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21 July 2009 Internal T.I. 2009-0322591I7 F - Déduction des intérêts -- summary under Disposition

The taxpayer purchased assets from the vendor (apparently, a non-resident) in consideration for shares of the taxpayer and interest-bearing debt, that was evidenced by a note providing that unpaid interest could be added to the principal of the note. This was done, and a new note subsequently was issued for the amount of the original indebtedness plus the capitalized interest. Did this constitute a payment by novation?

13 July 2018 Internal T.I. 2017-0713301I7 - Assumption of accrued interest -- summary under Paragraph 212(1)(b)

The Partnership, a general partnership governed by the laws of a U.S. state that was a Canadian partnership under s. 102 as its partners were Canco and a wholly-owned Canadian sub of Canco, held all the shares of a U.S. LLC (the “Creditor Affiliate”), which had made an interest bearing loan to the Partnership (the “Loan”). The Loan was not recognized for U.S. tax purposes because Creditor Affiliate was a disregarded entity.

By services, 13 November, 2016

Blank v Commissioner of Taxation, [2016] HCA 42 -- summary under Paragraph 6(1)(a)

The taxpayer was employed by Glencore International AG (“GI”), an international commodity trading business incorporated in Switzerland, or a subsidiary from November 1991 to December 2006, with his employment in Australia commencing in 2002 when he also became an Australian resident. In 1994, GI granted him rights (Genusscheine, or “GS”) pursuant to an agreement with him and evidenced by profit sharing certificates issued pursuant to its articles of association, to share in future consolidated net income.

By services, 11 January, 2016

General Electric Capital Equipment Finance Inc. v. Canada, 2002 DTC 6734, 2001 FCA 392 -- summary under Disposition

Following assessments of withholding tax on interest on notes owing by the taxpayer, the notes were amended to decrease the principal owing (by the amount of withholding tax paid by the taxpayer on behalf of the non-resident holder), increase the interest rate (by grossing-up the interest rate for the applicable withholding tax), extend the maturity date by one year and change the identity of the payee (to reflect the notes' assignment) were found to give rise to new obligations, with the result that their maturity date occurred within five years of the date of (new) issue.

By services, 11 January, 2016

National Trust Co. v. Mead, [1990] 5 WWR 455, [1990] 2 SCR 410 -- summary under Disposition

The execution by an individual ("Mead") of an assumption of liability agreement in favour of a mortgage lender ("National Trust"), with Mead thereby being acepted by National Trust as the principal debtor, was found not to entail the novation of the mortgage loan in light inter alia of a clause in the original mortgage which provided that no "dealing by the Mortgagee with the owner of the equity of redemption of the Mortgage Premises shall in any way affect or prejudice the rights of the Mortgagee against the Mortgagor ...

By services, 28 November, 2015

Carma Developers Ltd. v. The Queen, 96 DTC 1798, [1996] 3 CTC 2029 (TCC), briefly aff'd 96 DTC 6569 (FCA) -- summary under Paragraph 80(2)(a)

Under a plan that was approved by the requisite majority of creditors in accordance with the companies' Creditors Arrangement Act, various classes of unsecured or undersecured creditors of the taxpayer ("CDL") transferred indebtedness of the taxpayer in exchange for shares of the taxpayer's parent corporation ("CL").

Bowman TCJ. found that the debts were not extinguished by novation notwithstanding that the creditors acknowledged to CDL that no further consideration was owed to them in respect of the assigned indebtedness, and stated (at p. 1802):

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