On February 28, 2019, a new Canadian corporation is created by issuing $12,200,000 in debt securities and $2,500,000 in common shares. The debt securities pay interest at 9 percent. The corporation has elected a December 31 year end. Of the securities issued by the new corporation, one-half of the debt securities and $1,000,000 of the common shares are acquired by Nathalie Bergeron, a resident of France. As of January 1, 2020, the Retained Earnings balance of the corporation is $560,000. How much, if any, of the interest paid in 2020 on Ms. Bergeron's holding of debt securities would be disallowed under the thin capitalization rules in ITA 18(4)?

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The Answer of On February 28, 2019, a new Canadian corporation is created by issuing $12,200,000 in debt securities and $2,500,000 in common shares. The debt securities pay interest at 9 percent. The corporation has elected a December 31 year end. Of the securities issued by the new corporation, one-half of the debt securities and $1,000,000 of the common shares are acquired by Nathalie Bergeron, a resident of France. As of January 1, 2020, the Retained Earnings balance of the corporation is $560,000. How much, if any, of the interest paid in 2020 on Ms. Bergeron's holding of debt securities would be disallowed under the thin capitalization rules in ITA 18(4)?

On February 28, 2019, a New Canadian Corporation Is Created