Source: http://taxinterpretations.com/tax-topics/general-concepts/payment-receipt
Timestamp: 2019-04-21 06:39:03+00:00

Document:
In order to ensure payment of a loan owing by the taxpayer ("Innovative") to a bank (RBC) on the death of Innovative's principal (Mr Peacock), Innovative purchased key man insurance from Sun Life with RBC as the policyholder and funded the payment of premiums on the policy. When Mr Peacock died, Sun Life paid the insurance proceeds to RBC, which was contractually obliged to apply them to discharge the loan.
Paragraph 89(1)(d) does not require that a corporation receive the proceeds directly from the insurer or that it be named as the beneficiary of the policy. It only had to have "received" them in consequence of Mr Peacock's death.
The quantum of the taxpayer's liability under s. 160 turned upon whether a bankruptcy dividend received by the Crown from the trustee in bankruptcy for her husband should be considered to reduce the tax liability of her husband at the time he made contributions to her RRSP rather than being applied to more recent tax liabilities. The taxpayer argued that Clayton's case should be applied to deem the dividend to be applied to the oldest debt. Sharlow J.A., however, was not satisfied that the Crown was precluded from applying the bankruptcy dividend, as it did, to the newest of the tax liabilities of the taxpayer's husband.
"The legal effect of delivery of a promissory note depends upon all the relevant facts, the most important fact being the intention of the maker of the note as determined by the evidence. For example, in some circumstances a promissory note may be evidence of a debt to be paid at some future time. In other circumstances, delivery of a promissory note may itself be payment of a particular obligation."
The replacement of a French-franc note by a Canadian-dollar note with an equivalent principal amount did not give rise to a payment or crediting for purposes of s. 212(13.1)(b) given that the Canadian-dollar note was issued and accepted as replacement for the French-franc note in circumstances where the terms remained the same except for the currency of payment.
The law is well established that accounting documents or accounting entries serve only to reflect transactions and that it is the reality of the facts that determines the true nature and substance of transactions: Vander Nurseries Inc. v. The Queen, 95 D.T.C. 91 (T.C.C.); Mountwest Steel Ltd. v. The Queen (1994), 2 G.T.C. 1087 (T.C.C.); Uphill Holdings Ltd. v. M.N.R., 93 D.T.C. 148 (T.C.C.); M.N.R. v. Wardean Drilling Ltd., 69 D.T.C. 5194 (Ex. Ct.); M.N.R. v. Société Coopérative Agricole de la Vallée d'Yamaska, 57 D.T.C. 1078 (Ex. Ct.).
Interest owing to the taxpayer as a result of the acceptance by his co-shareholders of his offer to sell his shares in a corporation, was found to be received by him at the end of 1990, when he accepted the related cheque as payment (as evidenced by his deposit of the cheque to his bank account), rather than early in 1991 when the amount was credited by the bank to his bank account at another branch.
Although "there can be no doubt that a book entry can constitute payment" (p. 540), in the case of an informal loan from the taxpayer's parent corporation to the taxpayer, the mere addition of accrued interest to the principal owing by the taxpayer to the parent did not constitute payment.
In response to the proposed repeal effective 1 June 1984 of the zero rating of building alteration services, four building companies with existing contracts for building alterations arranged with their customers for payment by the customers before that date subject (in one case) to the condition that the building company would immediately lend back an equivalent sum, to be repaid as the work was done or subject (in the other case) to that money being paid into an account of the building company for release only as the work was done.
Although the use of the money was fettered, the payments discharged the liability of the customers under the building contracts. Accordingly, the building companies had "receive[d] a payment" before 1 June 1984.
Interest paid by cheque was not received on the date that the cheque was received. Instead, the interest was not received until either the date that the recipient deposited the cheque, or the date that the cheque cleared.
An argument was rejected to the effect that fees received by employees of a company were not wages because they were collected directly from clients of the company.
The sending of a cheque by the lender to (its) solicitors did not constitute the payment of a sum to the borrower.
A company's shareholder was held to have received a bonus when the amount of the bonus payable by the company was credited against the balance outstanding on the loan by the company to the shareholder.
[The Crown contended] that there was no actual payment by cheque or cash from the partnership to the Company. That is so but the exchange was effected by journal entries. There was a credit entry in the records of the Company indicating a credit of $20,000 and I take it that there was a corresponding debit entry in the records of the partnership.
All that Georgia did was to pay the monthly rental of $500 to the defendant and to receive in each month the amounts paid to the defendant by the customers which in the nine months in the defendant's taxation year totalled $14,028.60.
A post-dated cheque was payable for purposes of ss. 12(1)(l) and 76(1) on its date rather than the date of delivery.
An individual following the cash method for the recognition of interest income received interest represented by interest coupons on the due dates. "On the due date ... the obligation to pay vested subject only to the 'presentation and surrender of the ... interest coupons'. Hence the presentation and surrender of the coupons was a condition precedent to the obligation to pay ... but the appellant having the coupons could readily present and surrender them and thereby satisfy the condition precedent."
A dividend was "received" by a shareholder in the year in which the cheque was drawn and received by him, rather than in the previous year in which the dividend was declared and in which the record date occurred.
Dividends on preference shares of a corporation, including those held by the taxpayer, were substantially in arrears. The corporation declared a dividend in the amount of the aggregate arrears on such shares, but postponed payment of the dividend for a period of 20 years and issued interest-bearing "dividend notes" to shareholders evidencing the right to receive such dividend. Angers J. found that the taxpayer had not received interest, dividends or profits ... from stocks, or from any other investment" in the year in which the dividend was declared.
Although all the conditions for the receipt of government assistance had not yet been (and never were) satisfied, Campbell J found that the taxpayer had “physically acquired” the funds in question through depositing a cheque to a trust account of its own formation and thereafter disbursed the funds out of the account to fund its project without any practical hindrance by the government foundation in question (which appeared to have waived the condition referred to above). Accordingly, she found that the taxpayer had in fact “received” the assistance in question at that time for purpose of a grind to its SR&ED expenditures under s. 37(1)(d).
The taxpayer was a market dealer with a securities dealer (“WCM”), which provided support in the form of an assistant, shared with others and it answered “no” to the question in the T2200 as to whether the contract of employment required the taxpayer to pay for an assistant. For 2011 and 2013, the taxpayer claimed that he paid his wife $12,000 annually for the handling of administrative and expense related matters. The Minister denied an employment expense deduction.
… There are no cheques to Ms. Thériault. Mr. Blott’s income went into the joint account and Ms. Thériault could simply access it. Is there any amount paid to Ms. Thériault in such circumstances? I conclude there is not. … I do not see how anything has been paid or expended to Ms. Thériault. She has received nothing more than what she already had.
A Quistclose trust (as described by C. Miller J ) provides an equitable remedy to a lender where it has lent to a borrower for a specific purpose and it is exposed to the risk of other creditors snatching the advanced funds before the borrower uses them for the intended purpose. C. Miller J made a Rule 58(1) determination that no Quistclose trust attached to the funds advanced by the lender under a leveraged donation arangement because the funds essentially were advanced by the lender directly to the charity rather than, on a realistic view, passing first through the hands of the borrower taxpayers.
Bocock J found that when a bank seized the security (a GIC) provided by a tax debtor to secure his guarantee of a bank loan to his son’s company, this constituted a transfer of property by him to that company for s. 160 purposes.
In 1994, a non-resident executive was granted units which entitled him, on retirement, to receive payments calculated by reference to the consolidated profits of Glencore International AG, a Swiss corporation ("GI"). He retired at the end of 2006, and became entitled to receive U.S.$160 million in instalments commencing in July 2007. He and Glencore then agreed (pursuant to an agreement which was not executed until January 2008) that the first four instalments would be paid by GI to the Swiss taxing authority (the FTA) in satisfaction of Swiss withholding tax on the U.S.$160 million. This remittance occurred in 2008.
The relevant Australian tax law provided that, in the case of a reward for personal service, the income “derived” by the taxpayer is the “amount…actually received in the year in question” (Brent, 125 CLR 418, at para. 13), and a deeming provision specified that “you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct."
The… Commissioner’s submission… postulates that income is relevantly “dealt with” on behalf of a taxpayer when the debtor (here GI) refrains from making payment of a debt due to the taxpayer at the creditor’s request. Brent v Federal Commissioner of Taxation  HCA 48; 125 CLR 418 ...indicates that more is required… . There was therefore no derivation of income in the 2007 income year when the first two instalments, though due, were merely withheld from payment to the appellant. … The applicant derived the first two instalments as income when, in January 2008, they were paid, with his agreement, to the FTA by GI on his behalf.
The appellant ("Great-West") provided prescription drug plans to the employees of various employers. The claims were processed by a third party ("Emergis") using its "Assure Card System." The plan members' claims were adjudicated electronically immediately upon being charged for filling a prescription at a participating pharmacy. Emergis would then reimburse the pharmacies for the claim amount, and submit periodic invoices to Great-West.
In the past, the entitlement to the benefit would have been satisfied by the issuance of a cheque to the plan member. Under the Assure Card system, the entitlement is satisfied by relieving the plan member of the obligation to pay the amount of the benefit to the pharmacy at the point of sale. The result is the same. The plan member constructively receives at the pharmacy counter the benefit payable to him or her under the terms of the group health benefits plan.
See summaries under Financial Services and Financial Institutions (GST/HST) Regulations, s. 4(2) and s. 123(1) – financial service – (f.1) and (r.4).
Purported distributions out of a purported EPSP to children employees of the taxpayer were to a bank account controlled by the father, so that the participants "never had control of these funds" (para. 40), and so that the "real transactions" were "the payment of amounts by the corporation to the father" (para. 42). See detailed summary under General Concepts –Sham.
Margeson J. accepted (at para. 99) that employees to whom the taxpayer issued shares in payment of bonuses to them gave consideration equal to the full value of those share "on the basis of past unremunerated services rendered to the Appellant."
In settlement of a suit by the taxpayer, who was an income beneficiary, the settlement agreement provided for the payment by the trust to her of $1.7 million in satisfaction of her interest in the trust. Through a numbered company, the capital beneficiary issued a promissory note to the trust for $1.7 million in exchange for shares held for the taxpayer. The trust issued a promissory note to the taxpayer in the same amount. The trust's law firm then gave the taxpayer a certified cheque for $1.7 million to discharge the trust's promissory note.
Surely [the Minister] would not seriously have contested a bill of exchange involving a bank and I have been provided with no persuasive argument that enforceable promissory notes from solvent entities should be treated any differently.
Boyle J. also found that the property had been distributed to the taxpayer. He stated (at para. 22) that "[t]here is no apparent reason put forward to suggest that the term 'distributed' should not be given its ordinary meaning."
The allocation of revenue from the Golden Giant Mine to the calculation of the Quarter Claim Royalty was not payment of an amount by Teck/Corona. [The taxpayer] as the owner of the Golden Giant Mine (including the Quarter Claim) realized all revenue from mining the Golden Giant Mine. This revenue was not the revenue of Teck/Corona. Teck/Corona was only entitled to receive an amount as a royalty. Further, such royalty was only payable if the Royalty Account showed a credit balance.
The individual taxpayer was found to have received a bonus from a closely-held corporation in the year that the corporation declared the bonus rather than in the subsequent year of payment in light of the withholding and remittance of source deductions on the full amount of the bonus in the first year, the booking by by the corporation in that year of a loan back to it of the net bonus proceeds and the absence of any evidence that this was done without his knowledge or consent. Jorré J. also quoted (at para. 78) with apparent approval a statement of commentators that "when money is paid by an employer to a third party for the benefit of the taxpayer, the payment constituted constructive receipt in the hands of the taxpayer."
After noting (at para. 21) that "the case law is clear that an amount may be included in income even where it is only notionally or constructively received", McArthur, J. went on to find that the taxpayer had received insurance policies under a policy that had been assigned by it to a bank given that it benefited from the insurance proceeds being applied to pay off a loan owing by it to the bank.
Promissory notes owing by the taxpayers, which were consideration for their acquisition of units of a limited partnership, provided that the interest thereon was to be paid by way of set-off against distributions otherwise payable by the partnership to the taxpayers. In fact, the partnership did not generate distributable cash and, particularly for the first taxation year in question, there was no evidence that interest was paid through the making of timely journal entries. Accordingly, the amounts represented by the notes were limited recourse amounts.
Since Holdings did not have a bank account, in each case the amount of Holdings' return of capital to Products was distributed electronically from C&A's bank account directly to Products' bank account. There was no dispute that C&A was acting as Holdings' agent in this regard with satisfactory directions and financial reporting.
t was found that bonuses declared payable by the taxpayer to its two directors were paid by it within the 180 day period referred to in s. 78(4) pursuant to a demand loan agreement (notwithstanding that the directors did not report the portion of the demand loan that was not paid in cash until the subsequent year as employment income until that subsequent year).
Bell J. rejected the Crown's submission that the taxpayer can only make a deduction under s. 8(1)(i) for amounts paid in cash or by cheque with proof of payment, and found that the taxpayer was entitled to a deduction under s. 8(1)(I)(ii) for snowmobiles, motorcycles and gasoline that he had purchased for his sons as payment for their services in performing mailings to 2,500 people on five different occasions in the year.
"It was not a matter of each side relying on the other side's funds for their cheques to be honoured."
In order to generate an interest deduction for accrued interest owing by an insolvent company ("WIL") to its shareholder (a pension fund) pursuant to a provision of the Corporation Taxes Act 1988 (U.K.) which required that interest be paid in order to be deductible, the pension fund lent money to WIL with WIL using the borrowed proceeds to pay the outstanding arrears of interest. In finding that this arrangement was effective, Lord Nicholls stated (at pp. 868-869) that "prima facie, payment of interest in s. 338 has its normal legal meaning, and connotes simple satisfaction of the obligation to pay ... . Leaving aside sham transactions, a debt may be discharged and replaced with another even when the only persons involved are the debtor and the creditor".
'The taxpayer received two cash payments of $10,000 and $25,000 on an interest-bearing promissory note for $525,000 owing by an arm's length debtor. The payments were found by Mogan J not to have been appropriated by the debtor as between interest or principal, and to have been applied by the taxpayer to principal. Mogan J found (at para. 11) that the payments were of interest rather than of principal on the basis of the doctrine that "in the absence of any appropriation made by the debtor, the creditor may direct his payment to be applied as he thinks fit."
The taxpayer transferred his equity in a house to his former spouse in satisfaction of arrears of alimony or maintenance owing to her of $19,946. In finding that this constituted a payment of such arrears, O'Connor TCJ. stated (at p. 752) that "payment in kind, provided there has been an agreement or a binding determination of the value in money of the object given, will suffice ... . To do otherwise would seem to run counter to the definition of 'amount' in subsection 248(1)".
"Nor can I accept that the mere bookkeeping entry of moving the amount of bonus owing to Mr. Phillips from 'bonus payable' to 'due to shareholder' connotes receipt. Accounting entries are supposed to reflect realities, not create it ...".
and went on to refer to the decision in Gresham Life Society Co., Ltd. v. Bishop (1902), 4 TC 464 (HL) [below].
"... The verb 'pay' in the context of that paragraph means a transfer of money, a handing over of funds ... [and] the expression 'received' involves the idea of being put in possession of something."
My Lords I agree with the Court of Appeal that a sum of money may be received in more ways than one e.g. by the transfer of a coin or a negotiable instrument or other document which represents and produces coin, and is treated as such by business men. Even a settlement in account may be equivalent to a receipt of a sum of money, although no money may pass; and I am not myself prepared to say that what amongst business men is equivalent to a receipt of a sum of money is not a receipt within the meaning of the Statute which your Lordships have to interpret. But to constitute a receipt of anything there must be a person to receive and a person from whom he receives and something received by the former from the latter, and in this case that something must be a sum of money. A mere entry in an account which does not represent such a transaction does not prove any receipt, whatever else it may be worth.
A company issued charge cards to cardholders who would obtain petrol from garages by presenting the card and signing a sales voucher completed by the garage. Because the acceptance of the card by the garage constituted unconditional payment for the petrol, the garages following the insolvency of the company had no entitlement to receive payment for the petrol directly from cardholders.
An American corporation passed a resolution providing "'that a distribution of seven per cent on the capital stock of this corporation, amounting to $52,500 dollars, be and the same is hereby declared, payable on the 15th December, 1936'" and went on to provide that the distribution should not be payable in cash, but in the form of certificates of indebtedness bearing interest at 4%, and payable approximately four years later. In finding that there was no "income arising from possessions out of the United Kingdom" to the U.K. shareholder, Scott L. J. concluded that "the reality of the transaction was the declaration of a money dividend payable not presently, but only on a future date", rather than "a distribution by way of dividend not of money but of money's worth" (at p. 203, All E.R.).
The taxpayer, who held bonds on which the payment of interest had been suspended, exchanged his matured interest coupons on the bond for interest-bearing 20-year funding bonds of the debtor. In finding that the funding bonds did not constitute "income arising from securities outside the United Kingdom", MacKinnon L.J. stated (at p. 435) that "there can never be payment of its debt by a debtor by giving his own promise to pay at a future date ... though income arises to a creditor from a debtor's paying his debt, income does not arise by the debtor's promising that he will pay his debt later on".
[I]t is conceded that no part of the money in question was ever received in the United Kingdom in specie… . But it was argued that… it was "constructively" so received in the accounts of the Society. …If it means something differing from or short of an actual receipt, then it seems to me that a constructive receipt is not recognised by the Statute, which in using the word "received" alone, must be taken to have used it having regard to its ordinary acceptation. … I am not myself prepared to say that what amongst business men is equivalent to a receipt of a sum of money is not a receipt within the meaning of the Statute… . But…[a] mere entry in an account which does not represent such a transaction does not prove any receipt… .
Although CRA usually applies its constructive receipt concepts in the context of employment income recognition, it has applied that concept to pension income recognition under s. 56(1)(a)(i). A survivor benefit under a registered pension plan (“RPP”) is paid in a taxation year to the Quebec Unclaimed Property Directorate pursuant to the Quebec Unclaimed Property Act because the person entitled thereto (the “right-holder”) has not been determined. That person, when subsequently identified, receives from the Directorate the net amount that the Directorate, in turn, had received from the RPP, i.e., the survivor benefit payable under the RPP (as reduced by income tax source deductions) paid by the Directorate to the right-holder, as further reduced by its administration fee.
favours a more restrictive interpretation of the word "paid", according to which the issuance of a note, although irrevocable, unrestricted and payable on demand, does not satisfy the requirement provided for in those [provisions].
1.83 In circumstances where accrued interest is added to the outstanding principal amount of an existing loan resulting in a new obligation or novation, an interest payment will not be considered to have been made. A portion of the interest charged in respect of the new loan will constitute compound interest and may only be deductible under paragraph 20(1)(d) in the year it is paid. It is a question of fact whether a transaction results in the payment of interest from a second borrowed amount, or results in the addition of accrued interest to an outstanding principal amount with the creation of a new loan.
An individual shareholder immigrates to Canada, thereby becoming a Canadian resident. NRCo issues a $1,000 promissory note to her in satisfaction of a dividend declared before her immigration (with the note being paid after the immigration). The dividend would be considered received at the time when the shareholder was still a non-resident of Canada on the presumption (applying Banner Pharmacaps) that the note was issued and delivered to her in satisfaction of the obligation to pay the dividend.
A loan or indebtedness will be considered to have been repaid by a debtor by way of set-off against a receivable of the debtor "if the set-off represents a legal discharge of the loan or indebtedness." This generally will be accepted to have occurred "if the intention to do so is evidenced in the relevant books and records including any contracts or agreements between the parties and the accounting records of the parties."
[W]e refer you to ... 2007-0229311I7 where the facts of the situation presented did not allow for the conclusion that by virtue of accounting entries, a capital dividend had actually been received by a corporation.
In Innovative Installation Inc. v The Queen, 2009 TCC 580, the Tax Court of Canada explained that "received" does not require "proceeds to pass directly to the taxpayer. The taxpayer can notionally or constructively receive it."
Therefore, it is our view that, generally, the date on which the dividend is paid, whether by cheque, electronic payment, offset or credit to the shareholder's account, would also be the date on which the amount is received.
Vendor sold blocks of shares in the capital of a corporation (the “Purchaser”) to the Purchaser, with the purchase price being payable over a following number of years based a percentage in each year of the annual consolidated after-tax profits of the Purchaser. The deemed dividend arising in the year of the repurchase under s. 84(3) was deemed by s. 55(2) to be proceeds of disposition. Was the reserve under s. 40(1)(a)(iii) available as a deduction from this capital gain?
[A] shareholder would be entitled to the reserve under subparagraph 40(1)(a)(iii) in such a context if the promissory note is considered to have been accepted as evidence of or security for the balance payable of the purchase price of the shares. On the other hand, in a situation where the promissory note is considered as "absolute payment" of the debt, the shareholder would not be entitled to such reserve.
CRA went on to indicate that essentially the same positon applied to the above facts where the unpaid purchase price was not evidenced by a promissory note and was payable on an earnout basis with a prepayment right which had not yet been exercised.
An ordinary promissory note is generally regarded as a promise to pay a debt at a later date, and not as payment of the debt on the date on which the note was issued. However, an amount may be considered to be "paid" by a promissory note if an agreement between the parties clearly indicates that the note was accepted as absolute payment.
Under the civil law in force in Quebec, the delivery of an outstanding cheque does not constitute payment … [and] the date of payment of a debt settled by cheque is considered to be the date on which the cheque is honored or paid by the bank … .
[Here] the cheques in circulation and not yet cashed do not constitute payments of the amounts due to Opco's suppliers and … consequently, there can be no reduction in the amount of the cash of Opco as long as the bank does not honour or pay such cheques.
Cheques issued by Opco but not yet cashed would not reduce its cash on hand given that under the applicable law (the Quebec Civil Code), the issuance of a cheque does not constitute payment, so that the debt is not settled until the cheque is honoured.
In indicating that a cash pooling arrangement entered into by a Canadian subsidiary with its non-resident parent corporation could result in an income inclusion under s. 15(2), Revenue Canada indicated that its review of the jurisprudence on s. 15(2) suggested that debts between a shareholder and a particular corporation do not generally offset for purposes of determining either whether the shareholder became indebted to the corporation in the first place, or whether that indebtedness has been repaid.
"A corporation is not considered to have paid a dividend when it merely credits a shareholder's account, unless the shareholder is able to withdraw the money credited at any time."
Where a promissory note is given in consideration for services, the acceptance of the note would be considered to be an amount received under s. 12(1)(a) where the note has been accepted as absolute payment for the services, whereas if the note has been accepted as conditional payment, s. 12(1)(a) will apply only when actual payments are made on the note assuming the related services have not yet been performed at that time.
A gross-up on a debt obligation owing to a Canadian lender will be included in the Canadian lender's income under s. 9 or s. 12(1)(c) even "where the gross-up is paid or credited to the government of a foreign country on the Canadian lender's behalf since the Canadian lender would have constructively received the gross-up".
A payment by cheque is equivalent to a payment in cash as long as no special circumstances lead to another conclusion, and the cheque is not dishonoured on presentation for payment. Accordingly, where a cash-basis farmer receives a cheque from the Canadian Wheat Board, he will be considered to have received payment at that time notwithstanding that he returns the cheque to the Board for reissue in the subsequent year.
Payment of a patronage dividend may be effected by the issuance of shares or debt instruments, where such an arrangement is authorized by the customer.
Bank overdrafts are considered to have arisen to the extent that they have been utilized or drawn upon. For these purposes, RC, in common law jurisdictions, applies the conditional payment principle established in such cases as Marreco v. Richardson (1908), 2 K.B. 584, at 593 (C.A.) and Moody v. MNR, 57 DTC 1050, at 1054 (Ex Ct).
Bonds issued to a Canadian bank in settlement of arrears interest on a non-performing loan of a Brazilian debtor would not be considered to constitute payment by the debtor and receipt by the bank of interest on the underlying loans, in light of the comments in Cross v. London and Provincial Trust Ltd.,  1 K.B.D. 792.
There is no repayment for the purposes of s. 20(1)(hh) when shares are converted to a debt security and the parties are in essentially the same situation before and after the conversion. There also is no repayment of the debt if it is assumed by another taxpayer in connection with the transfer to that other taxpayer of the assets for which the loan was contracted.
For farmers on the cash method, a post-dated cheque that is received on a date that a debt owing to the taxpayer is not yet payable will be brought into income on the earlier of the date the debt becomes payable and the date the cheque is negotiated. However, where a post-dated cheque is accepted as absolute payment of the debt, the amount of the cheque is considered to be income at the time it is received.
A direct payment by a non-resident to Revenue Canada of a tax liability of a related Canadian corporation would entail the receipt of an amount by the Canadian corporation for purposes of s. 12(1)(x).
Because the function of a journal entry is to record a transaction rather than to make it legally effective, the reclassification of a shareholder's loan into remuneration payable by a journal entry would not be considered to be payment of the remuneration.
A taxpayer is not considered to have "paid" interest on a loan owing by him to a charitable foundation by virtue only of journal entries being recorded in his ledgers and those of the foundation.
No payment will be considered to occur pursuant to an agreement between the parties to the effect that interest on a promissory note will be deemed to be paid and then loaned back to the borrower.
A journal entry recording a transfer of an amount from a salary payable account to a loan from shareholder account does not by itself constitute payment of the salary.
Constructive receipt by an employee benefit plan beneficiary occurs when an amount is made available to him without being subject to any restrictions concerning its use.
Under an unfunded deferred compensation plan, constructive receipt is considered to occur in situations where an amount is credited to an employee's account, set apart for the employee, or is otherwise available to the employee without being subject to any restriction concerning its use.
IT-436R "Reserves - Where Promissory Notes are Included in Disposal Proceeds"
Where a promissory note has been accepted as absolute payment for the disposition of a property, no amount is due in respect of the disposition, because the debt is considered to have been paid or satisfied by the receipt of the promissory note.
deferred remuneration should be included in income for the year in which the employee is entitled to receive it or actually receives it.
IT-305R3 "Establishment of Testamentary Spouse Trust"
In interpreting the requirement that the spouse must be entitled to receive all the income of a spouse trust that arises before the spouse's death, RC applies the doctrine of constructive receipt.
A taxable payment is included in computing the employee's income on the earliest taxation year in which he receives it, absolute enjoyment or use vests in him, or it is paid or transferred pursuant to his direction.
In other words, once the SAR units become fully vested it would have be determined whether the executive is postponing the exercise of the SARs in order to avoid the immediate tax consequences (i.e., the employment income). As stated by the CRA, this is a question of fact… .
…[T]he CRA addressed its position with respect to CR in the context of SDAs in… 1999-0007315… .
…As can be seen…the CRA adopts a very broad approach and leaves open the possibility that even if the SDA main purpose test is met, the rules with respect to the doctrine of CR may still be rendered applicable. Hence, in light of the above-mentioned, it seems likely that the SARs would be taxed at the moment they become fully vested regardless of when exercise occurs.
E.G. McKendrick, Chitty on Contracts, Vol. 1, Thirtieth Edition (2008).
If the creditor requests the debtor to pay the debt to a third party, such a payment is equivalent to payment direct to the creditor, and is a good discharge of the debt.
...Where the debtor has not exercised his option, and the right to appropriate has therefore devolved upon the creditor, he may exercise it at any time "up to the very last moment" or until something happens which makes it inequitable for him to exercise it. What is "the very last moment" depends on the circumstances of each case. In one instance the creditor was held entitled, in the witness-box during the course of his action, to exercise his right to appropriate a payment by his debtor, as nothing had previously happened to determine his right of election. The creditor need not make his election in express terms. He may declare it by bringing an action or in any other way that makes his meaning and intention plain. An entry in the creditor's books applying a payment to a particular debt does not constitute an election which will preclude the creditor from afterwards applying it to another debt, unless the entry has been communicated to the debtor. Once, however, the election is made and communicated to the debtor, it is irrevocable.
A creditor may appropriate a payment to a debt barred by the Limitation Act 1980, or to a debt which is unenforceable because of some formal defect in the contract.
Where there is no appropriation by either debtor or creditor in the case of a debt bearing interest, the law will (unless a contrary intention appears) apply the payment to discharge any interest due before applying it to the earliest items of principal.
C.R.B. Dunlop, Creditor-Debtor Law in Canada, Second Edition (1994).
As a general rule, a debtor can discharge a debt only by payment to the creditor personally, However, if the creditor asks the debtor to pay a third party and the debtor pays the third party qua agent, such payment will be effective to discharge the debt.
...The converse situation of an agent or third person paying the debtor's obligation to his or her creditor presents difficult and controversial legal problems. It is of course clear that a debtor can pay a debt through an agent instead of personally. But what happens if a third person without authority pays the creditor? Most debtors (and creditors) would probably welcome such meddling with cries of joy, but there are situations in which the debtor or the creditor may want the debt to continue rather than come to an end.
When a debtor is making a payment to his creditor he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment the right of application devolves on the creditor. In 1816, when Clayton's Case was decided, there seems to have been authority, for saying that the creditor was bound to make his election at once according to the rule of the civil law, or at any rate, within a reasonable time, whatever that expression in such a connection may be taken to mean. But it has long been held and it is now quite settled that the creditor has the right of election 'up to the very last moment,' and he is not bound to declare his election in express terms. He may declare it by bringing an action or in any other way that makes his meaning and intention plain. Where the election is with the creditor, it is always his intention expressed or implied or presumed, and not any rigid rule of law that governs the application of the money.
Lord Macnaghten makes it clear that the appropriation by either the debtor or the creditor need not be declared in express terms but may be implied from the appropriator's actions. What is required is that the appropriation, whether expressed in words or implied from conduct, should be communicated to the other party. Thus it has been held that an uncommunicated entry in the creditor's private books is not an appropriation which will preclude that creditor from subsequently making a different application of the payment. On the other hand, once the party does make a communicated appropriation, that party cannot subsequently change the appropriation. The rules in the Cory Bros. case will of course not apply where the parties have previously agreed as to the appropriation of payments.
Assuming that there is no evidence of the parties' intention, the law will attribute a payment first to interest and then to principal.
See chapter 3 entitled "Cash Basis Accounting: The Concepts of Receipt and Payment".
Wilson, "Repayment of Shareholder Loans", 1995 Canadian Tax Journal, Vol. 43, No. 3, p. 746.
Includes (at pp. 751-754) a discussion of the Clayton rule.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.