Income Tax Act — I-3.3 90
ubsection and subsections (6), (8) to (15) and 39(2.1) and (2.2) and paragraph 95(2)(g.04), if at any time a person or partnership (referred to in this subsection as the “intermediate lender”) makes a loan to another person or partnership (in this subsection referred to as the “intended borrower”) because the intermediate lender received a loan from another person or partnership (in this subsection referred to as the “initial lender”) (a) the loan made by the intermediate lender to the intended borrower is deemed, at that time, to have been made by the initial lender to the intended borrower (to the extent of the lesser of the amount of the loan made by the initial lender to the intermediate lender and the amount of the loan made by the intermediate lender to the intended borrower) 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 paragraph (a). Exceptions to subsection (6) (8) Subsection (6) does not apply to (a) a loan or indebtedness that is repaid, other than as part of a series of loans or other transactions and repayments, within two years of the day the loan was made or the indebtedness arose; (b) indebtedness that arose in the ordinary course of the business of the creditor or a loan made in the ordinary course of the creditor’s ordinary business of lending money (other than a business of lending money if, at any time during which the loan is outstanding, less than 90% of the aggregate outstanding amount of the loans of the business is owing by borrowers that deal at arm’s length with the creditor) if, at the time the indebtedness arose or the loan was made, bona fide arrangements were made for repayment of the indebtedness or loan within a reasonable time; (c) a loan that was made, or indebtedness that arose, in the ordinary course of carrying on a life insurance business outside Canada if (i) the loan or indebtedness is owed by the taxpayer or by a subsidiary wholly-owned corporation of the taxpayer, (ii) the taxpayer, or the subsidiary wholly-owned corporation, as the case may be, is a life insurance corporation resident in Canada, (iii) the loan or indebtedness directly relates to a business of the taxpayer, or of the subsidiary wholly-owned corporation, that is carried on outside Canada, and (iv) the interest on the loan or indebtedness is, or would be if it were otherwise income from property, included in the active business income of the creditor, or if the creditor is a partnership, a member of the partnership, under clause 95(2)(a)(ii)(A); and (d) subject to subsection (8.1), an upstream deposit owing to an eligible bank affiliate. Interpretation — partnerships (8.01) For the purposes of paragraph (8)(b), a borrower shall be considered to deal at arm’s length with a creditor only if (a) for greater certainty, the borrower and the creditor deal with each other at arm’s length; (b) where either the borrower or the creditor is a partnership and the other party is not, each member of the partnership deals at arm’s length with the other party; and (c) where both the borrower and the creditor are partnerships, the borrower and each member of the borrower deal at arm’s length with the creditor and each member of the creditor. Upstream deposit  — eligible bank affiliate (8.1) For the purposes of this section, if a taxpayer is an eligible Canadian bank and an eligible bank affiliate of the taxpayer is owed, at any time in a particular taxation year of the affiliate or the immediately preceding taxation year, an upstream deposit, (a) the affiliate is deemed to make a loan to the taxpayer immediately before the end of the particular year equal to the amount determined by the following formula, where all amounts referred to in the f