XXXX R. B. Day (613) 957-2136
FEB 9 1988
Dear Mr. XXXX
We are writing in response to your letter of December 8, 1987, wherein you requested our views as to whether subsection 80.4(6) of the Income Tax Act (the "Act") would apply to a situation where an employee home purchase loan is given to an individual employee on a demand basis and which remains outstanding beyond five years from the day on which the loan was received by the employee.
It is our opinion that where no demand for full payment is made on a demand note for a period in excess of five years then such a loan has a term for repayment exceeding five years. The loan would then be deemed to be a new loan by virtue of subsection 80.4(6) of the Act and would be affected by the prescribed rate of interest in effect at the time it is deemed to be a new loan.
The above comments are based on the limited information set out in your letter, and as such, are not binding upon the Department.
Yours truly,
ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR ROBERT H. JOYCE
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch