We agree that where subsection 18(9.1) of the Act applies to an amount, such amount is deemed to have been paid as interest on the debt obligation. We note, however, that for purposes of computing the payer's income, such deemed interest is not necessarily deductible in the year the penalty or bonus is paid. Rather, pursuant to paragraph 18(9.1)(f) of the Act, the amount is deemed to have been paid or payable in the taxation year in which the actual interest would have otherwise been paid or payable were it not for the early repayment.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate