920566
24(1) A. Seidel
(613) 957-2120
Attention:19(1)
May 25, 1992
Dear Sirs:
This is in reply to your letter dated February 20, 1992 with respect to the application of subsection 15(1) of the Income Tax Act (the "Act") in the situation where a corporation has guaranteed the loan of one of its shareholders.
Whether the guarantee by a corporation of a loan for one of its shareholders constitutes a benefit to the shareholder to which subsection 15(1) of the Act could apply and the value of that benefit are both questions of fact which can only be determined by reviewing the details of each specific loan guarantee. In the situation where a loan guarantee confers a benefit on a shareholder, it is our view that the benefit is included in the income of the shareholder pursuant to subsection 15(1) of the Act. Furthermore, in the situation where a Canadian corporation is guaranteeing a loan of a non-resident person with whom the corporation is not dealing at arm's length, subsection 69(3) of the Act will apply to deem the amount that would have been reasonable in the circumstances, if the persons had been dealing at arm's length, to have been received or receivable by the Canadian corporation and therefore the amount would be included in computing the income of the Canadian corporation.
While we hope our comments are of assistance to you they do not constitute an advance income tax ruling and, therefore, are not binding on the Department in respect of a specific situation.
Yours truly,
for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch