,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,numb]3 ,,it-#aai;,r#d
,date3 ,augu/ #g1 #aiih
,subject3 ,9come ,tax ,act--,debts (
  ,%>ehold]s & ,c]ta9 ,p]sons ,3nect$ ,)
  ,%>ehold]s
,ref];e3 ,subsec;n #ae7#b7 7al subsec;ns
  #ae7#a71 #ae7#a.b71 #ae7#b.a7 to
  7#b.g71 #ae7#g71 #ae7#i71 #bab7#b71
  #bad7#c7 & #bbg7#f.a71 #bdh7#a7
  def9i;ns ( 8=eign a6iliate0 &
  8specifi$ employee0 & p>agraph
  #bj7#a77j77

  ,9t]pret,n bullet9s 7,,it's7 provide
,rev5ue ,canada's te*nical 9t]pret,ns (
9come tax law4 ,due 6_! te*nical nature1
,,it's >e us$ prim>ily 0de"p;tal /aff1
tax speciali/s1 & o!r 9dividuals :o h an
9t]e/ 9 tax matt]s4 ,= ^? r1d]s :o pref]
a less te*nical explan,n (! law1 !    #a
             ,,it-#aai;,r#d          a#a
,de"p;t (f]s o!r public,ns1 s* z tax
guides & pamphlets4
  ,:ile ! ,,it's d n h ! =ce ( law1 !y c
g5],y 2 reli$ ^u z reflect+ ! ,de"p;t's
9t]pret,n (! law 6be appli$ on a 3si/5t
basis 0de"p;tal /aff4 ,9 cases ": an
,,it has n yet be5 revis$ 6reflect
legislative *anges1 r1d]s %d ref] 6!
am5d$ legisl,n & xs e6ective date4
,simil>ly1 c\rt deci.ns subsequ5t 6!
date (! ,,it %d 2 3sid]$ :5 det]m9+ !
relevancy (! -;ts 9 ! ,,it4
  ,an 9t]pret,n describ$ 9 an ,,it
applies z (! date ! ,,it is publi%$1
un.s o!rwise specifi$4 ,:5 "! is a *ange
9 a previ\s 9t]pret,n &! *ange is
b5eficial 6taxpay]s1 x is usu,y e6ective
= all future assess;ts & reassess;ts4
,if ! *ange is n fav\ra# 6taxpay]s1 x w
norm,y 2 e6ective =! curr5t & subsequ5t
tax,n ye>s or = transac;ns 5t]$ 96af !
date (! ,,it4

                                      #b
             ,,it-#aai;,r#d          b#a
  ,a *ange 9 a de"p;tal 9t]pret,n may al
2 ann\nc$ 9 ! ,9come ,tax ,te*nical
,news4
  ,if y h any -;ts reg>d+ matt]s 4cuss$
9 ? ,,it1 pl1se s5d !m to3

  ,director1 ,busi;s & ,public,ns
    ,divi.n
  ,9come ,tax ,rul+s ,directorate
  ,policy & ,legisl,n ,bran*
  ,rev5ue ,canada
  ,ottawa ,,on ,k#a;,a #j;,l#e

  ,9t]pret,n bullet9s c 2 f.d on !
,rev5ue ,canada ,9t]net site at3
_+www.rc.gc.ca_:

               ,applic,n
    
  ,? bullet9 c.els & replaces ,9t]pret,n
,bullet9 ,,it-#aai;,r#c1 dat$ ,octob]
#ab1 #aihd1 &! ,special ,rel1se "!to
dat$ ,m>* #ca1 #aihg4
                                      #c
                ,summ>y              c#a
    
  ,%>ehold]s >e g5],y taxa# on am.ts
rcvd f a corpor,n4 ,! purpose ( subsec;n
#ae7#b7 is 69clude 9 a %>ehold]'s 9come
am.ts rcvd f a corpor,n 9 ! guise (
loans or o!r 9debt$;s1 ) specific
excep;ns provid$ 9 ! law4
  ,? bullet9 4cusses ! tax implic,ns 6a
p]son or "pn]%ip :o is a %>ehold] (a
corpor,n1 3nect$ )a %>ehold] (!
corpor,n1 or :o [ns %>es (! corpor,n "?
a "pn]%ip or tru/1 (a loan or 9debt$;s f
t corpor,n1 a relat$ corpor,n or a
"pn]%ip ( : t corpor,n or a relat$
corpor,n is a memb]4 ,x -;ts on !
factors t det]m9e :e!r or n ! loan or
9debt$;s m/ 2 9clud$ 9 ! 9come (! debtor
& on ! tim+ ( s* 9clu.n4 ,x al 4cusses !
deductibil;y ( repay;ts &! e6ect (a
s]ies ( loans & repay;ts4



                                      #d
             ,,it-#aai;,r#d          d#a
                              ,p>agraphs
,g5]al """""""""""""""""""""""""""" #a-f
,excep;ns3 ,loans ,made =
  ,specific ,purposes
  ,g5]al """"""""""""""""""""""""" #g-ad
  ,trade ,debts """""""""""""""""""" #ae
  ,revolv+ ,debt """"""""""""""""""" #af
  ,dwell+ """""""""""""""""""""""" #g-ai
  ,acquisi;n ( ,%>es """"""""""""""" #bj
  ,acquisi;n (a ,motor ,vehicle """" #ba
,employee & ,specifi$ ,employee   #bb-bc
,excep;n3 ,repay;t ,)9 ,"o ,ye>   #bd-bg
,:e!r ,repay;t is ,"p (a ,s]ies (
  ,loans or ,o!r ,transac;ns &
  ,repay;ts """"""""""""""""""""" #bh-bi
,deduc;n ( ,repay;t if ,n ,"p (a
  ,s]ies """""""""""""""""""""""" #cj-cc
--------------------------------------#b
,applic,n ( ,subsec;n #ae7#b7 &
  ,p>agraph #bj7#a77j7 ,:5 8a
  ,s]ies0 """"""""""""""""""""""" #cd-cf
,non-,resid5ts """""""""""""""""" #cg-da

                                      #e
          ,4cus.n & ,9t]pret,n       a#b
    
                 ,g5]al
    
#a4 ,a p]son or "pn]%ip1 describ$ 9
  p>agraph #b 2l1 t has 9 a tax,n ye>
  rcvd a loan f or 2come 9debt$ to
  7a7 a "picul> corpor,n2
  7b7 any o!r corpor,n relat$ 6! "picul>
    corpor,n2 or
  7c7 a "pn]%ip ( : ! "picul> corpor,n
    or a relat$ corpor,n is a memb]1
    w 2 requir$ 69clude ! am.t (! loan
  or 9debt$;s 7"h9af ref]r$ 6z ! 8loan07
  9 9come = t ye> "u subsec;n #ae7#b71
  un.s ! loan -es )9 ! excep;ns 4cuss$ 9
  ? bullet94 ,an 5t;y describ$ 9 7a71
  7b71 or 7c7 is ref]r$ 6"h9 z ! 8l5d]0
  or 8cr$itor10 dep5d+ on ! circum/.es4
  ,loans t >e n subject 6subsec;n
  #ae7#b7 may give rise 6a b5efit 9clud$
  9 9come "u subsec;n #ae7#a7 pursuant
  6subsec;n #ae7#i71 if no 9t]e/ or a l[
  rate ( 9t]e/ is *>g$4 ,= -;ts 3c]n+
  taxa# b5efits >is+ f 9t]e/-free     #f
          ,4cus.n & 9t]pret,n        b#b
  or l[-9t]e/ loans1 see ! curr5t v].n (
  ,,it-#dba1 ,b5efits 6,9dividuals1
  ,corpor,ns & ,%>ehold]s f ,loans or
  ,debt4
#b4 ,! 8p]son or "pn]%ip0 ref]r$ 6in
  p>agraph #a abv is a p]son 7o!r ?an a
  corpor,n resid5t 9 ,canada7 or a
  "pn]%ip 7o!r ?an a "pn]%ip ea* memb] (
  : is a corpor,n resid5t 9 ,canada7 t
  is
  7a7 a %>ehold] (! "picul> corpor,n 9
    p>agraph #a7a7 abv2
  7b7 3nect$ )a %>ehold] (! "picul>
    corpor,n 7see p>agraph #e 2l72 or
  7c7 a memb] (a "pn]%ip1 or a b5efici>y
    (a tru/1 t is a %>ehold] (! "picul>
    corpor,n4
  ,an 5t;y ref]r$ 6in 7a71 7b71 or 7c7
  is ref]r$ 6"h9 z ! 8borr[]0 or
  8debtor10 dep5d+ on ! circum/.es4
#c4 ,sec;n #bea provides ! rules =
  det]m9+ :5 corpor,ns >e relat$ 7see
  p>agraph #a7b7 & 7c7 abv7 & is 4cuss$
                                      #g
          ,4cus.n & 9t]pret,n        c#b
  9 ! curr5t v].n ( ,,it-#dai1 ,m1n+ (
  ,>m's ,l5g?4
#d4 ,! phrase 8a tax,n ye>10 9 subsec;n
  #ae7#b71 ref]s 6t (! borr[]4 ,! date
  on : a loan 0 made det]m9es ! tax,n
  ye> (! borr[] 9 : ! loan is 9clud$ 9
  9come "u ? subsec;n4 ,= example1 if
  subsec;n #ae7#b7 applies 6a loan t a
  corpor,n makes 6an 9dividual on
  ,novemb] #cj1 #aiie1 &! loan falls 9 !
  corpor,n's tax,n ye> 5d+ on ,june #cj1
  #aiif1 ! loan w 2 9clud$ 9 !
  9dividual's #aiie 9come4 ,if ! borr[]
  is a "pn]%ip1 ! phrase 8a tax,n ye>10
  9 subsec;n #ae7#b71 m1ns ! fiscal
  p]iod (! "pn]%ip4 ,simil>ly1 :5 ! l5d]
  is a "pn]%ip1 ! phrase 8! tax,n ye>0
  ref]r$ 6in subsec;n #ae7#b.f7 m1ns !
  fiscal p]iod ( t "pn]%ip4
#e4 ,subsec;n #ae7#b.a7 provides t1 )
  two excep;ns1 all p]sons :o d n d1l at
  >m's l5g? )a %>ehold] (a "picul>
  corpor,n >e 83nect$0 ) t %>ehold] =!
  purposes ( subsec;n #ae7#b74 ,!     #h
          ,4cus.n & 9t]pret,n        d#b
  two excep;ns >e a =eign a6iliate (!
  "picul> corpor,n or a =eign a6iliate
  (a p]son resid5t 9 ,canada ) : !
  "picul> corpor,n does n d1l at >m's
  l5g?4 ,! def9i;n ( 8=eign a6iliate0 9
  subsec;n #ie7#a7 applies =! purposes (
  subsec;n #ae7#b.a74 ,= fur!r 9=m,n on
  :e!r or n p]sons >e d1l+ at >m's l5g?1
  see ! curr5t v].n ( ,,it-#dai1 ,m1n+ (
  ,>m's ,l5g?4
#f4 ,:5 a loan or o!r oblig,n (a
  %>ehold] 6a corpor,n is settl$ or
  ext+ui%$ 0pay;t ( less ?an ! am.t (!
  oblig,n \t/&+1 or 0no pay;t1 subsec;n
  #ae7#a.b7 det]m9es ! value (! b5efit t
  is 6be 9clud$ 9 ! %>ehold]'s 9come "u
  subsec;n #ae7#a74 ,subsec;n #ae7#a.b7
  deems ! value (! b5efit 6be ! 8=giv5
  am.t0 at ! "t ! loan 0 settl$ or
  ext+ui%$1 ! 8=giv5 am.t0 2+ def9$ 9
  subsec;n #ae7#a.ba74 ,see ! curr5t
  v].n ( ,,it-#dcb1 ,b5efits ,3f]r$ on
  ,%>ehold]s1 =a 4cus.n ( subsec;n
  #ae7#a.b74                          #i
       ,excep;ns3 ,loans ,made =     e#b
          ,specific ,purposes
    
                 ,g5]al
    
#g4 ,if a borr[] c e/abli% t a loan
  falls )9 ! provi.ns ( "o ( subsec;ns
  #ae7#b.b7 to 7#b.f71 ! loan w n h 6be
  9clud$ 9 9come "u subsec;n #ae7#b74 ,!
  provi.ns ( subsec;n #ae7#b.c7 to
  7#b.e7 provide = excep;ns 69clud+
  loans 9 9come :5 ! loan is provid$ =a
  specific purpose ":as subsec;ns
  #ae7#b.b7 & 7#b.f7 simply provide t
  subsec;n #ae7#b7 does n apply 6loans
  :5 c]ta9 circum/.es exi/4 ,subsec;n
  #ae7#b.b7 is describ$ 9 p>agraph #cg
  2l1 :ile subsec;ns #ae7#b.c7 to 7#b.e7
  >e 4cuss$ 9 p>agraphs #h 6#bc 2l &
  subsec;n #ae7#b.f7 is 4cuss$ 9
  p>agraphs #bd 6#bi 2l4

  ,:ile a writt5 agree;t is ! pref]a#
  m1ns ( e/abli%+ t a loan exi/s1 a
  writt5 agree;t is n nec2 h["e1 9   #aj
         ,excep;ns3 loans made       f#b
  xs abs;e "! m/ 2 3v9c+ evid;e t a loan
  exi/s4 ,s* evid;e cd 9clude a
  corporate resolu;n sett+ \ ! loan1 !
  t]ms ( xs repay;t & s* a corporate
  resolu;n %d 2 reflect$ 9 ! f9ancial
  /ate;ts (! corpor,n4
--------------------------------------#c
#h4 ,! excep;n 9 subsec;n #ae7#b.c7
  applies :5 ! loan is made 6borr[]s
  7:e!r or n !y >e employees7 if ! loan
  is made 9 ! ord9>y c\rse (! l5d]'s
  busi;s 7see p>agraphs #ae & #af 2l7 &
  bona fide >range;ts 7 made1 at ! "t !
  loan 0 made1 = repay;t )9 a r1sona# "t
  7see p>agraph #ab 2l74
#i4 ,! excep;n 9 subsec;n #ae7#b.d7
  applies :5 ! loan is made to3
  7a7 an 9dividual :o is an employee (!
    l5d] b n a specifi$ employee (! l5d]
    7see p>agraphs #bb & #bc 2l71
    pursuant 6p>agraph #ae7#b.d77a72
  7b7 an 9dividual :o is an employee (!
    l5d] or is ! sp\se ( an employee (!
    l5d] 6acquire a dwell+ 7see      #aa
         ,excep;ns3 loans made       a#c
    p>agraphs #ag 6#ai 2l71 pursuant
    6p>agraph #ae7#b.d77b72
  7c7 an employee 6acquire previ\sly
    unissu$ fully pd %>es (a corpor,n
    7see p>agraph #bj 2l71 pursuant
    6p>agraph #ae7#b.d77c72 or
  7d7 an employee 6acquire a motor
    vehicle 6be us$ 9 ! p]=m.e (!
    employee's job 7see p>agraph #ba
    2l71 pursuant 6p>agraph
    #ae7#b.d77d72
":
  7e7 = loans made af ,april #be1 #aiie1
    x 0 r1sona# 63clude t ! employee or
    ! employee's sp\se rcvd ! loan 2c (!
    employee's employ;t & n 2c ( any
    p]son's %>ehold+s1 &
  7f7 at ! "t ! loan 0 made1 bona fide
    >range;ts 7 made = repay;t (! loan
    )9 a r1sona# "t 7see p>agraph #ab
    2l74
  ,=! purposes ( p>agraph #ae7#b.d77e71
  z describ$ 9 7e7 abv1 a loan is 3sid]$
  6h be5 made af ,april #be1         #ab
         ,excep;ns3 loans made       b#c
  #aiie1 if ! funds >e adv.ed 6! borr[]
  af t date4
#aj4 ,! excep;n 9 subsec;n #ae7#b.e7
  applies :5 a loan is made 9 respect (a
  tru/1 if all ! foll[+ 3di;ns >e met3
  7a7 ! l5d] is a private corpor,n2
  7b7 ! corpor,n is ! settlor & sole
    b5efici>y (! tru/2
  7c7 ! sole purpose (! tru/ is
    6facilitate ! pur*ase & sale (! %>es
    (! corpor,n or a relat$ corpor,n at
    _! fair m>ket value f or 6!
    employees (! corpor,n or ! relat$
    corpor,n 7o!r ?an1 = loans made af
    ,june #ai1 #aiif1 6employees :o >e
    specifi$ employees (! corpor,n or (a
    relat$ corpor,n72 &
  7d7 at ! "t ! loan 0 made1 bona fide
    >range;ts 7 made = repay;t (! loan
    )9 a r1sona# "t 7see p>agraph #ab
    2l74
#aa4 ,:e!r or n a loan made 0a corpor,n
  6an 9dividual is 3sid]$ 6h be5 rcvd 0t
  9dividual 9 8 or h] capac;y z an   #ac
         ,excep;ns3 loans made       c#c
  employee or z a %>ehold] 9volves a
  f9d+ ( fact 9 ea* "picul> case4 ,:5 a
  public corpor,n makes a loan 6a
  %>ehold] on ! same t]ms & 3di;ns z
  6o!r employees :o >e n %>ehold]s1 !
  loan is norm,y 3sid]$ 6be a loan rcvd
  0virtue ( t 9dividual's (fice or
  employ;t r ?an 8 or h] %>ehold+s4
  ,h["e1 :5 ! opportun;y 6borr[ funds is
  only made availa# 6%>ehold]s or :5 !
  t]ms & 3di;ns atta*$ 6loans 6employee-
  %>ehold]s >e m fav\ra# ?an ^? atta*$
  6loans 6o!r employees1 ! loan w 2
  3sid]$ 6h be5 made 6! employee-
  %>ehold] 9 8 or h] capac;y z a
  %>ehold] un.s ! facts cle>ly 9dicate
  o!rwise4
#ab4 ,9 3sid]+ :e!r any >range;ts =
  repay;t 7 bona fide1 ! ext5t 6: !
  >range;ts h be5 c>ri$ \ 0! borr[] is
  review$ &1 if ! borr[] is 9 default1
  any unusual circum/.es t mi<t h h9d]$
  !m f 2+ c>ri$ \4 ,:e!r or n ! p]iod
  all[$ = repay;t is 8)9 a r1sona#   #ad
         ,excep;ns3 loans made       d#c
  "t0 is a "q ( fact4 ,9 a giv5 situ,n1
  "o (! factors 3sid]$ 9 det]m9+ :at is
  a r1sona# "t is ! normal -m]cial
  practice : wd prevail 9 a simil>
  situ,n4 ,= example1 =a h\s+ loan1
  normal -m]cial practice requires !
  borr[]1 am;g o!r ?+s1 6give ! l5d] "s
  secur;y 7n necess>ily a mortgage7 &
  6repay any bal.e on ! loan %d !
  prop]ty 2 sold :ile an am.t is / [+4
#ac4 ,z not$ 9 p>agraph #h abv1 !
  excep;n 9 subsec;n #ae7#b.c7 applies
  6loans made 6borr[]s :e!r or n !y >e
  employees1 ":as ! excep;ns 9 subsec;n
  #ae7#b.d7 apply :5 ! borr[]s >e al
  employees (! l5d] or1 9 ! case (
  p>agraph #ae7#b.d77b7 relat+ 6!
  acquisi;n (a dwell+1 ! sp\se ( s* an
  employee4 ,! excep;n 9 p>agraph
  #ae7#b.d77c71 relat+ 6! acquisi;n (
  %>es1 al applies 6loans made 6an
  employee (a corpor,n relat$ 6! l5d]4
#ad4 ,! excep;ns 9 p>agraphs
  #ae7#b.d77b7 to 7d7 apply only     #ae
         ,excep;ns3 loans made       e#c
  if a specific loan 0 made =a qualifi$
  purpose describ$ 9 "o ( ^? provi.ns &
  is us$ = t purpose4 ,if a borr[] al
  has o!r loans t d n qualify = "o ( ^!
  excep;ns1 ! borr[] m/ 2 a# 6prove t !
  "p (! total bal.e ( loans1 t 0 us$ =a
  qualifi$ purpose1 meets all (! 3di;ns
  nec 6qualify = t excep;n4 ,? wd norm,y
  require t any loan : qualifies = "o (!
  excep;ns 9 p>agraphs #ae7#b.d77b7 to
  7d7 2 ma9ta9$ 9 a sep>ate a3.t4
--------------------------------------#d
             ,trade ,debts
    
#ae4 ,trade debts t >e a3.t$ = sep>ately
  & t >ise 9 ! ord9>y c\rse ( busi;s f !
  sale ( gds 0! cr$itor 6a debtor1 on !
  same t]ms = pay;t z sales 6o!r cu/om]s
  (! cr$itor1 w n 2 subject 6subsec;n
  #ae7#b7 7provid$ ^? t]ms >e -pli$ )7
  2c (! excep;n 9 subsec;n #ae7#b.c74
  ,:5 trade debts >e n pd ac 6!
  cr$itor's normal t]ms ( pay;t1 b s*
  debts >e settl$ )9 #ab mon?s (     #af
         ,excep;ns3 loans made       a#d
  2+ 9curr$1 bona fide >range;ts >e
  3sid]$ 6h be5 made at ! "t ! 9debt$;s
  >ose4

             ,revolv+ ,debt
    
#af4 ,an 9dividual may h revolv+ debt1 =
  example1 a l9e ( cr$it or a *>ge c>d1
  )a f9ancial 9/itu;n & may [n %>es 9 !
  9/itu;n or 2 3nect$ ) "s"o :o [ns %>es
  9 ! 9/itu;n4 ,subsec;n #ae7#b.c7 w 2
  3sid]$ 6apply if ! t]ms & 3di;ns
  atta*$ 6! revolv+ debt =! 9dividual >e
  ! same z =a memb] (! public at l>ge :o
  does n [n1 or is n 3nect$ ) "s"o :o
  [ns1 %>es 9 ! 9/itu;n4

                ,dwell+
    
#ag4 ,subject 6meet+ ! require;ts 9
  p>agraphs #ae7#b.d77e7 & 7f71 z
  describ$ 9 #i7e7 & 7f7 abv1 p>agraph
  #ae7#b.d77b7 provides an excep;n if !
  loan is made 6an employee or an    #ag
         ,excep;ns3 loans made       b#d
  employee's sp\se 65a# or assi/ !
  9dividual 6acquire a dwell+ =!
  9dividual's habit,n4 ,subsec;n
  #beb7#d7 exp&s ! m1n+ ( 8sp\se0
  69clude c]ta9 -mon-law c\ples4 ,! ^w
  8dwell+0 9cludes a h\se1 an a"p;t 9 a
  duplex or a"p;t build+1 a 3dom9ium1 a
  cottage1 a mobile home1 a trail]1 or a
  h\seboat z well z a %>e (! capital
  /ock (a coop]ative h\s+ corpor,n
  acquir$ =! sole purpose ( acquir+ ! "r
  69habit a dwell+ [n$ 0! corpor,n4 ,!
  dwell+ ne$ n 2 locat$ 9 ,canada nor
  ne$ x 2 ! pr9cipal resid;e1 z def9$ 9
  sec;n #ed1 (! employee or sp\se4 ,!
  employee or sp\se :o 9curr$ ! loan m/
  actu,y 9habit ! dwell+ un.s excep;nal
  circum/.es 9t]v5e1 s* z d1?1 ill;s1
  fire1 or transf] (! employee or sp\se
  6ano!r local;y4 ,! excep;n 9 p>agraph
  #ae7#b.d77b7 w n apply 6a loan made1 z
  ref]r$ 6"!91 t exce$s ! am.t t is !
  co/ 6! employee or ! employee's sp\se
  =! dwell+4 ,= example1 :5 !        #ah
         ,excep;ns3 loans made       c#d
  employee or ! employee's sp\se
  acquires a prop]ty t 3si/s ( two or m
  self-3ta9$ h\s+ units1 only "o ( : is
  9habit$ 0! 9dividual1 ! excep;n 9
  p>agraph #ae7#b.d77b7 w apply only if
  ! loan is no grt] ?an ! propor;nate
  co/ (! "o h\s+ unit s 9habit$4
  ,simil>ly1 if ! employee or !
  employee's sp\se acquires a tract ( l&
  on : is locat$ a h\se t ! 9dividual
  9habits1 ! excep;n 9 subp>agraph
  #ae7#b.d77b7 w apply only if ! loan is
  no grt] ?an an am.t t is ! a7regate (!
  co/ (! h\se xf &! propor;nate co/ ( an
  >ea (! l& t is r1sonably requir$ =!
  use & 5joy;t (! h\se4
#ah4 ,:e!r a loan has be5 made to 85a#
  or assi/0 an employee or an employee's
  sp\se 6acquire a dwell+ is a "q (
  fact4 ,a loan made =! purpose (
  ref9anc+ an 9debt$;s t 0 9curr$ e>li]
  6acquire a dwell+ is n 3sid]$ 6h be5
  made 65a# or assi/ an employee or an
  employee's sp\se 6acquire a        #ai
         ,excep;ns3 loans made       d#d
  dwell+4 ,h["e1 "! is an excep;n :5
  -mit;ts >e made at ! "t (! acquisi;n1
  2t ! employee or ! employee's sp\se &!
  l5d] 6! e6ect t ! l5d] wd provide !
  p]man5t f9anc+4 ,9 det]m9+ :e!r s*
  -mit;ts 7 made1 all relevant facts &
  evid;e w 2 3sid]$1 9clud+ =mal
  docu;t,n (! -mit;t1 ! nature (!
  orig9al f9anc+ : %d h ! "*i/ics (
  usual 9t]im f9anc+ &! r1sons :y ! l5d]
  did n provide ! orig9al f9anc+4 ,z an
  example1 ! excep;n wd apply ":
  ,mr4 ;,e1 an employee1 wrote 6his
  employ] 6reque/ t ! employ] provide
  9t]im & l;g-t]m f9anc+ =a h\se t
  ,mr4 ;,e 0 hav+ built = 8 habit,n &!
  employ] respond$ 9 writ+ 6advise t x
  wd provide l;g-t]m f9anc+ af ,mr4 ;,e
  _h tak5 posses.n (! h\se b 0 una#
  6provide ! 9t]im f9anc+ 2c ! ,bo>d (
  ,directors requir$ t all h\s+ loans 2
  secur$ 0regi/]$ mortgages4
#ai4 ,loans made 9 respect ( repairs1
  alt],ns1 r5ov,ns1 or a4i;ns made   #bj
         ,excep;ns3 loans made       e#d
  6a dwell+ >e n 3sid]$ 6qualify =!
  excep;n "u p>agraph #ae7#b.d77b74

           ,acquisi;n ( ,%>es
    
#bj4 ,subject 6meet+ ! require;ts 9
  p>agraphs #ae7#b.d77e7 & 7f71 z
  describ$ 9 #i7e7 & 7f7 abv1 ": ! l5d]
  is a corpor,n1 p>agraph #ae7#b.d77c7
  provides an excep;n if ! loan 0 made 9
  respect ( an employee (! corpor,n1 or
  (a relat$ corpor,n1 65a# or assi/ !
  employee 6acquire fully pd %>es (!
  corpor,n or a relat$ corpor,n1 f !
  corpor,n or relat$ corpor,n4 ,! %>es s
  acquir$ 0! employee m/ 2 previ\sly
  unissu$ %>es 6be held 0! employee =!
  employee's [n b5efit4 ,:ile "! is no
  specifi$ l5g? ( "t t an employee m/
  hold !
--------------------------------------#e
  %>es 9 ord] =! loan 6be exempt "u
  p>agraph #ae7#b.d77c71 a subsequ5t
  4posi;n (! %>es 79clud+ a          #ba
         ,excep;ns3 loans made       a#e
  4posi;n 6a corpor,n 9 : ! employee
  holds %>es7 2f ! loan is repd1 w g5],y
  2 9dicative (a purpose o!r ?an !
  acquisi;n ( %>es 6be held 0! employee
  =! employee's [n b5efit4

     ,acquisi;n (a ,motor ,vehicle
    
#ba4 ,subject 6meet+ ! require;ts 9
  p>agraphs #ae7#b.d77e7 & 7f71 z
  describ$ 9 #i7e7 & 7f7 abv1 p>agraph
  #ae7#b.d77d7 provides an excep;n if !
  loan 0 made 65a# or assi/ an employee
  6acquire a motor vehicle 6be us$ 0!
  employee 9 ! p]=m.e (! duties (!
  employee's (fice or employ;t4

         ,employee & ,specifi$
               ,employee
    
#bb4 ,an 8employee0 is def9$ 9 subsec;n
  #bdh7#a7 69clude an (fic]2 3sequ5tly1
  a director (a corpor,n is an employee4
  ,9 subsec;n #bdh7#a71 a            #bb
          ,employee & specifi$       b#e
  8specifi$ employee0 (a p]son is def9$
  z an employee (! p]son :o is a
  specifi$ %>ehold] (! p]son or :o does
  n d1l at >m's l5g? )! p]son4 ,a
  8specifi$ %>ehold]0 (a corpor,n m1ns a
  taxpay] :o [ns1 directly or 9directly1
  n less ?an #aj@3p (! issu$ %>es ( any
  class (! capital /ock (! corpor,n or (
  any o!r corpor,n t is relat$ 6!
  corpor,n4
#bc4 ,subsec;n #ae7#b.g7 provides t =!
  purposes ( sec;n #ae1 an 9dividual :o
  is an employee (a "pn]%ip is deem$ 6be
  a specifi$ employee (! "pn]%ip ": !
  9dividual is a specifi$ %>ehold] ( "o
  or m corpor,ns t1 9 total1 >e 5titl$1
  directly or 9directly1 6n less ?an a
  #aj@3p %>e ( any 9come or loss (!
  "pn]%ip4




                                     #bc
       ,excep;n3 ,repay;t ,)9 ,"o    c#e
                  ,ye>
    
#bd4 ,subsec;n #ae7#b.f7 provides t if !
  loan is repd )9 "o ye> f ! 5d (! tax,n
  ye> (! l5d] 9 : ! loan 0 made & if !
  repay;t is n "p (a s]ies ( loans or
  o!r transac;ns & repay;ts 7see
  p>agraphs #bh & #bi 2l71 ! loan is n
  9clud$ 9 ! 9come (! borr[] "u subsec;n
  #ae7#b74
#be4 ,! giv+ (a promissory note 0a
  borr[] or ! assump;n (! loan 0ano!r
  p]son does n 3/itute repay;t (a loan
  rcvd 0t borr[]4
#bf4 ,a loan ne$ n necess>ily 2 repd 9
  m"oy4 ,! borr[] c make repay;ts1 :olly
  or 9 "p1 0a bona fide transf] 6! l5d]
  ( r1l or p]sonal prop]ty4 ,a transf] (
  prop]ty 3/itutes repay;t only 6! ext5t
  (! fair m>ket value (! transf]r$
  prop]ty at ! "t (! transf]4
#bg4 ,repay;ts >e 3sid]$ 6apply f/ 6!
  olde/ loan or debt \t/&+ 78f/-in1 f/-\
                                     #bd
        ,excep;n3 repay;t "o ye>     d#e
  basis07 un.s ! facts cle>ly 9dicate
  o!rwise4

       ,:e!r ,repay;t ,is ,"p (a
        ,s]ies ( ,loans or ,o!r
        ,transac;ns & ,repay;ts
    
#bh4 ,x is a "q ( fact :e!r or n a
  repay;t (a loan is "p (a s]ies ( loans
  or o!r transac;ns & repay;ts4 ,9 mo/
  cases1 :5 "! >e only a few loans or
  o!r transac;ns &a few repay;ts made
  dur+ a tax,n ye> (a l5d]1 "! is no s*
  s]ies4 ,h["e1 :5 only "o loan or o!r
  transac;n & "o repay;t o3ur 9 ea*
  tax,n ye> (a l5d]1 a s]ies ( loans or
  o!r transac;ns & repay;ts may / 2 9
  evid;e4 ,? cd o3ur1 = example1 :5 a
  repay;t is (a tempor>y nature1 s* z a
  loan t is repd %ortly 2f ! 5d (! ye>
  &! same am.t1 or sub/anti,y ! same
  am.t is borr[$ %ortly af ! 5d (! ye>4
  ,s* a repay;t (a tempor>y nature is n
  3sid]$ 6decr1se ! loan bal.e 9     #be
          ,repay;t "p ( s]ies        e#e
  apply+ subsec;n #ae7#b7 & p>agraph
  #bj7#a77j7 6a s]ies ( loans or o!r
  transac;ns & repay;ts 7see p>agraphs
  #cd 6#cf 2l74
#bi4 ,p]sons a6ect$ 0subsec;n #ae7#b7
  may h loan a3.ts1 draw+s a3.ts1 or o!r
  simil>ly "nd a3.ts t 3ta9 s"eal *>ges
  = loans1 pay;ts made 6?ird "pies on
  2half (! %>ehold]1 adv.es ag/ future
  sal>ies1 r5ts or anticipat$ divid5ds
  or o!r *>ges1 & "o or m repay;ts4 ,if
  a %>ehold] has an a3.t )a numb] ( ^!
  f1tures 7a runn+ loan a3.t71 all (!
  relevant factors w 2 3sid]$ 6det]m9e
  :e!r a s]ies ( loans or o!r transac;ns
  & repay;ts exi/s4 ,bona fide repay;ts
  ( %>ehold] loans t result f1 =
  example1 ! pay;t ( divid5ds1 sal>ies1
  or bonuses1 >e n "p (a s]ies ( loans
  or o!r transac;ns & repay;ts4



                                     #bf
       ,deduc;n ( ,repay;t if ,n     f#e
             ,"p (a ,s]ies
    
#cj4 ,p>agraph #bj7#a77j7 provides t :5
  a borr[] has repd all or "p (a loan t
  0 9clud$ 9 9come =a prec$+ ye> "u
  subsec;n #ae7#b71 ! am.t (! repay;t is
  deducti# 9 calculat+ 9come =! ye> 9 :
  ! repay;t is made4 ,h["e1 no deduc;n
  is all[$3
  7a7 if ! borr[] 0 a corpor,n1 6! ext5t
    t ! am.t (! loan 0 deducti# f xs
    9come =! purpose ( calculat+ taxa#
    9come 9 ! ye> ! loan 0 made2 or
  7b7 if ! repay;t is made z a "p (a
    s]ies ( loans or o!r transac;ns &
    repay;ts4
--------------------------------------#f
#ca4 ,! -;ts 9 p>agraphs #bd 6#bi abv1
  on :at 3/itutes a repay;t & :e!r a
  repay;t is "p (a s]ies ( loans or o!r
  transac;ns & repay;ts1 apply =!
  purposes ( det]m9+ ! deduc;n (a
  repay;t z provid$ = 9 p>agraph
  #bj7#a77j74                        #bg
           ,deduc;n ( repay;t        a#f
#cb4 ,z p>agraph #bj7#a77j7 ref]s 6a
  8taxpay]0 &! ,act def9es a 8taxpay]0 z
  9clud+ a 8p]son0 &a 8p]son0 z 9clud+ a
  legal repres5tative af d1?1 ! dec1s$
  taxpay]'s e/ate c claim ! deduc;n "u ?
  p>agraph 9 ! ye> a repay;t is made4 ,9
  ord] 6make ! claim1 ! dec1s$ m/ h
  9clud$ ! am.t (! loan 9 9come 9 a
  prec$+ tax,n ye>4
#cc4 ,p>agraph #bj7#a77j7 applies 6a
  "pn]%ip if a loan subject 6subsec;n
  #ae7#b7 has be5 9clud$ 9 calculat+ !
  9come (! "pn]%ip 9 a prec$+ ye> &!
  "pn]%ip subsequ5tly repays ! loan4

     ,applic,n ( ,subsec;n #ae7#b7
      & p>agraph #bj7#a77j7 ,:5 8a
                ,s]ies0
    
#cd4 ,:5 "! is a s]ies ( loans or o!r
  transac;ns & repay;ts 7see p>agraphs
  #bh & #bi abv71 ! excep;n 9 subsec;n
  #ae7#b.f7 does n apply un.s bona fide
  repay;ts >e made4 ,loans : d n     #bh
          ,applic,n :5 a s]ies       b#f
  meet ? te/ >e 9clud$ 9 9come pursuant
  6! op5+ ^ws ( subsec;n #ae7#b7 )\t
  all[+ ! "o ye> = possi# repay;t1 un.s
  !y -e )9 "o (! o!r except+ provi.ns (
  subsec;ns #ae7#b.c7 to 7#b.e74
#ce4 ,6det]m9e ! am.t 6be ei 9clud$ "u
  subsec;n #ae7#b7 or deduct$ "u
  p>agraph #bj7#a77j7 9 calculat+ !
  9come (a "picul> tax,n ye> (! borr[]1
  ! a3.t m/ 2 analyz$4 ,a tempor>y
  repay;t 7see p>agraph #bh abv7 is n
  3sid]$ 6be a repay;t & w n 2 recogniz$
  z a decr1se (! a3.t bal.e4 ,! =ego+ is
  illu/rat$ 0! example 9 p>agraph #cf
  2l4

                ,example
    
#cf4 ,mr4 ,f.d] is a m9or;y %>ehold] (
  ,alphaco4 ,alphaco has a cal5d> ye>
  5d4 ,mr4 ,f.d] rcvs a sal>y : results
  9 take home pay ( 4#b1ejj p] mon?4 ,!
  foll[+ ev5ts >e reflect$ 9 !
  %>ehold]'s loan a3.t4              #bi
                ,example             c#f
  ,at ! 5d ( #aiib1 ! -pany [$ ,mr4
  ,f.d] 4#b1jjj4

  ,9 #aiic1 ,mr4 ,f.d] *>g$ 4#bj1jjj 9
  miscellane\s am.ts 6his loan a3.t &
  4#e1jjj =a memb]%ip 9 a club4 ,on
  ,octob] #ae1 #aiic1 ,mr4 ,f.d]
  transf]r$ [n]%ip ( #ejj %>es (
  ,megabank1 a -pany trad$ on a
  prescrib$ /ock ex*ange1 6,alphaco4 ,!
  %>es clos$ at 4#bh on t date4 ,!
  m9utes ( ,alphaco's annual meet+
  approv$ ! pur*ase (! ,megabank %>es &!
  f9ancial /ate;ts report$ ! %>es z a
  prop]ty acquir$ at a co/ ( 4#ad1jjj4
  ,mr4 ,f.d] advis$ ! transf] ag5t =!
  %>es ( ,megabank t he _h transf]r$
  [n]%ip (! %>es 6,alphaco4

  ,9 #aiid1 ,mr4 ,f.d] *>g$ 4#bc1jjj 9
  miscellane\s am.ts 6his loan a3.t4
  ,alphaco dcld a bonus ( 4#aj1jjj 6,mr4
  ,f.d] 9 ! ye>4
                                     #cj
                ,example             d#f
  ,9 #aiie1 ,mr4 ,f.d] *>g$ 4#bg1jjj 9
  miscellane\s am.ts 6his loan a3.t &
  4#cb1jjj = an automobile t he pur*as$
  :5 8 previ\s automobile 0 de/roy$ 9 a
  fire4 ,am;g ! 3di;ns atta*$ 6! loan 7
  t ,mr4 ,f.d] apply ! proce$s (! 9sur.e
  settle;t ( 8 previ\s automobile
  6reduce ! loan = 8 new automobile & t
  ! 4#ejj p] mon? = r5t t ! -pany pays
  ,mr4 ,f.d] 2 appli$ 6! loan1 )! f/
  pay;t 6be made on ,novemb] #a1 #aiie4
  ,! loan is n exempt "u ! provi.ns (
  p>agraph #ae7#b.d77d71 z describ$ 9
  p>agraph #ba abv4 ,mr4 ,f.d] 5dors$
  6,alphaco ! *eque = 4#ab1jjj t he rcvd
  f 8 9sur.e -pany =! loss ( 8 previ\s
  automobile4 ,alphaco pd a bonus (
  4#aj1jjj 6,mr4 ,f.d] 9 ! ye>4

  ,9 #aiif1 ,mr4 ,f.d] *>g$ 4#ah1jjj 9
  miscellane\s am.ts 6his loan a3.t &
  4#ae1jjj =a w9t] cruise4 ,on ,decemb]
  #bg1 #aiif1 ,mr4 ,f.d] made a ca%
  pay;t ( 4#cj1jjj 6reduce ! am.t    #ca
                ,example             e#f
  9 8 %>ehold] loan a3.t4 ,alphaco dcld
  & pd a divid5d ( 4#aj1jjj &a bonus (
  4#aj1jjj 6,mr4 ,f.d] 9 ! ye>4

  ,9 #aiig1 ,mr4 ,f.d] *>g$ 4#bb1jjj 9
  miscellane\s am.ts 6his loan a3.t & on
  ,janu>y #f1 #aiig1 he )drew 4#cj1jjj
  6repay a p]sonal loan4 ,alphaco dcld &
  pd a divid5d ( 4#ae1jjj &a bonus (
  4#aj1jjj 6,mr4 ,f.d] 9 ! ye>4
--------------------------------------#g
      ,mr4 ,f.d]'s ,%>ehold] ,loan
                 ,a3.t
    
,transcrib]'s note3
  7,! foll[+ is set-up 9 ?ree columns4
  ,column #a3 ,debits
  ,column #b3 ,cr$its
  ,column #c3 ,bal.e7
  



                                     #cb
                ,example             a#g
#aiib
  ,bal.e 4#b1jjj ,cr
#aiic
  ,miscellane\s draw+s ,debit 4#bj1jjj
  ,club memb]%ip ,debit 4#e1jjj
  ,%>es ( ,megabank ,debit 4#ad1jjj
    ,bal.e 4#i1jjj ,dr
#aiid
  ,miscellane\s draw+s ,debit 4#bc1jjj
  ,bonus ,cr$it 4#aj1jjj
    ,bal.e 4#bb1jjj ,dr
#aiie
  ,miscellane\s draw+s ,debit 4#bg1jjj
  ,bonus ,cr$it 4#aj1jjj
    ,bal.e 4#ci1jjj ,dr
#aiif
  ,miscellane\s draw+s ,debit 4#ah1jjj
  ,cruise ,debit 4#ae1jjj
  ,ca% pay;t ,cr$it 4#cj1jjj
  ,bonus ,cr$it 4#aj1jjj
  ,divid5ds ,cr$it 4#aj1jjj
    ,bal.e 4#bb1jjj ,dr
  
                                     #cc
                ,example             b#g
#aiig
  ,miscellane\s draw+s ,debit 4#bb1jjj
  ,ca% )drawal ,debit 4#cj1jjj
  ,bonus ,cr$it 4#aj1jjj
  ,divid5ds ,cr$it 4#ae1jjj
    ,bal.e 4#di1jjj ,dr
  
     ,mr4 ,f.d]'s ,automobile ,loan
                 ,a3.t
    
#aiie
  ,automobile loan ,debit 4#cb1jjj
  ,9sur.e proce$s ,cr$it 4#ab1jjj
  ,r5t pay;ts appli$ ,cr$it 4#a1jjj
    ,bal.e 4#ai1jjj ,dr
#aiif
  ,r5t pay;ts appli$ ,cr$it 4#f1jjj
    ,bal.e 4#ac1jjj ,dr
#aiig ,r5t pay;ts appli$ ,cr$it 4#f1jjj
  ,bal.e 4#g1jjj ,dr

  ,cr$its >e appli$ on a ,,fifo basis
un.s specific alloc,n (! cr$it is
reque/$ 0! debtor4                   #cd
        ,analysis ( ,mr4 ,f.d]'s      #h
         ,%>ehold] ,loan ,a3.t
    
,transcrib]'s note3
  7,! foll[+ is set-up 9 five columns4
  ,column #a3 ,debits
  ,column #b3 ,cr$its
  ,column #c3 ,bal.e
  ,column #d3 ,subsec;n #ae7#b7
  ,column #e3 ,p>agraph #bj7#a77j77
  
#aiib ,bal.e 4#b1jjj ,cr
#aiic
  ,debit 4#be1jjj
  ,cr$it 4#ad1jjj
  ,bal.e 4#i1jjj ,dr 7#a7
#aiid
  ,debit 4#bc1jjj
  ,dedit 4#bb1jjj 7#b7
  ,cr$it 4#aj1jjj
  ,bal.e 4#bb1jjj ,dr
  


                                     #ce
                ,example             a#h
,pd 9 #aiie
  ,debits 7#aj1jjj7
,bal.e af #a ye> 7#c7
  ,debit 4#ab1jjj
  ,subsec;n #ae7#b7 4#ab1jjj
,pd 9 #aiif 7#d7
  ,debit 74#ab1jjj7
  ,p>agraph #bj7#a77j7 4#ab1jjj

#aiie
  ,debit 4#bg1jjj
  ,cr$it 4#aj1jjj
  ,bal.e 4#ci1jjj ,dr
,appli$ 6#aiid
  ,cr$it 74#aj1jjj7
,pd 9 #aiif
  ,debit 74#h1jjj7
,bal.e af #a ye>
  ,debit 4#ai1jjj
  ,subsec;n #ae7#b7 4#ai1jjj
,pd 9 #aiig
  ,debit 74#ai1jjj7
  ,p>agraph #bj7#a77j7 4#ai1jjj
                                     #cf
                ,example             b#h
#aiif
  ,debit 4#cc1jjj
  ,cr$it 4#bj1jjj 7#e7
  ,bal.e 4#eb1jjj ,dr
,appli$ 6#aiid
  ,cr$it 74#ab1jjj7
,appli$ 6#aiie
  ,cr$it 74#h1jjj7
,pd 9 #aiig
  ,debit 74#f1jjj7
,bal.e af #a ye>
  ,debit 4#bg1jjj
  ,subsec;n #ae7#b7 4#bg1jjj

#aiig
  ,debit 4#bb1jjj
  ,cr$it 4#be1jjj
  ,bal.e 4#di1jjj ,dr
,appli$ 6#aiie
  ,cr$it 74#ai1jjj7
,appli$ 6#aiif
  ,cr$it 74#f1jjj7

                                     #cg
                ,example             c#h
7#a7 ,s9ce ! pay;t 9 #aiid exce$s !
  bal.e [+ 9 #aiic1 subsec;n #ae7#b7
  does n apply
7#b7 4#bb1jjj s9ce 4#a1jjj (! cr$its 9
  #aiid >e appli$ 6! debits (! ye>4
7#c7 ,! bal.e [+ af #a ye> is 9clud$ 9
  9come "u subsec;n #ae7#b74
7#d7 ,a pay;t on an a3.t af x has be5
  9clud$ 9 9come "u subsec;n #ae7#b7
  gives rise 6a cr$it "u p>agraph
  #bj7#a77j7 9 ! ye> ( pay;t4
7#e7 ,! 4#cj1jjj pd on ,decemb] #bg1
  #aiif1 & )drawn on ,janu>y #f1 #aiig1
  is "p (a s]ies ( loans or o!r
  transac;ns & repay;ts2 ?us x is nei a
  pay;t 9 #aiif nor a draw+ 9 #aiig4







                                     #ch
        ,analysis ( ,mr4 ,f.d]'s     d#h
        ,automobile ,loan ,a3.t
    
,transcrib]'s note3
  7,! foll[+ is set-up 9 five columns4
  ,column #a3 ,debits
  ,column #b3 ,cr$its
  ,column #c3 ,bal.e
  ,column #d3 ,subsec;n #ae7#b7
  ,column #e3 ,p>agraph #bj7#a77j77
  
#aiie
  ,debit 4#cb1jjj
  ,cr$it 4#ac1jjj
  ,bal.e 4#ai1jjj ,dr
#aiie ,bal.e
  ,debit 4#ai1jjj
,pd 9 #aiif
  ,debit 74#f1jjj7
,bal.e af #a ye>
  ,debit 4#ac1jjj
  ,subsec;n #ae7#b7 4#ac1jjj
,pd 9 #aiig
  ,debit 74#f1jjj7
  ,p>agraph #bj7#a77j7 4#f1jjj       #ci
                ,example             e#h
#aiif
  ,cr$it 4#f1jjj
  ,bal.e 4#ac1jjj ,dr
,appli$ 6#aiie
  ,cr$it 74#f1jjj7

#aiig
  ,cr$it 4#f1jjj
  ,bal.e 4#g1jjj ,dr
,appli$ 6#aiie
  ,cr$it 74#f1jjj7
--------------------------------------#i
         ,summ>y ( ,applic,ns (
      ,subsec;n #ae7#b7 & p>agraph
               #bj7#a77j7
    
,transcrib]'s note3
  7,! foll[+ is set-up 9 f\r columns4
  ,column #a3 #aiid
  ,column #b3 #aiie
  ,column #c3 #aiif
  ,column #d3 #aiig7
  
                                     #dj
                ,example             a#i
,subsec;n #ae7#b7
,%>ehold] ,a3.t
  #aiid 4#ab1jjj
  #aiie 4#ai1jjj
  #aiif 4#bg1jjj
  #aiig 7#a7
,automobile ,loan ,a3.t
  #aiie 4#ac1jjj

,p>agraph #bj7#a77j7
,%>ehold] ,a3.t
  #aiif 4#ab1jjj
  #aiig 4#ai1jjj
,automobile ,loan ,a3.t
  #aiig 4#f1jjj

7#a7 ,:e!r any "p (! miscellane\s draw+s
  ( 4#bb1jjj 9 #aiig w 2 9clud$ 9 9come
  dep5ds on ! pay;ts made 9 #aiih4

             ,non-,resid5ts
    
#cg4 ,subsec;n #ae7#g7 provides t
  subsec;n #ae7#b7 applies 9         #da
             ,non-,resid5ts          b#i
  calculat+ ! 9come "u ,"p ;,i (a p]son
  or "pn]%ip1 describ$ 9 p>agraph #b
  abv1 :e!r or n ! l5d]1 describ$ 9
  p>agraph #a7a7 to 7c7 abv1 0 resid5t 9
  ,canada or c>ri$ on busi;s 9 ,canada4
  ,subsec;n #ae7#b.b7 provides t
  subsec;n #ae7#b7 does n apply
  69debt$;s 2t non-resid5t p]sons4
#ch4 ,if ! borr[] is a non-resid5t1
  p>agraph #bad7#c77a7 deems1 = purposes
  ( ,"p ,,xiii1 am.ts : wd 2 9clud$ 9
  9come "u subsec;n #ae7#b71 if ,"p ;,i
  7 applica#1 6h be5 pd 6! non-resid5t z
  a divid5d f a corpor,n resid5t 9
  ,canada 7un.s ! l5d] is al a non-
  resid5t74 ,a divid5d pd 0a corpor,n
  resid5t 9 ,canada 6a non-resid5t is
  subject 6an 9come tax "u subsec;n
  #bab7#b74 ,subsec;n #bae7#a7 requires
  ! l5d] 6)hold & remit ! 9come tax 6!
  ,rcvr ,g5]al4 ,if "! is no s]ies (
  loans or o!r transac;ns & repay;ts
  7see p>agraph #bh abv71 ! non-resid5t
  :o has rcvd a loan 9 a "picul>     #db
             ,non-,resid5ts          c#i
  tax,n ye> _c 2 deem$ 6h rcvd a divid5d
  until "o ye> af ! 5d (! tax,n ye> (!
  l5d]1 9 ord] 6det]m9e if ! excep;n "u
  subsec;n #ae7#b.f7 applies4
  ,3sequ5tly1 x is ! ,de"p;t's practice1
  9 ^! circum/.es1 n 6levy a p5alty & n
  6*>ge 9t]e/ 9 respect (! require;t =
  remitt.e (! tax1 provid$ t ! tax is
  remitt$ on or 2f ! fifte5? "d (!
  ?irtie? mon? foll[+ ! 5d (! tax,n ye>
  (! l5d] 9 : ! loan 0 made 7if ! tax is
  n remitt$ 0? "d1 9t]e/ w />t a3ru+ z
  (! sixte5? "d (! ?irtie? mon?74 ,if "!
  is a s]ies ( loans or o!r transac;ns &
  repay;ts 7see p>agraphs #cd 6#cf abv71
  ! tax is bas$ on ! net 9cr1se (! loan
  dur+ ! tax,n ye> (! l5d]4 ,9 ! case (a
  s]ies1 a p5alty w n 2 levi$ & 9t]e/ w
  n 2 *>g$ provid$ t ! tax is remitt$ on
  or 2f ! fifte5? "d (! mon? foll[+ ! 5d
  (! l5d]'s tax,n ye> 9 : ! net 9cr1se
  o3urr$4 7,if ! tax is n remitt$ 0? "d1

                                     #dc
             ,non-,resid5ts          d#i
  9t]e/ w />t a3ru+ z (! sixte5? "d (!
  mon? foll[+ ! 5d (! l5d]'s tax,n ye>47
#ci4 ,subsec;n #bbg7#f.a7 provides =a
  refund (! ,"p ,,xiii tax pd on a loan
  deem$ 6be a divid5d 0virtue ( p>agraph
  #bad7#c77a7 if ! p]son1 on ^: 2half !
  tax 0 pd1 repays ! loan af ,decemb]
  #ba1 #aiib1 &! repay;t is n "p (a
  s]ies ( loans or o!r transac;ns &
  repay;ts4 ,! refund is limit$ 6! less]
  (! ,"p ,,xiii tax orig9,y pd on !
  por;n (! loan 2+ repd1 &! ,"p ,,xiii
  tax t wd 2 paya# if1 at ! "t (!
  repay;t1 a divid5d describ$ 9 p>agraph
  #bab7#b77a71 equal 6! am.t (! repay;t1
  7 pd 6! p]son4 ,9 ord] 6obta9 !
  refund1 applic,n m/ 2 made )9 #b ye>s
  (! 5d (! cal5d> ye> 9 : ! repay;t is
  made4 ,h["e1 :5 ! p]son is or is ab
  62come lia# 6make any pay;t 6,h]
  ,maje/y 9 "r ( ,canada1 ! am.t (!
  refund may 2 appli$ 6t pay;t4
#dj4 ,! -;ts 9 #bg abv apply =! purposes
  ( det]m9+ ! ,"p ,,xiii tax         #dd
             ,non-,resid5ts          e#i
  refund z provid$ 9 subsec;n
  #bbg7#f.a74 ,un.s ! facts cle>ly
  9dicate o!rwise1 repay;ts >e 3sid]$
  6apply f/ 6! olde/ loan or debt \t/&+4
#da4 ,2c p>agraph #bad7#c77a7 applies
  only = purposes ( ,"p ,,xiii1 if !
  l5d] is a private corpor,n ! deem$
  divid5d does n qualify z a divid5d pd
  0! corpor,n = purposes ( subp>agraph
  #abi7#a77a77;i7 7divid5d refund74
-------------------------------------#aj
         ,explan,n ( ,*anges =
          ,9t]pret,n ,bullet9
             ,,it-#aai;,r#d
      ,debts ( ,%>ehold]s & ,c]ta9
      ,p]sons ,3nect$ ) ,%>ehold]s
    
               ,9troduc;n
    
  ,! purpose (! ,explan,n ( ,*anges is
6give ! r1sons =! revi.ns 6an 9t]pret,n
bullet94 ,x \tl9es revi.ns t we h made z
a result ( *anges 6! law1 z well z
                                     #de
          ,explan,n ( ,*anges       a#aj
*anges reflect+ new or revis$ de"p;tal
9t]pret,ns4

           ,r1sons =! ,revi.n
    
  ,we h revis$ ! bullet9 6reflect
    --*anges 6! ,9come ,tax ,act result+
      f ,s4,c4 #aihg1 c4#df 7=m]ly ,bill
      ;,c-#fd71 ,s4,c4 #aiia1 c4#di
      7=m]ly ,bill ;,c-#ah71 ,s4,c4
      #aiid1 c4#ba 7=m]ly ,bill ;,c-
      #bg71 & ,s4,c4 #aiih c4#ai 7=m]ly
      ,bill ;,c-#bh71
    --new & revis$ de"p;tal posi;ns
      9clud+ a *ange 9 ! de"p;tal
      assess+ practice 6apply pay;ts
      6g5],y ! olde/ \t/&+ am.t 9 a
      %>ehold] loan a3.t1 &
    --relevant c\rt deci.ns1 9clud+
      ,joel ,attis v4 ,,mnr1 #ib ,,dtc
      #aabh1 ,7#aiib7' #a ,,ctc #bbdd1
      ,uphill ,hold+s ,ltd4 & ,nigel ,t4
      ,hill v4 ,,mnr1 #ic ,,dtc #adh1
      ,7#aiic7' #a ,,ctc #bjba :     #df
          ,explan,n ( ,*anges       b#aj
      4cuss bona fide repay;ts (
      %>ehold]s' loan a3.ts t >e n "p (a
      s]ies ( loans & repay;ts4
  ,bill ;,c-#bh1 except z o!rwise not$1
applies 6loans made & 9debt$;s >is+ 9 !
#aiij & subsequ5t tax,n ye>s4 ,bill ;,c-
#bh reorganiz$ subsec;n #ae7#b7 b1
except =! a4i;n ( p>agraph #ae7#b.d77e71
! law is n significantly *ang$4 ,! -;ts
9 ! bullet9 >e n a6ect$ 0any propos$
legisl,n t 0 rel1s$ 2f ,june #ai1 #aiih4

      ,legislative & ,o!r ,*anges
    
  ,bill ;,c-#bh reorganiz$ subsec;n
#ae7#b7 & mov$ ! excep;ns 3ta9$ 9 =m]
p>agraphs #ae7#b77a7 & 7b7 6subsec;ns
#ae7#b.c71 7#b.d71 & 7#b.f74 ,z "p (!
reorganiz,n1 subsec;n #ae7#h7 0 rep1l$2
h["e1 ! provi.ns ( t subsec;n >e 3ta9$ 9
subsec;n #ae7#b.b74 ,a p>agraph 9 !
bullet9 is n not$ z 2+ *ang$ :5 ! only
*ange is z a 3sequ;e (! reorganiz,n4
                                     #dg
          ,explan,n ( ,*anges       c#aj
  ,=m] p>agraph #a has be5 9corporat$
96! ,summ>y4
  ,p>agraph #d 7=m] p>agraph #e7 has be5
revis$ 6add an example 6illu/rate !
e6ect (! phrase 8a tax,n ye>0 9 subsec;n
#ae7#b74
  ,p>agraph #f 0 a4$ 6describe subsec;n
#ae7#a.b74 ,? subsec;n1 applica#
6oblig,ns settl$ or ext+ui%$ af ,febru>y
#ag1 #aihg1 det]m9es ! value (! b5efit
6be 9clud$ 9 a %>ehold]'s 9come1 :5 a
loan or o!r oblig,n (! %>ehold] 6a
corpor,n is settl$ or ext+ui%$ 0pay;t (
less ?an ! am.t (! oblig,n \t/&+1 or 0no
pay;t4
  ,p>agraph #g is a re/ructur+ ( "p (
=m] p>agraph #ab & notes t a loan or
9debt$;s w n h 6be 9clud$ 9 9come "u
subsec;n #ae7#b7 if ! loan or 9debt$;s
falls )9 ! provi.ns ( "o ( subsec;ns
#ae7#b.b7 to 7#b.f74
  ,new p>agraph #h describes subsec;n
#ae7#b.c74 ,! subsec;n is a re/ate;t (
=m] subp>agraph #ae7#b77a77;i74      #dh
          ,explan,n ( ,*anges       d#aj
  ,new p>agraph #i describes subsec;n
#ae7#b.d74 p>agraph #ae7#b.d77a7
provides an excep;n = loans 6or 9debt$;s
( an employee :o is n a specifi$
employee (! l5d]4 ,p>agraphs
#ae7#b.d77b7 & 7c7 >e re/ate;ts ( =m]
subp>agraphs #ae7#b77a77;ii7 & 7;iii7
:ile p>agraph #ae7#b.d77d7 is funda;t,y
a re/ate;t ( =m] subp>agraph
#ae7#b77a77;iv74 ,! excep;ns 9 p>agraphs
#ae7#b.d77a7 to 7d7 apply :5 ! provi.ns
( p>agraphs #ae7#b.d77e7 & 7f7 >e
satisfi$4 ,p>agraph #ae7#b.d77e71 :
applies af ,april #be1 #aiie1 provides t
! loan or 9debt$;s m/ 2 rcvd or 9curr$
2c (! employee's employ;t r ?an 2c (
employee's %>ehold+4 ,p>agraph
#ae7#b.d77f7 re/ates ! require;t 9 ! =m]
subsec;n #ae7#b7 3c]n+ ! >range;ts =
repay;t (! loan or 9debt$;s4 ,=!
purposes (! applic,n ( new p>agraph
#ae7#b.d77e71 a loan w 2 3sid]$ 6h be5
made af ,april #be1 #aiie1 if ! funds >e
adv.ed 6! borr[] af t date4          #di
          ,explan,n ( ,*anges       e#aj
  ,new p>agraph #aj describes subsec;n
#ae7#b.e74 ,! subsec;n applies 6c]ta9
loans made 0a private corpor,n 6a tru/4
,! tru/ ess5ti,y acts z a will+ buy] or
sell] (! %>es (! corpor,n = xs
employees4
  ,new p>agraph #aa 4cusses ! situ,n ":
a corpor,n makes a loan 6an 9dividual :o
is bo? an employee &a %>ehold] &
describes ! mo/ important factors t w 2
3sid]$ 9 det]m9+ :e!r ! loan w 2 se5 z
hav+ be5 made 6! 9dividual z an employee
or z a %>ehold]4
-------------------------------------#aa
  ,p>agraph #ac 7=m] p>agraph #ad7
reflects am5d;ts 6! =m] subp>agraphs
#ae7#b77a77;ii7 & 7;iii7 7am5d$
p>agraphs #ae7#b.d77b7 & 7c77 reg>d+ !
borr[] 6:om ! subp>agraphs appli$4 ,!
am5d;t 6=m] subp>agraph #ae7#b77a77;ii7
appli$ 6! #aihe & lat] tax,n ye>s :ile !
am5d;t 6=m] subp>agraph #ae7#b77a77;iii7
appli$ 6loans >is+ af #aiha4
                                     #ej
          ,explan,n ( ,*anges       a#aa
  ,new p>agraph #af describes ! applic,n
( subsec;n #ae7#b.c7 ": an 9dividual has
revolv+ debt )a f9ancial 9/itu;n & [ns
%>es 9 ! 9/itu;n or is 3nect$ ) "s"o :o
[ns %>es 9 x4
  ,p>agraph #ag 7=m] p>agraph #af7
reflects an am5d;t 6=m] subp>agraph
#ae7#b77a77;ii7 7am5d$ p>agraph
#ae7#b.d77b774 ,z a result ( ? am5d;t1 a
%>e (! capital /ock (a coop]ative h\s+
corpor,n cd qualify =! excep;n4 ,9
a4i;n1 ! am5d;t cl>ifi$ t ! dwell+ m/ 2
acquir$ = habit,n by 8! 9dividual0 7!
employee or ! employee's sp\se7 :o
9curr$ ! loan4 ,! am5d;t 6=m]
subp>agraph #ae7#b77a77;ii7 appli$ 6!
#aihe & lat] tax,n ye>s4 ,p>agraph #ag
al notes ! a4i;n ( subsec;n #beb7#d7 :1
af #aiib1 exp&s ! def9i;n ( 8sp\se40
  ,p>agraph #ah 7=m] p>agraph #ag7 has
be5 revis$ 6add an example ( h[ a loan
6an employee 6pur*ase a h\se mi<t 2
ref9.ed )a loan1 : wd qualify "u
                                     #ea
          ,explan,n ( ,*anges       b#aa
p>agraph #ae7#b.d77b71 f ! employee's
employ]4
  ,p>agraph #bj 7=m] p>agraph #ai7
reflects an am5d;t 6=m] subp>agraph
#ae7#b77a77;iii7 7am5d$ p>agraph
#ae7#b.d77c774 ,! excep;n 9 ! provi.n 0
am5d$ 6apply 6loans made 0a corpor,n 6an
employee (a relat$ corpor,n4 ,9 a4i;n1 !
am5d;t cl>ifi$ t ! %>es : qualifi$ =!
excep;n m/ 2 previ\sly unissu$ %>es4 ,!
am5d;t 6=m] subp>agraph #ae7#b77a77;iii7
appli$ 6loans >is+ af #aiha4
  ,new p>agraph #ba describes p>agraph
#ae7#b.d77d71 an excep;n 3c]n+ !
acquisi;n (a motor vehicle 0an employee
= use 0! employee 9 ! p]=m.e ( 8 or h]
duties ( employ;t4
  ,new p>agraphs #bb & #bc 4cuss ! m1n+
(! t]m 8specifi$ employee0 9 3nec;n )a
corpor,n &a "pn]%ip4
  ,p>agraph #bg 7=m] p>agraph #bd7 has
be5 revis$ 6delete ! -;ts 3c]n+ ! nett+
( loans & repay;ts s9ce t practice is
                                     #eb
          ,explan,n ( ,*anges       c#aa
g5],y 9consi/5t ) apply+ pay;ts 6! olde/
\t/&+ 9debt$;s4
  ,p>agraph #bi 7=m] p>agraph #bf7 has
be5 revis$ 6note t pursuant 6c\rt cases1
s* z ,joel ,attis v4 ,,mnr & ,uphill
,hold+s ,ltd4 & ,nigel ,t4 ,hill v4
,,mnr1 bona fide repay;ts ( %>ehold]
loans : >e ! result (1 = example1 !
pay;t ( divid5ds or bonuses >e n 3sid]$
"p (a s]ies ( loans or o!r transac;ns &
repay;ts4
  ,p>agraph #cj 7=m] p>agraph #bg7 has
be5 revis$ 6delete ! la/ s5t;e 9 !
p>agraph s9ce ! s5t;e is 9consi/5t )
p>agraph #bj7#a77j74
  ,p>agraph #cd 7=m] p>agraph #ca7 has
be5 revis$ 6describe t a bona fide
repay;t applies 6a s]ies ( loans or o!r
transac;ns & repay;ts4 ,! la/ two s5t;es
h be5 delet$ z !y >e 9consi/5t )
p>agraph #bj7#a77j74
  ,p>agraph #ce 7=m] p>agraph #cb7 has
be5 revis$ 6delete ! -;ts 3c]n+ !
analysis (! net 9cr1se or net        #ec
          ,explan,n ( ,*anges       d#aa
decr1se 6det]m9e ! tax,n ye> 9 : x >ose4
,? analysis %d n 2 nec s9ce pursuant
6,paul ,quigley v4 ,h] ,maje/y ! ,que5--
#if ,,dtc #ajeg1 ,7#aiif7' #a ,,ctc
#bcgh1 pay;ts >e g5],y appli$ 6! olde/
\t/&+ am.t4
  ,p>agraph #cf 7=m] p>agraph #cc7 has
be5 exp&$ 6reflect relevant c\rt deci.ns
s* z ,joel ,attis v4 ,,mnr1 ,uphill
,hold+s ,ltd4 & ,nigel ,t4 ,hill v4
,,mnr & ,paul ,quigley v4 ,h] ,maje/y !
,que5 : support apply+ pay;ts g5],y ag/
! olde/ \t/&+ am.t4
  ,p>agraph #cg -b9es ! 4cus.n 9 ! =m]
p>agraphs #g & #h4
  ,p>agraph #ch 7=m] p>agraph #i7
cl>ifies t n only ! p5alties1 b al !
9t]e/1 w n 2 *>g$ until ! dates 9dicat$
9 t p>agraph4
  ,p>agraph #ci replaces =m] p>agraph
#aj & describes subsec;n #bbg7#f.a74 ,!
subsec;n1 : applies 6repay;ts made af
,decemb] #ba1 #aiib1 provides =a refund
(! ,"p ,,xiii tax pd on a loan       #ed
          ,explan,n ( ,*anges       e#aa
deem$ 6be a divid5d "u p>agraph
#bad7#c77a71 :5 ! loan is repd & c]ta9
o!r require;ts >e met4
  ,new p>agraph #dj notes t 9 apply+
subsec;n #bbg7#f.a71 repay;ts >e 3sid]$
6apply f/ 6! olde/ loan or debt \t/&+1
un.s ! facts cle>ly 9dicate o!rwise4
  ,"?\t ! bullet91 we h made m9or *anges
= cl>ific,n or r1dabil;y purposes4














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