| 923079 | |
| 24(1) | M. Cooke |
| (613) 957-8972 |
Attention: 19(1)
November 23, 1992
Dear Sirs:
Re: Small Business Financing Program
This is in reply to your letter of October 5, 1992, in which you requested our opinion as to whether a qualifying debt obligation as defined in proposed subsection 15.1(3) of the Income Tax Act (the "Act") would include a debt obligation which has been issued directly in exchange for a lease obligation.
The Department has expressed the view, in various past Round Table responses, that for the purposes of the Act, a transaction that takes the form of a lease will ordinarily be treated as a lease. Therefore, it is our view that an obligation to make future payments under a lease obligation does not usually create a debtor/creditor relationship between the lessor and lessee and therefore is not considered to be a debt for the purposes of the financial difficulty provision of proposed paragraph 15.1(3)(f) of the Act.
Further, the determination of whether or not a qualifying debt obligation would include a debt obligation which has been issued in exchange for another debt obligation (which was previously issued in exchange for the original lease obligation) could not be made without a review of all the pertinent facts.
These comments have been provided in accordance with paragraph 22 of Information Circular 70-6R2 and accordingly are not binding on the Department.
Yours truly,
Section ChiefLeasing & Financing SectionFinancial Industries DivisionRulings Directorate