debt

The "debt" need not be for the price of merchandise sold or services rendered in the course of business, but may also represent business expenses for which the taxpayer is entitled to reimbursement from another party.

After a venture carried on through a U.S. subsidiary which was owned by the taxpayer and its Netherlands parent proved to be unsuccessful, the Netherlands parent advised the taxpayer's auditors that it had agreed to reimburse the taxpayer for 89% of the total loss, as a result of which the taxpayer's balance sheet showed an asset equal to the amount of the proposed reimbursement. Mogan TCJ. found that this "agreement" was "gratuitous and not enforceable" (p.

The question referred by the parties pursuant to Rule 58 was whether two contracts, entitled Notes and issued for US $998 million by affiliates of two Canadian banks and guaranteed by those banks, which were held by St. Lawrence Trading Inc. ("SLT"), an open-ended investment fund incorporated under the laws of the British Virgin Islands, constituted debt for purposes of the Act. If the Notes constituted "debt obligations" under s. 95(1) or "debt" under s.

In rejecting a submission that the taxpayer was not entitled to deduct a doubtful debt reserve for unpaid interest because no written demand to pay the interest was made by the taxpayer, Owen J stated (at para. 60):

Although the precise meaning of the word "debt" may be the subject of some debate, it certainly encompasses a contractual obligation to pay an ascertainable sum such as the Interest, regardless of whether or not a demand for payment had been made by the Appellant.

See summary under s. 20(1)(l).

Interest awarded on a retroactive award of back pay by the Canadian Human Rights Tribunal did not represent interest on a "debt obligation" as the debt was not acknowledged by the employer (the government) until the time of the award. Webb J noted (at para. 11):

Before finding that payments made by a corporation to its shareholder-employees constituted debts of the employees rather than representing advance distributions of share capital, and therefore were subject to s. 80.4(1), Rip J. stated (p. 2017):

"A debt is a sum payable in respect of a liquidated money demand. It does not include an unliquidated claim for damages. A debt is a sum of money owed in respect of which a plaintiff has a right to bring and maintain an action."

The appellant demolition company had a contractual obligation to pay the respondent construction company for a demolitions project (in exchange for the right to salvage the wreckage), but the obligation only triggered when the respondent gave the appellant possession of the building to be demolished. The Court found that this obligation did not constitute a debt until possession was transferred, because until that time the respondent could not "have maintained an effective action against the appellants" for the amount in question (p. 268).