interest

7 January 2025 External T.I. 2022-0945291E5 F - Intérêts versés sur des obligations communautaires d’une coopérative -- summary under Paragraph 149(1)(l)

A Quebec cooperative received loans from the community in support of it so as to enable it to carry out a project, contribute to its mission and serve the community. Regarding whether this was consistent with the requirement in s. 149(1)(l) that “no part of the income of which was payable to, or was otherwise available for the personal benefit of, any proprietor, member or shareholder,” CRA stated:

13 August 2004 Internal T.I. 2004-0076861I7 F - Investissement à l'étranger -- summary under Paragraph 12(1)(c)

A resident individual (the taxpayer) lent a sum to a Barbados borrower pursuant to a debenture contract which provided that the return was payable only on the maturity of the debenture, was equal to the return on a linked investment and specified that a portion of such return would include a taxable interest portion and a non-taxable capital gains portion. In finding that all of such return would be interest income, the Directorate stated:

By services, 27 April, 2021

Agence du revenu du Québec v. Bernardin, 2021 QCCA 625 -- summary under Paragraph 12(1)(c)

An individual, by virtue of being part of a group of class action claimants, was awarded damages in 2004 of $1,200 for each of the eight winter seasons in which she had endured snowmobile noise. In 2010 she received damages pursuant to Article 1619 of the Quebec Civil Code of $8,400 (capital) and $6,148 (interest). Whether the interest was taxable under the Taxation Act turned on when her damages were considered to have become “liquidated.”

7 October 2011 Roundtable, 2011-0412161C6 F - Timing of the increase in interest - stock option -- summary under Subparagraph 55(3)(a)(ii)

Mr. X implemented an estate freeze in favour of his children and a holding corporation respecting his wholly-owned operating corporation, which he continued to control. During the the reorganization, stock options to purchase common shares for $1 were issued to a key employee, who was not related to Mr. X, being the controlling shareholder of the holding corporation, which is the dividend recipient for the purposes of ss. 55(3) and (3.01).

By services, 28 March, 2019

Plains Midstream Canada ULC v. Canada, 2019 FCA 57 -- summary under Paragraph 20(1)(c)

As part of a complex set of transactions, a predecessor of the taxpayer agreed to assume a $225M loan that was due in perhaps 43-years’ time and that was non-interest-bearing (except in the remote event of oil production from the Beaufort Sea) in consideration inter alia for the payment to it of $17.5 million by the debtor. The predecessor treated the $207.5M difference between these two amounts as an amount which, although conceded not to be interest in form, was interest in substance and therefore could be treated as being recharacterized as interest under s.

By services, 5 September, 2018

Solar Power Network Inc. v. ClearFlow Energy Finance Corp., 2018 ONCA 727 -- summary under Paragraph (f)

A typical loan made by the lender (ClearFlow) to the borrower bore base interest rate of 12% p.a. compounded monthly, an administration fee that was charged when the Loan was initially advanced, and each time it renewed (of, say, 1.81% of the loan balance), and a “discount fee” of 0.003% per day of the outstanding principal. Sharpe JA confirmed the finding of the application judge that the administration fee was not interest, as well as his finding that the discount fee was interest, stating (at paras. 42-43):

By services, 28 November, 2015

R. v. Melford Developments Inc., 82 DTC 6281, [1982] CTC 330, [1982] 2 SCR 504 -- summary under Subsection 214(15)

In the absence of this provision, "interest" in Part XIII would refer primarily to "the payment of rent by a borrower for the use of the principal of the lender to whom the rent is paid". However, in the absence of the overriding effect of any Convention, the effect of s. 214(15) is to convert guarantee fees into "interest" for the purpose of the withholding tax provisions of that Part.

By services, 28 November, 2015

Morscher v. MNR, 92 DTC 2214, [1992] 2 CTC 2534 (TCC) -- summary under Paragraph 20(1)(c)

The taxpayer, who carried on a commercial litigation practice in partnership with another lawyer, was denied the deduction of interest which Revenue Canada alleged related to partnership drawings in excess of the profit reported in the computation of income for purposes of the Act. The taxpayer was successful in characterizing the alleged excess borrowings as relating to the financing of work in progress of the partnership.

In obiter dicta, Brulé J. defined the word "interest".

interest