Stone J.A.:
We agree with the respondent’s submission that subsection 80.4 (3) [1] of the Income Tax Act does not permit the market rate of interest on a portion of the applicant’s loan from his employer to be blended with the rates paid by him on other portions of the loan where those rates were less than the market rate, so as to reduce the “benefit” taxable under subsection 80.4 (I) . Accordingly, this section 28 application to review and set aside the order of the Tax Court of Canada of April 12, 1996, will be dismissed.
Application dismissed.
exceeds the total of
(c) the amount of interest for the year paid on all such loans and debts not later than 30 days after the end of the year, and
(d) any portion of the total determined in respect of the year under paragraph
(b) that is reimbursed in the year or within 30 days after the end of the year by the debtor to the person or entity who made the payment referred to in that paragraph.
Subsection 80.4 (3) reads:
(3) Subsection (1) and (2) do not apply in respect of any loan or debt, or any part thereof,
(a) on which the rate of interest was equal to or greater than the rate that would, having regard to all the circumstances (including the terms and conditions of the loan or debt), have been agreed on, at the time the loan was received or the debt was incurred, between parties dealing with each other at arm’s length if
(i) none of the parties received the loan or incurred the debt by virtue of an office or employment or by virtue of the shareholding of a person or partnership, and
(ii) the ordinary business of the creditor included the lending of money,
except where an amount is paid or payable in any taxation year to the credi tor in respect of interest on the loan or debt by a party other than the debtor; or
(b) that was included in computing the income of a person or partnership under this Part.
Subsection 80.4 (1) reads:
(1) Where a person or partnership receives a loan or otherwise incurs a debt because of or as a consequence of a previous, the current or an intended office or employment of an individual, or because of the services performed or to be performed by a corporation carrying on a personal services business, the indi vidual or corporation, as the case may be, shall be deemed to have received a benefit in a taxation year equal to the amount, if any, by which the total of
(a) all interest on all such loans and debts computed at the prescribed rate on each such loan and debt for the period in the year during which it was out standing, and
(b) the total of all amounts each of which is an amount of interest that was paid or payable in respect of the year on such a loan or debt by
(i) a person or partnership (in this paragraph referred to as the “em ployer”) that employed or intended to employ the individual,
(ii) a person (other than the debtor) related to the employer, or
(iii) a person or partnership to or for whom or which the services were or were to be provided or performed by the corporation or a person (other than the debtor) that does not deal at arm’s length with that person or any member of such partnership,