Income Tax Act — I-3.3 80.4
Loans 80.4 (1) Where a person or partnership receives a loan or otherwise incurs a debt because of or as a consequence of a previous, the current or an intended office or employment of an individual, or because of the services performed or to be performed by a corporation carrying on a personal services business, the individual or corporation, as the case may be, shall be deemed to have received a benefit in a taxation year equal to the amount, if any, by which the total of (a) all interest on all such loans and debts computed at the prescribed rate on each such loan and debt for the period in the year during which it was outstanding, and (b) the total of all amounts each of which is an amount of interest that was paid or payable in respect of the year on such a loan or debt by (i) a person or partnership (in this paragraph referred to as the “employer”) that employed or intended to employ the individual, (ii) a person (other than the debtor) related to the employer, or (iii) a person or partnership to or for whom or which the services were or were to be provided or performed by the corporation or a person (other than the debtor) who does not deal at arm’s length with that person or any member of that partnership, exceeds the total of (c) the amount of interest for the year paid on all such loans and debts not later than 30 days after the end of the year, and (d) any portion of the total determined in respect of the year under paragraph 80.4(1)(b) that is reimbursed in the year or within 30 days after the end of the year by the debtor to the person or entity who made the payment referred to in that paragraph. Interpretation (1.1) A loan or debt is deemed to have been received or incurred because of an individual’s office or employment, or because of services performed by a corporation that carries on a personal services business, as the case may be, if it is reasonable to conclude that, but for an individual’s previous, current or intended office or employment, or the services performed or to be performed by the corporation, (a) the terms of the loan or debt would have been different; or (b) the loan would not have been received or the debt would not have been incurred. Idem (2) Where a person (other than a corporation resident in Canada) or a partnership (other than a partnership each member of which is a corporation resident in Canada) was (a) a shareholder of a corporation, (b) connected with a shareholder of a corporation, or (c) a member of a partnership, or a beneficiary of a trust, that was a shareholder of a corporation, and by virtue of that shareholding that person or partnership received a loan from, or otherwise incurred a debt to, that corporation, any other corporation related thereto or a partnership of which that corporation or any corporation related thereto was a member, the person or partnership shall be deemed to have received a benefit in a taxation year equal to the amount, if any, by which (d) all interest on all such loans and debts computed at the prescribed rate on each such loan and debt for the period in the year during which it was outstanding exceeds (e) the total of (i) the amount of interest for the year paid on all such loans and debts (other than loans deemed to have been made under subsection 15(2.17)) not later than 30 days after the end of the year, and (ii) the specified interest amounts, for the year, in respect of all such loans that are deemed to have been made under subsection 15(2.17). Where ss. (1) and (2) do not apply (3) Subsections 80.4(1) and (2) do not apply in respect of any loan or debt, or any part thereof, (a) on which the rate of interest was equal to or greater than the rate that would, having regard to all the circumstances (including the terms and conditions of the loan or debt), have been agreed on, at the time the loan was received or the debt was incurred, between parties dealing with each other at arm’s length if (i) none of the parties received the loan or incurred