Précis: As part of a complex restructuring of Dome Petroleum Limited (Dome Petroleum) and Dome Canada Limited (Dome Canada) in the late 1980’s and early 1990’s, Amoco Canada Petroleum Company Ltd. (the predecessor of the appellant corporation) assumed liability for a $225 million loan payable by Dome Canada to Arctic Petroleum Corporation of Japan in 2030. As consideration for the assumption of such liability Amoco received $17.5 million and additional consideration. In this appeal the taxpayer argued that it was entitled to deduct the difference between $225 million and $17.5 million as a form of interest. Although the original claim was based on a straight-line deduction at trial the appellant reduced its interest deduction claim to $1,043,700 per year. This amount was determined by applying a simple interest rate of 5.964% to the $17.5 million. The original expense claimed had been roughly $4.8 million per year. In characterizing the deduction claimed as simple interest the taxpayer relied upon subsection 16(1) and paragraph 20(1)(c) of the Income Tax Act.
Plains Midstream v. R. – TCC: Assumption of debt did not give rise to interest expenseREAD MORE »