24 October 2000 Internal T.I. 2000-0048177 - DEDUCTIBILITY OF INTEREST ON ASSUMED DEBT -- summary under Paragraph 20(1)(c)

Where a corporation redeems its preferred shares and, as consideration, assumes a bank loan that the shareholder had previously incurred to purchase business assets which subsequently had been transferred to the corporation, the interest on the assumed debt will be non-deductible notwithstanding that if the corporation had assumed the debt upon its acquisition of those business assets, the interest would have been deductible under s. 20(1)(c)(ii).