I-3 - Taxation Act

Section 174 Disposition versions

2020-09-24

174. For the purposes of sections 169 to 172, the rules set out in section 174.0.1 apply at any time in respect of a taxpayer if at that time

(a)  the taxpayer owes a particular amount as or on account of a particular debt or other particular obligation to pay an amount to a person (in this section and section 174.0.1 referred to as the “intermediary”);

(b)  the intermediary is neither

i.  a person resident in Canada with whom the taxpayer does not deal at arm’s length, nor

ii.  a person that is, in respect of the taxpayer, a specified person not resident in Canada;

(c)  the intermediary or a person that does not deal at arm’s length with the intermediary

i.  owes an amount to a particular person that is, in respect of the taxpayer, a specified person not resident in Canada as or on account of a debt or other obligation to pay an amount (in this section and section 174.0.1 referred to as the “intermediary debt”), in respect of which any of the following conditions is met:

(1)  recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to the particular debt or other particular obligation, or

(2)  it can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, because all or a portion of the debt or other obligation was entered into or was permitted to remain owing, or the intermediary anticipated that all or a portion of the debt or other obligation would become owing or remain owing, or

ii.  has a specified right in respect of a particular property that was granted directly or indirectly by a particular person that is, in respect of the taxpayer, a specified person not resident in Canada and in respect of which any of the following conditions is met:

(1)  the existence of the specified right is required under the terms and conditions of the particular debt or other particular obligation, or

(2)  it can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, because the specified right was granted or the intermediary anticipated that it would be granted; and

(d)  the aggregate of all amounts—each of which is, in respect of the particular debt or other particular obligation, an amount owing as or on account of an intermediary debt or the fair market value of a particular property described in subparagraph ii of paragraph c—is equal to at least 25% of the total of

i.  the particular amount, and

ii.  the aggregate of all amounts each of which is an amount (other than the particular amount) that the taxpayer, or a person that does not deal at arm’s length with the taxpayer, owes to the intermediary as or on account of a debt or other obligation to pay an amount under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other particular obligation was entered into if

(1)  the intermediary is granted a security interest in respect of a property that is the intermediary debt or the particular property, as the case may be, and the security interest secures the payment of two or more debts or other obligations that include the debt or other obligation and the particular debt or other particular obligation, and

(2)  each security interest that secures the payment of a debt or other obligation referred to in subparagraph 1 secures the payment of every debt or other obligation referred to in that subparagraph.

1972, c. 23, s. 161; 1977, c. 26, s. 18; 1984, c. 15, s. 43; 1986, c. 19, s. 32; 1997, c. 3, s. 71; 2015, c. 24, s. 39; 2017, c. 29, s. 48; 2020, c. 16, s. 43.

2017-12-07

174. For the purposes of sections 169 to 172, the rules set out in section 174.0.1 apply at any time in respect of a taxpayer if at that time

(a)  the taxpayer has a particular amount outstanding as or on account of a particular debt or other particular obligation to pay an amount to a person (in this section and section 174.0.1 referred to as the “intermediary”);

(b)  the intermediary is neither

i.  a person resident in Canada with whom the taxpayer does not deal at arm’s length, nor

ii.  a person that is, in respect of the taxpayer, a specified person not resident in Canada;

(c)  the intermediary or a person that does not deal at arm’s length with the intermediary

i.  has an amount outstanding as or on account of a debt or other obligation to pay an amount to a particular person that is, in respect of the taxpayer, a specified person not resident in Canada (the debt or other obligation referred to in this section and section 174.0.1 as the “intermediary debt”) that meets either of the following conditions:

(1)  recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to the particular debt or other particular obligation, or

(2)  it can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, because all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or the intermediary anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or

ii.  has a specified right in respect of a particular property that was granted directly or indirectly by a particular person that is, in respect of the taxpayer, a specified person not resident in Canada and the existence of the specified right is required under the terms and conditions of the particular debt or other particular obligation, or it can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, because

(1)  the specified right was granted, or

(2)  the intermediary anticipated that the specified right would be granted; and

(d)  the aggregate of all amounts—each of which is, in respect of the particular debt or other particular obligation, an amount outstanding as or on account of an intermediary debt or the fair market value of a particular property described in subparagraph ii of paragraph c—is equal to at least 25% of the total of

i.  the particular amount, and

ii.  the aggregate of all amounts each of which is an amount (other than the particular amount) that the taxpayer, or a person that does not deal at arm’s length with the taxpayer, has outstanding as or on account of a debt or other obligation to pay an amount to the intermediary under the agreement, or an agreement that is connected to the agreement, under which the debt or other obligation was entered into if

(1)  the intermediary is granted a security interest in respect of a property that is the intermediary debt or the particular property, as the case may be, and the security interest secures the payment of two or more debts or other obligations that include the debt or other obligation and the particular debt or other particular obligation, and

(2)  each security interest that secures the payment of a debt or other obligation referred to in subparagraph 1 secures the payment of every debt or other obligation referred to in that subparagraph.

1972, c. 23, s. 161; 1977, c. 26, s. 18; 1984, c. 15, s. 43; 1986, c. 19, s. 32; 1997, c. 3, s. 71; 2015, c. 24, s. 39; 2017, c. 29, s. 48.

2015-10-26

174. For the purposes of sections 169 to 171, where a particular person, described in the second paragraph, makes a loan to another person on condition that a loan be made by a person to a particular corporation or trust, the lesser of these two loans is deemed to be a debt incurred by the particular corporation or trust to the particular person.

The particular person referred to in the first paragraph is

(a)  a specified shareholder not resident in Canada of a corporation or a specified beneficiary not resident in Canada of a trust; or

(b)  a person not resident in Canada who is not dealing at arm’s length with a specified shareholder of a corporation or with a specified beneficiary not resident in Canada of a trust.

1972, c. 23, s. 161; 1977, c. 26, s. 18; 1984, c. 15, s. 43; 1986, c. 19, s. 32; 1997, c. 3, s. 71; 2015, c. 24, s. 39.

2006-03-01

174. For the purposes of sections 169 to 171, where a particular person, described in the second paragraph, makes a loan to another person on condition that person make a loan to a particular corporation resident in Canada, the lesser of these two loans is deemed to be a debt incurred by the particular corporation towards that particular person.

The particular person referred to in the first paragraph is

(a)  a specified shareholder not resident in Canada of a corporation;

(b)  a person not resident in Canada or an investment corporation owned by persons not resident in Canada, who is not dealing at arm’s length with a specified shareholder of the corporation.

1972, c. 23, s. 161; 1977, c. 26, s. 18; 1984, c. 15, s. 43; 1986, c. 19, s. 32; 1997, c. 3, s. 71.