I-3 - Taxation Act

Section 127.3.2 Disposition versions

2006-03-01

127.3.2. For the purposes of section 127.7 and paragraph b of section 127.8, where an intermediate lender makes a loan to an intended borrower, and that loan arises out of another loan which the intermediate lender received from an initial lender, the following rules apply:

(a)  the loan made by the intermediate lender to the intended borrower is deemed to have been made by the initial lender to the intended borrower, to the extent of the lesser of the amount of that loan and the amount of the loan made by the initial lender to the intermediate lender, under the same terms and conditions and at the same time as it was made by the intermediate lender; and

(b)  the loan made by the initial lender to the intermediate lender and the loan made by the intermediate lender to the intended borrower are deemed not to have been made to the extent of the amount of the loan deemed to have been made under subparagraph a.

For the purposes of the first paragraph, the expressions “intermediate lender”, “intended borrower” and “initial lender” refer to a person not resident in Canada or a partnership each member of which is not resident in Canada.

2004, c. 8, s. 23.