2023 Ruling 2023-0964601R3 - Loss consolidation arrangement -- summary under Payment & Receipt

CRA ruled on routine transactions between two Lossco subsidiaries and one Profitco subsidiary of an immediate Canadian parent company involving Lossco loans to the Profitco and Profitco subscriptions for Lossco cumulative preferred shares. The ruling contemplated that the daylight loan to the immediate parent could be in a somewhat small amount borrowed from a group company, with the funds used in setting up the loss shifting structure moved in a circle up to five times. (Using a re-circulating in-house daylight loan would not only likely be cheaper and more expedient, but also could make it easier to give the representation that the daylight loan amount was consistent with that parent’s borrowing capacity.)