In the post-enron world, many financing transactions

Size: px
Start display at page:

Download "In the post-enron world, many financing transactions"

Transcription

1 Tax Consequences of Debt Restructuring And Workouts in Canada by Jack Bernstein, Kay Leung, and Henry Chong Jack Bernstein, Kay Leung, and Henry Chong are with Aird & Berlis LLP in Toronto. In the post-enron world, many financing transactions have come under scrutiny from both regulators and shareholders. Both are concerned with achieving greater transparency and reliability of financial statements. Parties involved in debt restructuring and workouts have been more sensitive to tax consequences. This article reviews debt forgiveness rules in Canada s Income Tax Act (the act) and addresses the tax consequences of altering existing debt obligations. I. Debt Forgiveness It is difficult to restructure corporate debt without considering debt forgiveness rules. Section 80 of the act contains most of those rules, which have remained mostly unchanged since A. Position of the Debtor In general terms, debt forgiveness rules apply when a commercial obligation of a debtor is settled and there is a forgiven amount. Subsection 80(1) defines a commercial obligation to include a commercial debt obligation. That is defined in the same subsection as a debt obligation on which interest paid or payable by the debtor under a legal obligation (or if interest had been so paid or payable) was (or would have been) deductible to the debtor (or would have been deductible but for rules in the act that otherwise preclude deduction of interest). Any debt incurred for the purpose of earning income from a business or property is included in the definition. A personal debt on which interest is not deductible does not fall within the definition. The use of the borrowed money determines whether it is a commercial debt obligation. If the debtor has deducted interest on the loan, it is likely that the debt is a commercial debt obligation subject to debt forgiveness rules. Paragraph 80(2)(a) says an obligation is settled by the debtor when the obligation is settled or extinguished (other than by a bequest or inheritance or in consideration for the issuance of particular shares). Forgiven amount is also defined in subsection 80(1). In general, it is the amount of the debt that remains unpaid upon the settlement, minus the amount paid by the debtor in satisfaction of the principal amount of the obligation and other amounts. For example, any amount of the obligation included in the debtor s income under paragraph 6(1)(a) and subsection 15(1) (the employee and shareholder benefit provisions, respectively) reduces the forgiven amount. As a result, forgiven employee and shareholder loans are included in income under paragraph 6(1)(b) and subsection 15(1), respectively, and are not subject to the debt forgiveness rules. The forgiven amount is reduced by the principal amount of the obligation if the debtor is bankrupt. Under paragraph 80(2)(b), interest payable is deemed to be an obligation that has a principal amount and was issued by the debtor for an amount equal to the amount deductible or that may be capitalized under subsection 18(2) or (3.1) or section 21. When a debtor s commercial obligation is settled, the forgiven amount is applied to reduce tax attributes of the debtor in the order described below: Noncapital Loss Carryforwards. The debtor s forgiven amount is applied to reduce, in order, noncapital losses, farm losses, and restricted farm losses from prior years to the extent they would be deductible in the current year. The reduction of loss carryforwards is mandatory. Losses are reduced in the order they arose. Losses that have expired are not reduced (subsection 80(3)). Capital Loss Carryforwards. Any remaining forgiven amount is used to reduce, in order, allowable business investment losses and net capital losses from prior years to the extent they would be deductible in the current year. Those reductions are also mandatory. Again, the loss carryforwards are reduced in the order they arose (subsection 80(4)). Depreciable Properties. Any remaining forgiven amount may be used, to the extent designated by the debtor in a form filed with the year s tax return, to reduce the capital cost of Tax Notes International October 17,

2 depreciable properties and the undepreciated capital cost of depreciable properties of a prescribed class (subsection 80(5)). Eligible Capital Properties. Three-quarters of any remaining forgiven amount may be used, to the extent designated by the debtor, to reduce the debtor s cumulative eligible capital in the debtor s businesses (subsection 80(7)). Resource Pools. Any remaining forgiven amount may be used to reduce, to the extent designated by the debtor, particular resource pools (subsection 80(8)). Nondepreciable Capital Properties. The debtor may apply any remaining forgiven amount (assuming the maximum designations permitted under subsections 80(5), (7), and (8) have been made) to reduce the adjusted cost base of capital properties as designated in a form filed with the debtor s tax return. First, the adjusted cost bases of capital properties may be reduced, except for: (1) shares of corporations in which the debtor is a specified shareholder; (2) debts issued by those corporations; (3) interest in partnerships related to the debtor; (4) depreciable property not in a prescribed class; (5) personal use properties; and (6) excluded properties (subsection 80(9)). Next, and only if the maximum amount was designated under subsection 80(9), the adjusted cost base of any shares of, or debt issued by, a corporation of which the debtor is a specified shareholder can be reduced (subsection 80(10)). In general, a debtor is a specified shareholder if he and any non-arm s-length parties own 10 percent or more of any class of shares of a corporation. If the maximum amount has been applied under subsections 80(9) and (10), subsection 80(11) allows the debtor to apply any remaining amount to reduce the adjusted cost bases of shares, debt held in related corporations, and interests held in related partnerships. Reduction of Current Year Capital Losses. If the debtor has designated the maximum amounts possible under subsections 80(5), (7), (8), and (9) to (11), any remaining forgiven amount is deemed to be a capital gain of the debtor in the year to the extent of the debtor s capital losses in the current year from dispositions of capital properties (subsection 80(12)). Income Inclusion. For individuals, corporations, and trusts, one-half of any remaining forgiven amount is included in the debtor s income under subsection 80(13). When the debtor is a partnership, the entire forgiven amount is included in the partnership s income. For corporations, if there is an eligible transferee of the debtor at the time the obligation is settled, the debtor can transfer any portion of the remaining forgiven amount to the eligible transferee under section An eligible transferee is a related taxable Canadian corporation, a related eligible Canadian partnership, or a directed person of the debtor. Directed person is defined in subsection 80(1). It generally means a taxable Canadian corporation or eligible Canadian partnership that either controls the debtor or is controlled by the debtor, the debtor and related parties, or a person or persons who also control the debtor. Thus, the remaining forgiven amount can be applied to reduce the transferee s various tax attributes, rather than forcing an immediate income inclusion to the debtor under subsection 80(13). If the debtor chooses a subsection 80(11) reduction instead of making a transfer under section 80.04, the lesser of the 80(11) reduction and the amount that could have been transferred to the transferees is added into the debtor s income under subsection 80(13). When a debtor has an income inclusion under subsection 80(13), a reserve may be available for the amount. Section 61.2 provides a reserve for Canadian resident individuals other than trusts. In effect, it allows a deductible reserve to the extent the forgiven amount included under subsection 80(13) exceeds 20 percent of the debtor s income (determined without reference to the debt forgiveness) in excess of C $40,000. For example, assume that the individual has income for the year of C $100,000 and that there is a net income inclusion of C $50,000 based on the foregoing rules. The individual would have to include only C $12,000 per year (20 percent times C $60,000). It does not apply if the forgiven amount is on a debt payable by the individual or by a partnership in which the individual is a member. If the individual has not taken advantage of the maximum designations set out above, the minister of national revenue has the authority under subsection 80(16) to reduce the tax attributes. A reserve may be claimed in the year of death with no requirement for an addback in the subsequent year. However, a settlement that occurs within six months after death is deemed to occur at the beginning of the day of the individual s death. A corporation resident in Canada, a trust resident in Canada, or a nonresident carrying on business in Canada can claim a reserve under section 61.4 to spread the income inclusion required by subsection 80(13) over five years. In the first year, the debtor may deduct up to four-fifths of the income inclusion under section That amount is added back in the subsequent year under section 56.3, and the debtor may deduct up to three-fifths of the original 288 October 17, 2005 Tax Notes International

3 income inclusion. The reserve amount becomes twofifths and then one-fifth for the subsequent two years. Section 61.3 addresses insolvent corporations. A deduction is available that essentially limits the income inclusion required by the debt forgiveness rules to twice the corporation s net assets. On the basis of an assumed corporate rate of 50 percent, the income inclusion will not result in the corporation s liabilities exceeding the fair market value of its assets. The minister of national revenue may reduce the tax attributes of the debtor corporation that have not already been reduced if the corporation claims a deduction under section The amount claimed as a deduction will also reduce the corporation s scientific research and experimental development balance. The debt forgiveness rules also operate at the partnership level to determine whether there is an unforgiven amount in excess of the tax attributes of the partnership. The full amount of the income inclusion is then allocated to persons who are partners at the end of the year. 1 There is no reserve available to a partnership to mitigate the income inclusion. Instead, it is claimed by the partner. 2 If an active partner has advanced funds to a partnership and that amount is forgiven or settled, no forgiven amount arises. A partnership cannot designate amounts under subsections 80(9), (10), or (11) so that the adjusted cost base of property is reduced to less than its fair market value at that time. 3 That should prevent a partnership from acquiring capital properties to minimize the effect of section 80. The reduction of the cost base of capital properties will be restricted to the adjusted cost base of the properties. If not for that provision, a capital loss could arise on the disposition of the partnership interest. Relief is provided for a partner that has undeducted loss carryforwards and resource expenditure pools attributable to the partnership. 4 Subsection 80(15) provides that a member may not claim a deduction in excess of the amount that would be the partner s income if the partnership had made the maximum designations under subsections 80(5) to (10) on the forgiven amount. The partner would then have to reduce his or her tax attributes by that amount, including the adjusted cost base of the partnership interest. However, if the person is related to the partnership, the individual must have 1 Subsection 80(13). 2 Section Subsection 80(18). 4 Subsection 80(15). made the maximum designations under subsections 80(5) to (10) to reduce its tax attributes for that to be effective. 5 To the extent that a balance remains, an individual will be taxable on one-half of the amount under subsection 80(13), but will be entitled to benefit from the reserve mechanism outlined above. Debt parking occurs when a debt (that is, a specified obligation as defined) is transferred at a discount to a person who is not at arm s length with the debtor or who has a significant interest in the debtor, when the objective is to keep the loan outstanding and to avoid the application of the debt forgiveness rules. That was a common practice in the sale of loss companies when losses were financed with shareholder advances. The use of the borrowed money determines whether it is a commercial debt obligation. The debt parking rules essentially deem the amount paid by the non-arm s-length person to be the amount paid to settle the debt. The difference between the face value of the debt and the amount thus paid is treated as forgiven, and the ordinary tax consequences of the debt forgiveness rules will apply. A threshold allows debt to be acquired at a 20 percent discount (or less) without the application of the debt parking rules. Subsections 80.01(6) through (8) contain provisions regarding debt parking. Those rules apply when an obligation issued by a debtor to one creditor is transferred to another creditor related to the debtor or who has a significant interest in the debtor. The debt must be a parked obligation, or an obligation that is a specified obligation 6 and the holder of the obligation does not deal at arm s length with the debtor or, when the debtor is a corporation, has a significant interest 7 in the debtor. 5 Subsections 80(11) and (13) and section A specified obligation is issued by a debtor when a person who owned the obligation dealt at arm s length with the debtor and when the debtor is a corporation that did not have a significant interest in a debtor or the obligation was acquired by the holder of the obligation from another person who was, at the time of the acquisition, not related to the holder or the obligation is deemed by subsection 50(1) to be reacquired. 7 Significant interest is also defined as a person who owns shares in the capital stock of the corporation that would give the person 25 percent or more of the votes that could be cast under all circumstances at an annual meeting of shareholders or shares of the capital stock of the corporation having a fair market value of all the issued shares of the capital stock of the corporation. Tax Notes International October 17,

4 II. Position of the Creditor As mentioned above, section 80 applies only to determine the tax position to the debtor, but has no application to the creditor. If a creditor holds a debt obligation as capital property, the general rule in paragraph 40(1)(b) of the act provides that, when capital property is disposed of in the year, the taxpayer has a capital loss equal to the difference between the adjusted cost base of the debt obligation plus any costs of disposition minus the proceeds of disposition. Under subparagraph 40(2)(g)(ii), a taxpayer s capital loss on the disposition of a debt or other right to receive an amount is nil unless the debt was acquired to gain or produce income from a business or property (other than exempt income), or the debt was acquired by the taxpayer as consideration for the disposition of capital property to a person with whom the taxpayer was dealing at arm s length. If an active partner has advanced funds to a partnership and that amount is forgiven or settled, no forgiven amount arises. A taxpayer need not dispose of the debt obligation to claim a loss. Paragraph 50(1)(a) deems a creditor to have disposed of a debt at the end of the year and to have reacquired it immediately thereafter at a cost equal to nil when the taxpayer establishes that the debt (other than a debt owing to him on the disposition of personal use property) became a bad debt in that year. Bad debt is not defined in the act. Whether a debt has become a bad debt during the year is a question of fact. In Interpretation Bulletin IT-159R3, paragraph 10, the Canada Revenue Agency (CRA) holds that a debt is not a bad debt at the end of a tax year unless the debtor is insolvent and has no means of repaying it or the creditor has exhausted all legal means of collecting it. A debt is considered to be bad for the purposes of section 50 only when the whole amount is uncollectible or when a portion of it has been settled and the remainder is uncollectible. Section 50 may not provide full relief to the creditor even though, for accounting purposes, a loan must be written down. When a taxpayer establishes that an amount receivable is a bad debt in the year, but subparagraph 40(2)(g)(ii) denies the resulting capital loss, the CRA takes the position that paragraph 50(1)(a) does not apply. There will be no deemed disposition or reacquisition of the debt. Any realization of the debt in future years will reduce the adjusted cost base thereof rather than produce a capital gain. When subsection 50(1) applies, the debt is deemed to be disposed of for tax purposes. If the debt is owed by a small-business corporation (except when it is owed to a corporation by a non-arm slength corporation), the resulting capital loss qualifies as a business investment loss. One-half of that loss is deductible against any other income. When a debt obligation is not held as capital property, a taxpayer whose ordinary business includes lending money may deduct from income the amortized cost of a loan when he can establish that it has become uncollectible in the year under subparagraph 20(1)(p)(ii). That condition would easily be satisfied when section 80 applies, particularly when there is a written agreement to that effect. Alternatively, a creditor whose ordinary business includes lending money may be entitled to a reserve under paragraph 20(1)(l) on a doubtful debt. It is a temporary reserve, and the amount deducted in one year is added back to the income of the taxpayer for the next year. When the obligation has not been settled or extinguished, a creditor who has deducted an amount under paragraph 20(1)(p) on a bad debt must include in income any amount later recovered on that debt. III. Alterations of Debt Obligations A. Changes to Terms of Debt Instrument When refinancing indebtedness, it is important to ensure that the debt obligation has not been disposed of and replaced with another debt obligation, or section 80 may apply. For a debt obligation to be extinguished at common law, there must be accord and satisfaction (that is, payment) or a novation. Novation is the annulment of one debt and the creation of a substituted debt in its place. At common law, altering the terms of a debt obligation generally does not result in a novation. Contrary to the common law, the CRA takes the position that section 80 may apply when the terms of a debt obligation are changed. Specifically, the CRA holds that some changes in a debt security are so fundamental that they almost invariably precipitate a disposition 8 of the original security. Those changes include: a change from interest-bearing to interest-free, or vice versa; a change in repayment schedule or maturity date; an increase or decrease in the principal amount of the debt; the addition, alteration, or elimination of a premium payable upon retirement; a change in the debtor; and 8 Interpretation Bulletin IT October 17, 2005 Tax Notes International

5 the conversion of a fixed interest bond to a bond for which interest is payable only to the extent that the debtor has made a profit, or vice versa. Despite the CRA s position in IT-448, it relaxed its position in Technical News No. 14 and stated that if a debt obligation is renegotiated otherwise than as provided for in its original terms, the determination of whether a change in its terms is a substitution of a debt obligation for another should be made in accordance with the law of the relevant jurisdiction. In other words, the CRA has accepted that whether or not a disposition occurs depends on the applicable law. The CRA stated that rescission of a debt obligation will be implied when the parties have effected such an alteration of its terms as to substitute a new obligation in its place, which is entirely inconsistent with the old, or, if not entirely inconsistent with it, inconsistent with it to an extent that goes to the very root of it. In such a case, it is appropriate to view the original obligation as having been disposed of for income tax purposes. In Ontario, rescission occurs only when the changes go to the very root of the original agreement such that there is patent the intention to completely extinguish the first contract, not merely alter it, however extensively, in terms which leave the original subsisting. 9 In Amirault v. The Queen, 90 DTC 1330, the Tax Court considered whether the employee entered into a new stock option agreement. The taxpayer was granted an option in accordance with a stock option plan of his employer. The plan originally offered an opportunity to purchase the shares of the employer at 10 percent below market value. However, when a potential tax problem was identified, the taxpayer agreed to amend the option by substituting a purchase price at the market value on the day the original option was granted. The taxpayer exercised his option rights and claimed a deduction on the basis that he purchased the stock option at fair market value. The minister of national revenue reassessed him, claiming that a new agreement had been entered into and that the new price did not equate with market value on the day the new agreement was made. The court held that no new agreement had been made. It stated: The determination of whether a subsequent agreement has effected a rescission, as opposed to a simple variation, of an earlier agreement depends on the intention of the parties to be gathered from an examination of the subsequent agreement and from all the surrounding 9 See Niagara Air Bus Inc. v. Camerman (1990) 69 O.R. (2d) 717 (Ont. H.C.); rev d by Ont. C.A. on different grounds, (1991) 3 O.R. (3d) 108. circumstances: United Dominion Trust (Jamaica) Ltd. and Michael Mitri Shoucair, [1969] 1 A.C. 340, at page 348. Citing the House of Lords decision in Morris v. Baron [1918] AC 1, the court stated that a written contract may be rescinded by parol either expressly or by the parties entering into a parol contract entirely inconsistent with the written one, or, if not entirely inconsistent with it, inconsistent with it to an extent that goes to the very root of it. The court held that what constitutes a change that goes to the very root of a contract so as to create a rescission depends on the facts of each case. For a debt obligation to be extinguished at common law, there must be accord and satisfaction or a novation. Similarly, in Carma Developers Ltd. v. The Queen, 96 DTC 1798, the taxpayer, CDL, was a wholly owned subsidiary of CL. CDL was heavily indebted to several classes of creditors, particularly operating lenders, project lenders, and debenture holders. The lenders had charges on specific properties of CDL. CDL experienced financial difficulties and sought protection under the Companies Creditors Arrangement Act. A plan was worked out and was filed with and approved by the courts. The CDL plan provided that the creditors assigned to CL the unsecured portion of the indebtedness owed to them by CDL and obtained shares in CL. After the implementation of the CDL plan, the creditors owned about 75 percent of the shares of CL, which in turn owned the debts of CDL assigned to it by the creditors. The minister of national revenue assessed CDL on the basis that the debts of CDL had been settled or extinguished under section 80. The minister of national revenue reduced CDL s capital and noncapital loss carryforwards, the capital cost of its depreciable property, and the adjusted cost base of its nondepreciable capital property. The court held that CDL s debts were not extinguished by novation. There was no new contract. The only difference was the creditor. The court made the following statement on the concept of novation: A novation involves the creation of a new contractual relationship, generally where a debtor is released from its obligation to an obligee with the consent of the obligee and the assumption of the obligation by a third party so that a new obligation arises between the obligee and the third party. Here there is no new contract. The same debt of CDL continues to exist. Only the creditor has changed as the result of the assignment. Tax Notes International October 17,

6 More recently, in Gibralt Capital Corporation v. The Queen, 2002 DTC 1601 (aff d by FCA, 2003 DTC 5270), novation was argued in the context of section 80. A businessman was the sole shareholder of a large group of corporations. The businessman, through personal guarantees, owed the bank C $32 million. A friend of the businessman paid C $10 million to the bank in final payment of the C $32 million debt. His friend, through his corporation, Cal-Con, took assignment of the C $32 million. As a result of a master settlement agreement, the businessman and Cal-Con entered into a new debt restructure agreement in 1993 wherein the businessman turned over many of his assets to Cal-Con. Cal-Con forgave approximately C $16 million. Provincial, a corporation owned by the businessman, was allocated the C $16 million debt. In filing its return for its 1995 tax year ending January 31, 1995, the corporate taxpayer, Gibralt, as the successor to Provincial by amalgamation, reported a reduction in Provincial s noncapital loss carryforward of C $16 million and carried forward from Provincial s 1993 tax year noncapital losses of C $428,890 to reduce its 1995 income to nil. Gibralt s original filing of its 1995 return was done on the assumptions that section 80 of the act applied and that it had sufficient noncapital losses to offset the additional forgiveness of the C $16 million debt. However, Provincial s noncapital losses were disallowed by the minister of national revenue, and Gibralt refiled, arguing that section 80 did not apply. The minister, however, applied section 80. The court found that a new debt obligation was created although no novation occurred. At the Tax Court, Gibralt argued that the C $16 million debt was not a commercial debt obligation under subsection 80(1). Gibralt submitted that when the C $16 million debt was severed and allocated to the different parties under the master settlement agreement, and the other parties were later released, it resulted in a novation. Through the novation, Provincial assumed a new debt legally distinct from the original debt. The new debt, it was argued, was not connected to any source of income, so interest was not and could not have been deductible. The Tax Court found Gibralt s argument untenable. In its view, no novation occurred. In support of its conclusion, it cited the Supreme Court of Canada s decision in National Trust Co. v. Mead, [1990] 5 W.W.R. 459: A novation is a trilateral agreement by which an existing contract is extinguished and a new contract brought into being in its place. Indeed, for an agreement to effect a valid novation the appropriate consideration is the discharge of the original debt in return for a promise to perform some obligation....thecreditor may no longer look to the original party if the obligations under the substituted contract are not subsequently met as promised....assent is the crux of novation. The court found that there was no evidence of the parties assenting to novation. It remarked: In National Trust, supra, the Supreme Court added that The essence of novation is the substitution of debtors. The Appellant argues that with regard to the $9 million, Provincial was substituted for the other joint and several creditors and that a new obligation arose between Provincial and the Appellant. I find that substitution of debtors contemplates a complete substitution. Presently, we have the individual assumption of a joint and several debt by each of the original joint and several debtors and not the substitution of debtors as contemplated by novation. The cases seem to suggest that when novation or rescission does not occur, there is no new debt obligation, which, in our opinion, is consistent with the common law. In contrast, in General Electric Capital Equipment Finance Inc. v. The Queen, 2002 DTC 6734, 10 the court found that a new debt obligation was created although no novation occurred. In Canada, interest paid by a Canadian resident to a nonresident is generally subject to withholding tax at the rate of 25 percent. However, if the requirements of the domestic withholding tax exemption in subparagraph 212(1)(b)(vii) are met, a Canadian corporation may borrow money from a nonresident lender and be exempt from paying a 25 percent withholding tax on interest payments made to the nonresident lender. A nonresident lender is exempt from withholding tax if the borrower is not required to pay more than 25 percent of the principal amount of the loan within five years from the date of issue. The five-year period may be shortened and still qualify for the exemption in the event of failure or default under the said terms or agreement Leave to appeal to the Supreme Court of Canada was denied on October 3, The CRA considers an event of failure or default under the terms of a loan agreement to be an event that has commercial reality, is beyond the control of the lender and is therefore not contrived....anevent that occurs as a consequence of an act by a person or persons who are not a party to the loan agreement is usually not considered a failure or default under the terms of the loan agreement. A default in payment under the loan, a breach of the credit covenants in the loan agreement, a failure to achieve or maintain financial ratios required by the loan agreement, or a change of control (Footnote continued on next page.) 292 October 17, 2005 Tax Notes International

7 In the General Electric decision, the issue was whether amendments to the terms of a financing agreement so materially altered the agreement as to result in the creation of a new obligation and the rescission of the original obligation. One of GE s predecessors, International Harvester Credit Corp. of Canada Limited (IHCC) (indirectly owned by International Harvester Co. (IHCo)), financed retail and wholesale sales in Canada of International Harvester products. While raising capital for its financing business from March 15, 1977, to August 8, 1980, IHCC issued four subordinated promissory notes with maturity dates that differed by at least five years from the original issue date to two Bermudan corporations and one U.S. corporation, all part of the IHCo group. The notes did not meet the requirements of the exemption in subparagraph 212(1)(b)(vii) because the beneficial owners of the notes did not deal at arm s length with IHCC. For some unknown reason, IHCC did not pay withholding tax on the interest paid to the non-arm s-length parties, and it was reassessed in 1984 by the minister of national revenue. IHCC paid the applicable withholding taxes. Several changes were then made to the promissory notes. In separate agreements dated February 18, 1985, the beneficial owner of each of the promissory notes sold them to a Netherlands corporation, Harneth, also indirectly owned by IHCo. (The minister did not, however, dispute that IHCC and Harneth dealt at arm s length at the time the interest was paid.) In each case, interest on the applicable note was payable at such a rate as to result in the holder receiving, after the application of any applicable withholding tax, a net return equal to the rate of interest stated on the face of that note. The principal amount of each note was also reduced by the amount of the withholding tax payment IHCC had made on behalf of the holder as a result of the 1984 assessment. On December 18, 1986, the shares of IHCC were sold to Genelcan Limited, an arm s-length party and subsidiary of GE. At the time of the transfer, none of the notes had been repaid. Hence, Genelcan caused IHCC to pay in full all amounts owing on account of the outstanding principal and accrued and unpaid interest on the notes held by Harneth. IHCC paid Harneth all amounts owing under the notes without remitting withholding tax on the interest payments. The minister assessed IHCC (now known as GE) for withholding tax on the interest it had paid on the notes. GE argued that, under subparagraph 212(1)(b) (vii), withholding tax was not exigible because the of the borrower are some examples that may constitute a failure or default, if specified in the loan agreement. interest was paid to an arm s-length party and the original terms of the notes met the requirements of subparagraph 212(1)(b)(vii). It also argued that the only way an existing legal obligation can be superseded to acquire a new issue date is by a novation. The minister of national revenue s position was that the amendments to the original promissory notes resulted in a rescission of the original notes, thus creating new obligations. The new obligations did not meet the requirements of subparagraph 212(1)(b)(vii) because the terms were for a period of less than five years (the amendments provided an extension of one year). The court found that the original promissory notes were so materially altered as to result in new obligations. GE lost its appeal at the federal court-trial division level. The court found that the original promissory notes were so materially altered by the agreements of February 18, 1995, as to result in new obligations. GE appealed to the Federal Court of Appeal. The Federal Court of Appeal dismissed GE s appeal and held that the effect of the February 18, 1985, agreements was to change the interest rate, the manner of calculating the interest rate, the parties, and the maturity date of each note, and to reduce the principal amount. That created a new obligation under paragraph 212(1)(b). Also, IHCC was obliged to pay to Harneth more than 25 percent of the principal amount of the obligation within five years of the issue date on February 18, According to the court, the fundamental terms of the promissory notes were: the identity of the debtor; the principal amount of the note; the amount of interest under the note; and the maturity date of the note. Because all but one of those fundamental terms were changed, the court concluded that when it can be said that substantial changes have been made to the fundamental terms of an obligation which materially alter the terms of that obligation, then a new obligation is created within the meaning of subparagraph 212(1)(b)(vii) of the Act. The court noted that although novation is not necessarily the same thing as a change of obligation as that term is used in subsection 212(1)...because novation is an issue of fact, whether or not a new obligation has been created is also, by analogy, a question of fact. It held that the changes did not amount to a novation, but were sufficient to create a new obligation. Tax Notes International October 17,

8 Both courts found it was important that the principal amount was reduced to offset withholding taxes paid, but neither court discussed the application of subsection 215(6). 12 General Electric seems to confirm the CRA s position in IT-448. This case cautions the unwary: Changes to the terms of a loan may create a new debt obligation even if the obligor remains unchanged. Unfortunately, the Federal Court of Appeal did not set out clear guidelines on how significant the changes should be to constitute a new debt obligation under subparagraph 212(1)(b)(vii). This case cautions the unwary: Changes to the terms of a loan may create a new debt obligation even if the obligor remains unchanged. Of course, the CRA accepts the General Electric decision. In a technical interpretation, 13 the CRA adopts the Federal Court of Appeal s decision that the term novation is not included in subparagraph 212(1)(b)(vii) of the Act and that a novation is not required for there to be a new obligation for the purpose of subsection 212(1) of the Act. According to the CRA, when there has been a novation, rescission or accord and satisfaction at common law, it would usually mean that one contract/obligation has been replaced by a new contract/obligation. However, in many cases it is not easy for both income tax practitioners and the CRA to determine whether changes made to a debt obligation result in the creation of a new obligation at law. Often when a debtor has defaulted on a debt obligation, the parties will consider rescheduling the obligation. Given the CRA s position and the recent General Electric decision on a possible deemed disposition on a change in the repayment schedule or maturity date, it may be best not to reschedule. Instead, a waiver or capitalization of interest should be considered. B. Conversion Into Equity When the debt-to-equity ratio of the debtor corporation is out of line, the debtor may be anxious to 12 Subsection 215(6) provides that the person who is obliged under section 215 to withhold the amount of the tax and fails to do so is personally liable for the amount of the tax. Subsection 215(6) provides that the person can recover that amount from the nonresident by deducting that amount from any amount paid or credited to the nonresident or otherwise. 13 Technical Interpretation , dated June 17, reduce the amount of indebtedness on the balance sheet and convert some or all of that debt into equity. The conversion may then enable the debtor to seek outside sources of financing to provide it with additional working capital so that it can continue to carry on its business. When a debt obligation held by the creditor as capital property is converted into shares of the debtor corporation under the terms of a debt obligation, section 51 permits a tax-free rollover. The conversion is deemed not to be a disposition of property, and the adjusted cost base of the debt obligation converted becomes the adjusted cost base of the shares issued in consideration. Paragraph 80(2)(g) provides that a debtor that issues shares (other than excluded securities) to a creditor in satisfaction of a debt held by the creditor is deemed to have paid an amount in satisfaction of the debt equal to the fair market value of the issued shares. Generally, if the shares fair market value is equal to the debt, the debt forgiveness rules will not apply. As a result, it may be a simple task to clean up the balance sheet and improve the debt-to-equity ratio when the debt is convertible into equity. However, most debt obligations are not convertible into equity under their terms. Can a conversion feature be added to the debt obligation and the conversion be made under the rollover provisions of section 51? In Interpretation Bulletin IT-448, the CRA said that the addition of an optional conversion feature to a particular class of security does not generally involve a disposition. As a result, it may be possible to amend the terms of the outstanding debt obligation to add a conversion feature and later convert the debt to equity. However, in reality, many debtors are hesitant to lose the security that may be attached to the debt obligation. And if the shares carry a fixed dividend rate or a fixed retraction amount, they are taxable preferred shares under the act. As a result, the issuing corporation will be subject to a tax of either 50 percent 14 or 40 percent/25 percent (Part VI.1 tax). However, the corporation is entitled to a deduction in calculating its Part I tax liability equal to three times the amount of Part VI.1 tax paid. Therefore, Part VI.1 tax is recoverable under Part I of the act. However, a debtor corporation with financial difficulties is unlikely to have sufficient Part I income to fully recover that tax. The Part VI.1 tax contains a few exceptions that may still make the issuance of taxable preferred shares a viable option. For example, if, on the conversion of the debt to equity, the shareholder will 14 The rate is now percent. It is proposed that it be reduced to 50 percent. 294 October 17, 2005 Tax Notes International

9 have a substantial interest 15 in the corporation, the preferred share rules will not apply. Also, no tax is payable under Part VI.1 when the amount of dividends paid in any year on all classes of taxable preferred shares issued by the corporation (and associated corporations) does not exceed C $500,000. When a related party holds the debt obligation, or the size of the debt obligation is not too large, a conversion of debt to preferred shares may provide a viable alternative. The act also includes rules designed to discourage the issuance of term preferred shares. 16 Before the introduction of those rules, preferred shares were commonly used to finance corporations. Preferred shares were issued by operating corporations to financial institutions. Dividends paid on those shares (which would otherwise be interest income if the financial institutions loaned funds to the operating corporations) would be tax-free to the holders under subsection 112(1), which allows a deduction on a dividend received by another corporation. Subsection 112(2.1) was enacted to deny the intercorporate dividend deduction in similar situations. Distressed preferred shares are similar to term preferred shares. Generally, they are issued in circumstances of financial difficulty. A distressed preferred share would otherwise be a term preferred share issued: as part of a proposal or an arrangement approved by a court under the Bankruptcy and Insolvency Act; when all or substantially all of the issuer s assets are under the control of a receiver, receiver-manager, sequestrator, or trustee in bankruptcy; or when, because of financial difficulty, the issuer or a related corporation resident in Canada was in default or could reasonably be expected to default on a debt owed to an arm s-length person, and that share was issued, in whole or in substantial part, directly or indirectly, in exchange or substitution of that debt. 15 Generally, substantial interest means a shareholder that has 25 percent or more of the votes and value of the corporation and also owns either 25 percent or more of the nontaxable preferred shares of the corporation or 25 percent or more of each class of shares of the corporation. 16 Term preferred share is defined in the act. Generally, it gives the holder the right to cause (or the issuing corporation may be required to implement) the redemption, acquisition, or cancellation of the share or a reduction of the paid-up capital in the share. The definition of term preferred shares also includes a reference to any share in which the issuing corporation or any other person provides any form of guarantee, security, or similar indemnity or covenant with respect to the share. Distressed preferred shares are not subject to term preferred share rules for up to five years after the shares are issued. If the distressed preferred shares remain outstanding for longer than five years, they become term preferred shares. Distressed preferred shares are subject to debt forgiveness rules and are treated as debt if redeemed, acquired, or cancelled for less than their face value. Before debt is converted into preferred shares, a detailed review of the rules is necessary to ensure that they don t become applicable. The rules are complex 17 and are beyond the scope of this article. 18 Before debt is converted into preferred shares, a detailed review of the rules is necessary to ensure that they don t become applicable. C. Replacing Debt With Debt Replacing existing debt with another debt is generally preferable to issuing equity for debt, because the value of the new debt is irrelevant to the debt forgiveness rules. There is no forgiveness of debt if the principal amount remains unchanged. 19 The exchange of a debt for another debt may be completed on a rollover basis under section 51.1, which is applicable only when: the convertible obligation exchanged contains in its terms a provision conferring upon the holder the right to make the exchange; and the amount payable on the new obligation at maturity is the same as the amount that would have been payable at maturity on the convertible obligation exchanged. That provision applies only when the convertible obligation is capital property of the taxpayer. When 17 See, e.g., Citibank Canada v. The Queen, [2001] 2 CTC 2260 (TCC) (aff d. [2002] 2 CTC 171 (FCA)), in which the court referred to the statutory definition of term preferred share as follows: The definition of term preferred share is prolix in the extreme. The persons who drafted that definition did not practise any economy of words or language. One may well ask how many members of parliament understood the definition when it was made law by amendment to the Act.... Itissodetailed; so particularized; so long and tedious and excessive in its use of language. 18 For a detailed analysis of those rules, see David Downie and Tony Martin, The Preferred Share Rules: An Introduction, Report of Proceedings of Fifty-Fifth Tax Conference, 2003 Tax Conference (Toronto: Canadian Tax Foundation, 2004), 52: See paragraph 80(2)(h) of the act. Tax Notes International October 17,

10 it applies, the cost of the new obligation and the proceeds of disposition of the convertible obligation are deemed to equal the adjusted cost base of the convertible obligation, therefore deferring any tax consequences on the disposition. When bonds, debentures, or notes are held by a financial institution, the financial institution is subject to the specified debt obligations and mark-tomarket rules in sections to Under section (for specified debt obligations) and section (for mark-to-market properties), any gain or loss on the disposition of those properties by a financial institution is on income account. Consequently, section 51.1 does not apply to the conversion of debt obligations by financial institutions. As discussed above, when both the debtor and creditor are Canadian residents, the tax consequences on an exchange of debt for another debt are generally neutral. However, the exchange of an existing debt for a new debt may cause adverse Canadian tax consequences with a nonresident creditor. As discussed above, interest paid by a Canadian resident to a nonresident is generally subject to withholding tax at 25 percent. However, a nonresident lender is exempt from withholding tax under subparagraph 212(1)(b)(vii) if the borrower is not required to pay more than 25 percent of the principal amount of the loan within five years of the date of issue. Subsection 212(3) may allow a corporation in financial difficulty to treat a debt obligation that replaces another as having been issued when that other obligation was issued. The circumstances of financial difficulty include: as part of a court-approved proposal to, or arrangement with, the borrower s creditors under the Bankruptcy and Insolvency Act (Canada); when all or substantially all of the borrower s assets are under the control of a receiver, receiver-manager, sequestrator, or trustee in bankruptcy; or when, because of financial difficulty, the issuer of the replacement obligation, or a non-arm slength Canadian resident corporation, is in default or could reasonably be expected to default on the original obligation. The borrower must have used the original debt to finance an active business in Canada. The Department of Finance has proposed to eliminate that requirement for replacement obligations issued after The department said that there was no clear basis in tax policy for this requirement. Of course, nonresident creditors should be cautious of the General Electric decision when restructuring debt. There is speculation that under the next protocol to the Canada-U.S. Income Tax Convention (1980), some Canadian-source interest would be paid free of Canadian withholding tax to arm s-length U.S. residents. If that is allowed, U.S. treaty beneficiaries who deal at arm s length with Canadian debtors need not be concerned about whether a new debt has been created on a restructuring of a subparagraph 212(1)(b)(vii) debt. IV. Conclusion There are some tools in the act that may be used to restructure the debts of a corporation without significant adverse tax consequences when the corporation has financial difficulties. Unfortunately, when a corporation has financial difficulties, the tax advisers who have devised the most tax-effective plan will be unable to guarantee that a debtor corporation will not fall from grace, as happened to Enron. 296 October 17, 2005 Tax Notes International

FEDERATED PRESS CONFERENCE TAXATION OF CORPORATE REORGANIZATION February 27, 28 and March 1, 2002. DEBT RESTRUCTURING Kathleen S.M.

FEDERATED PRESS CONFERENCE TAXATION OF CORPORATE REORGANIZATION February 27, 28 and March 1, 2002. DEBT RESTRUCTURING Kathleen S.M. FEDERATED PRESS CONFERENCE TAXATION OF CORPORATE REORGANIZATION February 27, 28 and March 1, 2002 DEBT RESTRUCTURING Kathleen S.M. Hanly Debt Restructuring Distress preferred shares Debt forgiveness rules

More information

WHAT HAPPENS IF A CORPORATION BECOMES A BANKRUPT?

WHAT HAPPENS IF A CORPORATION BECOMES A BANKRUPT? A Selection of Income Tax Issues in the Downsizing and Restructuring of an Insolvent Company by Joan E. Jung, Tax Partner Minden Gross LLP, a member of MERITAS Law Firms Worldwide. (First presented at

More information

Debt Restructuring. 17th Taxation of Corporate Reorganization Conference January 22, 23 & 24, 2013 Kathleen S.M. Hanly and Kevin H.

Debt Restructuring. 17th Taxation of Corporate Reorganization Conference January 22, 23 & 24, 2013 Kathleen S.M. Hanly and Kevin H. Debt Restructuring 17th Taxation of Corporate Reorganization Conference January 22, 23 & 24, 2013 Kathleen S.M. Hanly and Kevin H. Yip Debt Restructuring Legislative framework for insolvency proceedings

More information

XXXXXXXXXX 2011-039356 V. Srikanth June 13, 2011

XXXXXXXXXX 2011-039356 V. Srikanth June 13, 2011 LANGIND E DOCNUM 2011-0393561E5 REFDATE 110613 SUBJECT Debt forgiveness SECTION 80, 20(1)(p), 39(1)(c), 40(2)(g)(ii), 61.3 Please note that the following document, although believed to be correct at the

More information

Explanatory Notes Relating to the Income Tax Act, the Excise Tax Act and the Income Tax Regulations

Explanatory Notes Relating to the Income Tax Act, the Excise Tax Act and the Income Tax Regulations Explanatory Notes Relating to the Income Tax Act, the Excise Tax Act and the Income Tax Regulations Published by The Honourable James M. Flaherty, P.C., M.P. Minister of Finance September 2013 Preface

More information

OVERVIEW OF SECTION 80

OVERVIEW OF SECTION 80 FINANCING ISSUES OVERVIEW OF SECTION 80 RON DURAND STIKEMAN ELLIOTT LLP June 2, 2011 TABLE OF CONTENTS OVERVIEW OF SECTION 80...1 PURPOSE 1 OLD RULE 2 OLD PLANNING OPPORTUNITIES...4 OFFICIAL REACTION TO

More information

INCOME TAX CONSIDERATIONS IN SHAREHOLDERS' AGREEMENTS

INCOME TAX CONSIDERATIONS IN SHAREHOLDERS' AGREEMENTS INCOME TAX CONSIDERATIONS IN SHAREHOLDERS' AGREEMENTS Evelyn R. Schusheim, B.A., LL.B., LL.M. 2010 Tax Law for Lawyers Canadian Bar Association The Queen s Landing Inn Niagara-on-the-Lake, Ontario OVERVIEW

More information

Income Tax Issues in the Purchase and Sale of Assets. Catherine A. Brayley

Income Tax Issues in the Purchase and Sale of Assets. Catherine A. Brayley Income Tax Issues in the Purchase and Sale of Assets Catherine A. Brayley Income Tax Issues in the Purchase and Sale of Assets Catherine A. Brayley Bennett Jones LLP (Toronto) Table of Contents Scope of

More information

Debt restructuring in Canada Domestic and U.S. cross-border case studies (Part 1)

Debt restructuring in Canada Domestic and U.S. cross-border case studies (Part 1) This article was originally published in the Journal of International Taxation in February 2011 Debt restructuring in Canada Domestic and U.S. cross-border case studies (Part 1) Steven Hurowitz (KPMG),

More information

ASPE AT A GLANCE Section 3856 Financial Instruments

ASPE AT A GLANCE Section 3856 Financial Instruments ASPE AT A GLANCE Section 3856 Financial Instruments December 2014 Section 3856 Financial Instruments Effective Date Fiscal years beginning on or after January 1, 2011 1 SCOPE Applies to all financial instruments

More information

Dealing with Stock Options in Corporate Acquisitions Navigating the Labyrinth

Dealing with Stock Options in Corporate Acquisitions Navigating the Labyrinth Dealing with Stock Options in Corporate Acquisitions Navigating the Labyrinth Precis In a transaction involving the purchase and sale of shares of a corporation, there may be outstanding employee stock

More information

NEW STOCK OPTION RULES

NEW STOCK OPTION RULES 1. INTRODUCTION This paper concerns the new rules relating to stock options. It discusses the various provisions of the new rules and looks at some of the planning opportunities that exist with these new

More information

Cross Border Tax Issues

Cross Border Tax Issues Cross Border Tax Issues By Reinhold G. Krahn December 2000 This is a general overview of the subject matter and should not be relied upon as legal advice or opinion. For specific legal advice on the information

More information

ALLOWABLE BUSINESS INVESTMENT LOSSES PART 1

ALLOWABLE BUSINESS INVESTMENT LOSSES PART 1 ALLOWABLE BUSINESS INVESTMENT LOSSES PART 1 This issue of the Legal Business Report provides current information to the clients of Alpert Law Firm on allowable business investment losses ( ABILs ). Alpert

More information

Presented by: Matt McCulloch H. Michael Dolson

Presented by: Matt McCulloch H. Michael Dolson Presented by: Matt McCulloch H. Michael Dolson To begin it is important to start by confirming that CRA is the most dangerous creditor in insolvency situations for the following reasons: Highly sophisticated

More information

PENNSYLVANIA PERSONAL INCOME TAX GUIDE CANCELLATION OF DEBT FOR PENNSYLVANIA PERSONAL INCOME TAX PURPOSES

PENNSYLVANIA PERSONAL INCOME TAX GUIDE CANCELLATION OF DEBT FOR PENNSYLVANIA PERSONAL INCOME TAX PURPOSES CHAPTER 24: CANCELLATION OF DEBT FOR PENNSYLVANIA PERSONAL INCOME TAX PURPOSES TABLE OF CONTENTS I. OVERVIEW OF CANCELLATION OF DEBT FOR PENNSYLVANIA PERSONAL INCOME TAX PURPOSES... 7 A. In General...

More information

SECTION 85 SAMPLE PROBLEMS

SECTION 85 SAMPLE PROBLEMS SECTION 85 SAMPLE PROBLEMS PROBLEM 1 Jenny developed a new product that she now sells through a number of retail stores. Over the years, since she started the business, she has grown to 5 stores. Jenny

More information

Employee Life and Health Trust Explanatory Notes

Employee Life and Health Trust Explanatory Notes Employee Life and Health Trust Explanatory Notes 6(1)(a) Paragraph 6(1)(a) of the Income Tax Act (the Act) provides for the inclusion in computing the income of a taxpayer from an office or employment

More information

AcuityAds Inc. Condensed Consolidated Interim Financial Statements. Three months ended March 31, 2014 and 2013 (Unaudited)

AcuityAds Inc. Condensed Consolidated Interim Financial Statements. Three months ended March 31, 2014 and 2013 (Unaudited) AcuityAds Inc. Condensed Consolidated Interim Financial Statements Condensed Consolidated Interim Statements of Financial Position March 31, December 31, 2014 2013 Assets Current assets: Cash $ 446,034

More information

PURCHASE AND SALE OF A BUSINESS - SHARE TRANSACTIONS

PURCHASE AND SALE OF A BUSINESS - SHARE TRANSACTIONS TAX LAW FOR LAWYERS PURCHASE AND SALE OF A BUSINESS - SHARE TRANSACTIONS INCLUDING TAX ISSUES IN DOCUMENTATION Douglas A. Cannon Mario Abrioux McCarthy Tétrault LLP May 2010 TABLE OF CONTENTS PART ONE:

More information

tes for Guidance Taxes Consolidation Act 1997 Finance Act 2014 Edition - Part 13

tes for Guidance Taxes Consolidation Act 1997 Finance Act 2014 Edition - Part 13 Part 13 Close companies CHAPTER 1 Interpretation and general 430 Meaning of close company 431 Certain companies with quoted shares not to be close companies 432 Meaning of associated company and control

More information

Indian Accounting Standard (Ind AS) 12. Income Taxes

Indian Accounting Standard (Ind AS) 12. Income Taxes Indian Accounting Standard (Ind AS) 12 Contents Income Taxes Paragraphs Objective Scope 1 4 Definitions 5 11 Tax base 7 11 Recognition of current tax liabilities and current tax assets 12 14 Recognition

More information

RULE 1 INTERPRETATION AND EFFECT

RULE 1 INTERPRETATION AND EFFECT RULE 1 INTERPRETATION AND EFFECT 1.1. In these Rules unless the context otherwise requires, the expression: Affiliate or Affiliated Corporation means in respect of two corporations, either corporation

More information

ALBERTA CORPORATE TAX ACT

ALBERTA CORPORATE TAX ACT Province of Alberta ALBERTA CORPORATE TAX ACT Revised Statutes of Alberta 2000 Current as of December 11, 2015 Office Consolidation Published by Alberta Queen s Printer Alberta Queen s Printer 7 th Floor,

More information

Structuring Entry into the Canadian Market: A Corporate Tax Primer

Structuring Entry into the Canadian Market: A Corporate Tax Primer Structuring Entry into the Canadian Market: A Corporate Tax Primer It is critical for non-residents to obtain proper Canadian legal advice respecting their long-term tax position before entering the Canadian

More information

This is a Public Ruling made under section 91D of the Tax Administration Act 1994.

This is a Public Ruling made under section 91D of the Tax Administration Act 1994. DEBT FACTORING ARRANGEMENTS AND GST PUBLIC RULING - BR Pub 00/07 This is a Public Ruling made under section 91D of the Tax Administration Act 1994. Taxation Laws All legislative references are to the Goods

More information

Contents. Application. Summary

Contents. Application. Summary NO.: IT-99R5 (Consolidated) DATE: See Bulletin Revisions section SUBJECT: REFERENCE: INCOME TAX ACT Legal and Accounting Fees Paragraph 18(1)(a) (also sections 9 and 239; subsections 13(12), 20(9), and

More information

Tax Issues for Bankruptcy & Insolvency

Tax Issues for Bankruptcy & Insolvency Tax Issues for Bankruptcy & Insolvency By David S. De Jong, Esquire, CPA Stein, Sperling, Bennett, De Jong, Driscoll & Greenfeig, PC 25 West Middle Lane Rockville, Maryland 20850 301-838-3204 ddejong@steinsperling.com

More information

Tax Consequences of Different Types of Transfers and Different. Business Transactions

Tax Consequences of Different Types of Transfers and Different. Business Transactions Tax Consequences of Different Types of Transfers and Different Business Transactions by Joan E. Jung, Tax Partner Minden Gross LLP, a member of MERITAS Law Firms Worldwide. (Excerpts from materials presented

More information

Certain capitalized terms in this Premium Dividend and Dividend Reinvestment Plan have the meaning assigned to them under "Definitions" below.

Certain capitalized terms in this Premium Dividend and Dividend Reinvestment Plan have the meaning assigned to them under Definitions below. Premium Dividend and Dividend Reinvestment Plan Certain capitalized terms in this Premium Dividend and Dividend Reinvestment Plan have the meaning assigned to them under "Definitions" below. Important

More information

CANADIAN CORPORATE TAXATION. A General Guide January 31, 2011 TABLE OF CONTENTS INCORPORATION OF A BUSINESS 1 POTENTIAL ADVANTAGES OF INCORPORATION 1

CANADIAN CORPORATE TAXATION. A General Guide January 31, 2011 TABLE OF CONTENTS INCORPORATION OF A BUSINESS 1 POTENTIAL ADVANTAGES OF INCORPORATION 1 CANADIAN CORPORATE TAXATION A General Guide January 31, 2011 TABLE OF CONTENTS PART A PAGE INCORPORATION OF A BUSINESS 1 POTENTIAL ADVANTAGES OF INCORPORATION 1 POTENTIAL DISADVANTAGES OF INCORPORATION

More information

TAX PLANNING FOR THE SALE OF YOUR BUSINESS

TAX PLANNING FOR THE SALE OF YOUR BUSINESS TAX PLANNING FOR THE SALE OF YOUR BUSINESS REFERENCE GUIDE If you own a corporation that carries on an active business, you may be in a position at some point to consider the sale of your business. This

More information

UTILIZATION OF TAX LOSSES AND DEBT RESTRUCTURING

UTILIZATION OF TAX LOSSES AND DEBT RESTRUCTURING UTILIZATION OF TAX LOSSES AND DEBT RESTRUCTURING GERALD D. COURAGE MILLER THOMSON LLP JANUARY 10, 2008 TABLE OF CONTENTS I. INTRODUCTION...1 II. TRIGGERING ACCRUED LOSSES THE STOP-LOSS RULES...1 A. THE

More information

INTERNAL REVENUE SERVICE NATIONAL OFFICE TECHNICAL ADVICE MEMORANDUM. Taxpayer s Name: Taxpayer s Address:

INTERNAL REVENUE SERVICE NATIONAL OFFICE TECHNICAL ADVICE MEMORANDUM. Taxpayer s Name: Taxpayer s Address: INTERNAL REVENUE SERVICE NATIONAL OFFICE TECHNICAL ADVICE MEMORANDUM Number: 200101001 Release Date: 1/5/2001 Third Party Contact: None Index (UIL) No.: 166.03-00 CASE MIS No.: TAM-103260-00/CC:ITA:B6

More information

2011 TAX LAW FOR LAWYERS

2011 TAX LAW FOR LAWYERS 2011 TAX LAW FOR LAWYERS Rollover Provisions of Sections 51, 85.1, 86 and 86.1 BY Donald N. Cherniawsky, Q.C., C.A. F. Patrick Kirby, Q.C., F.C.A. Mike Dolson Felesky Flynn LLP (Edmonton) May 23, 2011

More information

International Accounting Standard 12 Income Taxes. Objective. Scope. Definitions IAS 12

International Accounting Standard 12 Income Taxes. Objective. Scope. Definitions IAS 12 International Accounting Standard 12 Income Taxes Objective The objective of this Standard is to prescribe the accounting treatment for income taxes. The principal issue in accounting for income taxes

More information

Insert index tab here: 4. TAXATION OF PERSONAL TRUSTS. (Then recycle this sheet.)

Insert index tab here: 4. TAXATION OF PERSONAL TRUSTS. (Then recycle this sheet.) Insert index tab here: 4. TAXATION OF PERSONAL TRUSTS (Then recycle this sheet.) TAX FUNDAMENTALS FOR THE ESTATE PRACTITIONER PAPER 4.1 Taxation of Personal Trusts These materials were prepared by Nicholas

More information

Term Sheet ISIN: NO 0010672827. FRN Marine Harvest ASA Senior Unsecured Open Bond Issue 2013/2018 (the Bonds or the Loan )

Term Sheet ISIN: NO 0010672827. FRN Marine Harvest ASA Senior Unsecured Open Bond Issue 2013/2018 (the Bonds or the Loan ) Term Sheet ISIN: NO 0010672827 FRN Marine Harvest ASA Senior Unsecured Open Bond Issue 2013/2018 (the Bonds or the Loan ) Settlement date: Expected to be 12 March 2013 Issuer: Currency: Loan Amount / First

More information

Income Taxes STATUTORY BOARD SB-FRS 12 FINANCIAL REPORTING STANDARD

Income Taxes STATUTORY BOARD SB-FRS 12 FINANCIAL REPORTING STANDARD STATUTORY BOARD SB-FRS 12 FINANCIAL REPORTING STANDARD Income Taxes This version of the Statutory Board Financial Reporting Standard does not include amendments that are effective for annual periods beginning

More information

FINAL TERM SHEET. Scatec Solar ASA Senior Unsecured Bond Issue 2015/2018 (the Bonds or the Bond Issue )

FINAL TERM SHEET. Scatec Solar ASA Senior Unsecured Bond Issue 2015/2018 (the Bonds or the Bond Issue ) 11 November 2015 FINAL TERM SHEET Scatec Solar ASA Senior Unsecured Bond Issue 2015/2018 (the Bonds or the Bond Issue ) ISIN: NO001 075229.8 Issuer: Group: Currency: Borrowing Amount: Coupon Rate: Scatec

More information

IBA 2001 CANCUN COMMITTEE NP STRUCTURING INTERNATIONAL EQUITY COMPENSATION PLANS CASE STUDY

IBA 2001 CANCUN COMMITTEE NP STRUCTURING INTERNATIONAL EQUITY COMPENSATION PLANS CASE STUDY IBA 2001 CANCUN COMMITTEE NP STRUCTURING INTERNATIONAL EQUITY COMPENSATION PLANS CASE STUDY CANADIAN APPROACH BY ALAIN RANGER FASKEN MARTINEAU DuMOULIN LLP Stock Exchange Tower Suite 3400, P.O. Box 242

More information

Tax Brief. 9 April, 2009. Debt for Equity Swaps. 1. Introduction. 2. Income tax issues for the creditor

Tax Brief. 9 April, 2009. Debt for Equity Swaps. 1. Introduction. 2. Income tax issues for the creditor Tax Brief 9 April, 2009 Debt for Equity Swaps 1. Introduction It may be possible to find a silver lining in the cloud of economic woes being experienced by many struggling businesses unable to meet their

More information

Canadian Taxation of Foreign Exchange Gains and Losses

Canadian Taxation of Foreign Exchange Gains and Losses Volume 53, Number 2 January 12, 2009 Canadian Taxation of Foreign Exchange Gains and Losses by Steve Suarez and Byron Beswick Reprinted from Tax Notes Int l, January 12, 2009, p. 157 Canadian Taxation

More information

TAX LETTER for May 2004 INCOME ATTRIBUTION RULES SPLIT INCOME OF MINOR CHILDREN FEDERAL BUDGET HIGHLIGHTS AROUND THE COURTS

TAX LETTER for May 2004 INCOME ATTRIBUTION RULES SPLIT INCOME OF MINOR CHILDREN FEDERAL BUDGET HIGHLIGHTS AROUND THE COURTS BLAIN M. ARCHER, B.Sc., CA* PAUL M. FOURNIER, B.Sc., CA* RUSS J. WILSON, B.Sc., CA* KATRIN BRAUN, B.B.A., CA* KELLY A. RIEHL, B. Comm., CA* TAX LETTER for May 2004 INCOME ATTRIBUTION RULES SPLIT INCOME

More information

NORTHERN BLIZZARD RESOURCES INC. STOCK DIVIDEND PROGRAM

NORTHERN BLIZZARD RESOURCES INC. STOCK DIVIDEND PROGRAM NORTHERN BLIZZARD RESOURCES INC. STOCK DIVIDEND PROGRAM Introduction This Stock Dividend Program (the "Program") provides eligible holders ("Shareholders") of common shares ("Common Shares") of Northern

More information

2003 ISDA. Credit Derivatives. Definitions ISDA INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.

2003 ISDA. Credit Derivatives. Definitions ISDA INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC. 2003 ISDA Credit Derivatives Definitions ISDA INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC. Copyright 2003 by INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC. 360 Madison Avenue, 16 th Floor

More information

Sri Lanka Accounting Standard LKAS 12. Income Taxes

Sri Lanka Accounting Standard LKAS 12. Income Taxes Sri Lanka Accounting Standard LKAS 12 Income Taxes CONTENTS paragraphs SRI LANKA ACCOUNTING STANDARD-LKAS 12 INCOME TAXES OBJECTIVE SCOPE 1 4 DEFINITIONS 5 11 Tax base 7 11 RECOGNITION OF CURRENT TAX LIABILITIES

More information

How Canada Taxes Foreign Income

How Canada Taxes Foreign Income - 1 - How Canada Taxes Foreign Income (Summary) Purpose of the book The purpose of writing this book, entitled How Canada Taxes Foreign Income is particularly for the benefit of foreign tax lawyers, accountants,

More information

SMALL BUSINESS INVESTMENT ACT OF 1958. This Act may be cited as the Small Business Investment Act of 1958.

SMALL BUSINESS INVESTMENT ACT OF 1958. This Act may be cited as the Small Business Investment Act of 1958. This compilation includes P.L. 110-246, enacted 6/18/08. SMALL BUSINESS INVESTMENT ACT OF 1958 (Public Law 85-699, as amended) Sec. 101. SHORT TITLE This Act may be cited as the Small Business Investment

More information

Binding rulings. Investment Marketing Group Ltd s Geared Equities Investment. Product ruling - BR Prd 96/4. Taxation law

Binding rulings. Investment Marketing Group Ltd s Geared Equities Investment. Product ruling - BR Prd 96/4. Taxation law Binding rulings This section of the TIB contains binding rulings that the Commissioner of Inland Revenue has issued recently. The Commissioner can issue binding rulings in certain situations. Inland Revenue

More information

Non-Resident Investment in Canadian Real Estate. Jack Bernstein and Barbara Worndl

Non-Resident Investment in Canadian Real Estate. Jack Bernstein and Barbara Worndl Non-Resident Investment in Canadian Real Estate Jack Bernstein and Barbara Worndl Nonresident Investment in Canadian Real Estate by Jack Bernstein and Barbara Worndl Jack Bernstein and Barbara Worndl are

More information

Term Sheet ISIN: NO 001 060029.9. Prosafe SE 3 months NIBOR + 3.50 % Senior Unsecured Bond Issue 2011/2016 (the Bonds or the Loan )

Term Sheet ISIN: NO 001 060029.9. Prosafe SE 3 months NIBOR + 3.50 % Senior Unsecured Bond Issue 2011/2016 (the Bonds or the Loan ) Term Sheet ISIN: NO 001 060029.9 Prosafe SE 3 months NIBOR + 3.50 % Senior Unsecured Bond Issue 2011/2016 (the Bonds or the Loan ) Settlement date: Expected to be 25 February 2011 Issuer: Currency: First

More information

Tax Talk For Tough Times: A Primer On Cancellation Of Debt And Related Partnership Matters

Tax Talk For Tough Times: A Primer On Cancellation Of Debt And Related Partnership Matters Tax Talk For Tough Times: A Primer On Cancellation Of Debt And Related Partnership Matters Walter R. Rogers, Jr. Tough times often result in canceled debt and unexpected income. Walter R. Rogers, Jr.,

More information

International Accounting Standard 12 Income Taxes

International Accounting Standard 12 Income Taxes EC staff consolidated version as of 21 June 2012, EN IAS 12 FOR INFORMATION PURPOSES ONLY International Accounting Standard 12 Income Taxes Objective The objective of this Standard is to prescribe the

More information

BANK OF MONTREAL SHAREHOLDER DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN

BANK OF MONTREAL SHAREHOLDER DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN BANK OF MONTREAL SHAREHOLDER DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN This Offering Circular covers common shares of Bank of Montreal (the Bank ) which may be purchased on the open market through

More information

FIRSTSERVICE CORPORATION NOTICE OF REDEMPTION & CONVERSION TO ALL REGISTERED HOLDERS OF OUTSTANDING 7% CUMULATIVE PREFERENCE SHARES, SERIES 1

FIRSTSERVICE CORPORATION NOTICE OF REDEMPTION & CONVERSION TO ALL REGISTERED HOLDERS OF OUTSTANDING 7% CUMULATIVE PREFERENCE SHARES, SERIES 1 FIRSTSERVICE CORPORATION NOTICE OF REDEMPTION & CONVERSION TO ALL REGISTERED HOLDERS OF OUTSTANDING 7% CUMULATIVE PREFERENCE SHARES, SERIES 1 To: All Registered Holders of Outstanding 7% Cumulative Preference

More information

HKAS 12 Revised May November 2014. Hong Kong Accounting Standard 12. Income Taxes

HKAS 12 Revised May November 2014. Hong Kong Accounting Standard 12. Income Taxes HKAS 12 Revised May November 2014 Hong Kong Accounting Standard 12 Income Taxes HKAS 12 COPYRIGHT Copyright 2014 Hong Kong Institute of Certified Public Accountants This Hong Kong Financial Reporting Standard

More information

FARM LEGAL SERIES June 2015 Tax Considerations in Liquidations and Reorganizations

FARM LEGAL SERIES June 2015 Tax Considerations in Liquidations and Reorganizations Agricultural Business Management FARM LEGAL SERIES June 2015 Tax Considerations in Liquidations and Reorganizations Phillip L. Kunkel, Jeffrey A. Peterson, S. Scott Wick Attorneys, Gray Plant Mooty INTRODUCTION

More information

0175/00014699/en Half-Yearly Financial Report GLOBAL DIGITAL SERVICES PLC STC. Correction To:0175/00014529

0175/00014699/en Half-Yearly Financial Report GLOBAL DIGITAL SERVICES PLC STC. Correction To:0175/00014529 Correction To:0175/00014529 0175/00014699/en Half-Yearly Financial Report GLOBAL DIGITAL SERVICES PLC STC Corrected Consolidated Half Year Financial Report 9th February 2016 Global Digital Services PLC

More information

EXPLANATION OF INCOME TAX TREATMENT OF BAD DEBTS SINCE THE INTRODUCTION OF ACCRUALS RULES

EXPLANATION OF INCOME TAX TREATMENT OF BAD DEBTS SINCE THE INTRODUCTION OF ACCRUALS RULES APPENDIX C TO TIB NO.3, SEPTEMBER 1989 EXPLANATION OF INCOME TAX TREATMENT OF BAD DEBTS SINCE THE INTRODUCTION OF ACCRUALS RULES CONTENTS Page 1 INTRODUCTION 2 2 Bad Debts Outside the Accruals Regime 2

More information

Replacement Rules for Capital Property

Replacement Rules for Capital Property TAX UPDATE Replacement Rules for Capital Property If you sell a capital property (let s call it the initial property ) at a gain, but replace the property with a replacement property within a specifi ed

More information

Roche Capital Market Ltd Financial Statements 2009

Roche Capital Market Ltd Financial Statements 2009 R Roche Capital Market Ltd Financial Statements 2009 1 Roche Capital Market Ltd, Financial Statements Reference numbers indicate corresponding Notes to the Financial Statements. Roche Capital Market Ltd,

More information

Assurance and accounting A Guide to Financial Instruments for Private

Assurance and accounting A Guide to Financial Instruments for Private june 2011 www.bdo.ca Assurance and accounting A Guide to Financial Instruments for Private Enterprises and Private Sector t-for-profit Organizations For many entities adopting the Accounting Standards

More information

SSAP 24 STATEMENT OF STANDARD ACCOUNTING PRACTICE 24 ACCOUNTING FOR INVESTMENTS IN SECURITIES

SSAP 24 STATEMENT OF STANDARD ACCOUNTING PRACTICE 24 ACCOUNTING FOR INVESTMENTS IN SECURITIES SSAP 24 STATEMENT OF STANDARD ACCOUNTING PRACTICE 24 ACCOUNTING FOR INVESTMENTS IN SECURITIES (Issued April 1999) The standards, which have been set in bold italic type, should be read in the context of

More information

Understanding the Tax Implications of Exchange-Traded Funds

Understanding the Tax Implications of Exchange-Traded Funds Understanding the Tax Implications of Exchange-Traded Funds 11/21/2003 1 Forward Barclays Global Investors Canada Limited (Barclays Canada) is pleased to present "Understanding the Tax Implications of

More information

In a nutshell... Article published in Issue 13, 2009-10 of The Taxpayer, dated 18 Jan 2010. ...the full article follows

In a nutshell... Article published in Issue 13, 2009-10 of The Taxpayer, dated 18 Jan 2010. ...the full article follows Article published in Issue 13, 2009-10 of The Taxpayer, dated 18 Jan 2010 In a nutshell... Debt forgiveness: Beware unforeseen implications The global financial crisis had one (probably not unexpected)

More information

Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)

Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Form 982 (Rev. July 2013) Department of the Treasury Internal Revenue Service Name shown on return Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) OMB No.

More information

EIGHT SOLUTIONS INC.

EIGHT SOLUTIONS INC. June 30, 2015 NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Under National Instrument 51-102, part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed consolidated

More information

In This Issue. Earnings and Single-Member LLCs: Where Do We Start?...2 Anti-Discrimination and the Canada-UK Tax Treaty...5.

In This Issue. Earnings and Single-Member LLCs: Where Do We Start?...2 Anti-Discrimination and the Canada-UK Tax Treaty...5. In This Issue Earnings and Single-Member LLCs: Where Do We Start?...2 Anti-Discrimination and the Canada-UK Tax Treaty...5 A report on cross-border developments in Canadian tax law / March 2011 2 Earnings

More information

EMPLOYEE STOCK OPTIONS

EMPLOYEE STOCK OPTIONS EMPLOYEE STOCK OPTIONS This issue of the Legal Business Report provides current information to the clients of Alpert Law Firm on the potential liability of a corporation s directors under the Income Tax

More information

LONDON STOCK EXCHANGE HIGH GROWTH SEGMENT RULEBOOK 27 March 2013

LONDON STOCK EXCHANGE HIGH GROWTH SEGMENT RULEBOOK 27 March 2013 LONDON STOCK EXCHANGE HIGH GROWTH SEGMENT RULEBOOK 27 March 2013 Contents INTRODUCTION... 2 SECTION A ADMISSION... 3 A1: Eligibility for admission... 3 A2: Procedure for admission... 4 SECTION B CONTINUING

More information

NAS 09 NEPAL ACCOUNTING STANDARDS ON INCOME TAXES

NAS 09 NEPAL ACCOUNTING STANDARDS ON INCOME TAXES NAS 09 NEPAL ACCOUNTING STANDARDS ON INCOME TAXES CONTENTS Paragraphs OBJECTIVE SCOPE 1-4 DEFINITIONS 5-11 Tax Base 7-11 RECOGNITION OF CURRENT TAX LIABILITIES AND CURRENT TAX ASSETS 12-14 RECOGNITION

More information

Provinces and territories also impose income taxes on individuals in addition to federal taxes

Provinces and territories also impose income taxes on individuals in addition to federal taxes Worldwide personal tax guide 2013 2014 Canada Local information Tax Authority Website Tax Year Tax Return due date Is joint filing possible Are tax return extensions possible Canada Revenue Agency (CRA)

More information

PART III. Consolidated Financial Statements of Hitachi, Ltd. and Subsidiaries: Independent Auditors Report 47

PART III. Consolidated Financial Statements of Hitachi, Ltd. and Subsidiaries: Independent Auditors Report 47 PART III Item 17. Financial Statements Consolidated Financial Statements of Hitachi, Ltd. and Subsidiaries: Schedule: Page Number Independent Auditors Report 47 Consolidated Balance Sheets as of March

More information

SMALL BUSINESS VENTURE CAPITAL REGULATION 390/98

SMALL BUSINESS VENTURE CAPITAL REGULATION 390/98 PDF Version [Printer friendly ideal for printing entire document] SMALL BUSINESS VENTURE CAPITAL REGULATION 390/98 Published by DISCLAIMER: These documents are provided for private study or research purposes

More information

TAX PLANNING FOR IMMIGRATION TO CANADA. Jack Bernstein & Ron Choudhury Aird & Berlis LLP Toronto, Ontario

TAX PLANNING FOR IMMIGRATION TO CANADA. Jack Bernstein & Ron Choudhury Aird & Berlis LLP Toronto, Ontario TAX PLANNING FOR IMMIGRATION TO CANADA Jack Bernstein & Ron Choudhury Aird & Berlis LLP Toronto, Ontario *Submitted for presentation at the Pre-immigration Planning and Exit Taxation, Visas and Passport

More information

International Accounting Standard 32 Financial Instruments: Presentation

International Accounting Standard 32 Financial Instruments: Presentation EC staff consolidated version as of 21 June 2012, EN EU IAS 32 FOR INFORMATION PURPOSES ONLY International Accounting Standard 32 Financial Instruments: Presentation Objective 1 [Deleted] 2 The objective

More information

Forgiveness. Ceasing of Rights to Sue. Agreements to Forgive with Effect from a Future Time. Debt Parking. Share Subscription to Enable Repayment

Forgiveness. Ceasing of Rights to Sue. Agreements to Forgive with Effect from a Future Time. Debt Parking. Share Subscription to Enable Repayment !"## Refer to ID 2003/27 for full details of the decision. In addition, an overview of the commercial debt forgiveness provisions is provided below. The Forgiveness of Commercial Debt provisions apply

More information

Transfers to Corporations

Transfers to Corporations Estate Planning in the 21st Century - Life Insurance: Exploring the Corporate Edge - Part II* By David Louis, Partner, and Michael Goldberg, Associate, of Minden Gross with thanks to Joel Cuperfain of

More information

UTILITY SPLIT TRUST. Annual Financial Statements for the year ended December 31, 2011

UTILITY SPLIT TRUST. Annual Financial Statements for the year ended December 31, 2011 Annual Financial Statements for the year ended December 31, 2011 MANAGEMENT S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying financial statements of Utility Split Trust (the Fund ) are the responsibility

More information

Home Loan Agreement General Terms

Home Loan Agreement General Terms Your Home Loan Agreement with us, China Construction Bank (New Zealand) Limited is made up of two documents: A. This document called ; and B. The document called Home Loan Agreement Specific Terms. Your

More information

INDUSTRIAL-ALLIANCE LIFE INSURANCE COMPANY. FIRST QUARTER 2000 Consolidated Financial Statements (Non audited)

INDUSTRIAL-ALLIANCE LIFE INSURANCE COMPANY. FIRST QUARTER 2000 Consolidated Financial Statements (Non audited) INDUSTRIAL-ALLIANCE LIFE INSURANCE COMPANY FIRST QUARTER 2000 Consolidated Financial Statements (Non audited) March 31,2000 TABLE OF CONTENTS CONSOLIDATED INCOME 2 CONSOLIDATED CONTINUITY OF EQUITY 3 CONSOLIDATED

More information

18 BUSINESS ACCOUNTING STANDARD FINANCIAL ASSETS AND FINANCIAL LIABILITIES I. GENERAL PROVISIONS

18 BUSINESS ACCOUNTING STANDARD FINANCIAL ASSETS AND FINANCIAL LIABILITIES I. GENERAL PROVISIONS APPROVED by Resolution No. 11 of 27 October 2004 of the Standards Board of the Public Establishment the Institute of Accounting of the Republic of Lithuania 18 BUSINESS ACCOUNTING STANDARD FINANCIAL ASSETS

More information

The Bank of Nova Scotia Shareholder Dividend and Share Purchase Plan

The Bank of Nova Scotia Shareholder Dividend and Share Purchase Plan The Bank of Nova Scotia Shareholder Dividend and Share Purchase Plan Offering Circular Effective November 6, 2013 The description contained in this Offering Circular of the Canadian and U.S. income tax

More information

Fall Tax Update. By: Ian Crosbie, Elie Roth, Raj Juneja, Nathan Boidman, Brian Bloom, Michael Kandev and Christopher Anderson

Fall Tax Update. By: Ian Crosbie, Elie Roth, Raj Juneja, Nathan Boidman, Brian Bloom, Michael Kandev and Christopher Anderson Davies Ward Phillips & Vineberg LLP November 7, 2012 Fall Tax Update By: Ian Crosbie, Elie Roth, Raj Juneja, Nathan Boidman, Brian Bloom, Michael Kandev and Christopher Anderson The month of October saw

More information

IDENTIFYING AND DEALING WITH TAXATION ISSUES 10

IDENTIFYING AND DEALING WITH TAXATION ISSUES 10 IDENTIFYING AND DEALING WITH TAXATION ISSUES 10 SECTION 10(A): TAX AND FAMILY DEALINGS 10 This section looks at the taxation issues that typically arise in succession planning, how these issues can be

More information

TAX 101 INTRODUCTORY LESSONS: FINANCING A U.S. SU BSIDIARY DEBT VS. EQUITY INTRODUCTION. Authors Galia Antebi and Nina Krauthamer

TAX 101 INTRODUCTORY LESSONS: FINANCING A U.S. SU BSIDIARY DEBT VS. EQUITY INTRODUCTION. Authors Galia Antebi and Nina Krauthamer TAX 101 INTRODUCTORY LESSONS: FINANCING A U.S. SU BSIDIARY DEBT VS. EQUITY Authors Galia Antebi and Nina Krauthamer Tags Debt Equity INTRODUCTION When a foreign business contemplates operating in the U.S.

More information

Insolvency Procedures under Section 108

Insolvency Procedures under Section 108 Income Tax Insolvency Insights Insolvency Procedures under Section 108 Irina Borushko and Urmi Sampat In the current prolonged recession, many industrial and commercial entities have had to restructure

More information

CONSUMER LOAN AND SECURITY GENERAL TERMS

CONSUMER LOAN AND SECURITY GENERAL TERMS CONSUMER LOAN AND SECURITY GENERAL TERMS H0000275MD DEALER 05/15 Clause 1: Understanding and interpreting this Agreement We use ordinary words where possible. But sometimes we have to use legal words or

More information

Deliverable Obligation Characteristics for North American Corporate Transaction Type

Deliverable Obligation Characteristics for North American Corporate Transaction Type ISDA International Swaps and Derivatives Association, Inc. 360 Madison Avenue, 16th Floor New York, NY 10017 United States of America Telephone: 1 (212) 901-6000 Facsimile: 1 (212) 901-6001 email: isda@isda.org

More information

5N PLUS INC. Condensed Interim Consolidated Financial Statements (Unaudited) For the three month periods ended March 31, 2016 and 2015 (in thousands

5N PLUS INC. Condensed Interim Consolidated Financial Statements (Unaudited) For the three month periods ended March 31, 2016 and 2015 (in thousands Condensed Interim Consolidated Financial Statements (Unaudited) (in thousands of United States dollars) Condensed Interim Consolidated Statements of Financial Position (in thousands of United States dollars)

More information

Is Cancellation of Debt Income Taxable? One question that I am asked often these days is whether cancellation of debt (COD) income is taxable or not?

Is Cancellation of Debt Income Taxable? One question that I am asked often these days is whether cancellation of debt (COD) income is taxable or not? Is Cancellation of Debt Income Taxable? One question that I am asked often these days is whether cancellation of debt (COD) income is taxable or not? For tax purposes, the general rule is that all debt

More information

TAXATION ON DEATH: DEEMED DISPOSITIONS AND POST MORTEM PLANNING. Professor Catherine Brown Faculty of Law University of Calgary

TAXATION ON DEATH: DEEMED DISPOSITIONS AND POST MORTEM PLANNING. Professor Catherine Brown Faculty of Law University of Calgary TAXATION ON DEATH: DEEMED DISPOSITIONS AND POST MORTEM PLANNING Professor Catherine Brown Faculty of Law University of Calgary Tax Law for Lawyers June 2010 i TABLE OF CONTENTS INTRODUCTION... 1 I. INCOME...

More information

INCOME TAX : THE TREATMENT OF GAINS AND LOSSES ON FOREIGN EXCHANGE TRANSACTIONS IN TERMS OF SECTION 24I OF THE INCOME TAX ACT, 1962 (the Act)

INCOME TAX : THE TREATMENT OF GAINS AND LOSSES ON FOREIGN EXCHANGE TRANSACTIONS IN TERMS OF SECTION 24I OF THE INCOME TAX ACT, 1962 (the Act) REPUBLIC OF SOUTH AFRICA SOUTH AFRICAN REVENUE SERVICE PRACTICE NOTE : NO. 4 DATE : 8 MARCH 1999 INCOME TAX : THE TREATMENT OF GAINS AND LOSSES ON FOREIGN EXCHANGE TRANSACTIONS IN TERMS OF SECTION 24I

More information

Canadian Corporate Tax Guide

Canadian Corporate Tax Guide Canadian Corporate Tax Guide P850 Goodmans Tax Guide Cover:P850 Goodmans Tax Guide Cover 10-01-14 5:21 PM Page 2 Canadian Corporate Tax Guide About This Guide If you are considering doing business in Canada,

More information

TITLE II Small Business Investment Division of the Small Business Administration

TITLE II Small Business Investment Division of the Small Business Administration This compilation includes P.L. 112-239, enacted 1/3/13. SMALL BUSINESS INVESTMENT ACT TABLE OF CONTENTS Sec. 101 Short title. Sec. 102 Statement of policy. 15 USC 661. Sec. 103 Definitions. 15 USC 662.

More information

Order Authorizing Securitization of Certain Additional Transition Costs and Related Transactions

Order Authorizing Securitization of Certain Additional Transition Costs and Related Transactions SECURITIES AND EXCHANGE COMMISSION (Release No. 35-28040; 70-10329) CenterPoint Energy, Inc., et al. Order Authorizing Securitization of Certain Additional Transition Costs and Related Transactions September

More information