29 November 2000 Internal T.I. 2000-0051367 - INTEREST ON REDEMPTION OF SHARES -- summary under Paragraph 20(1)(c)

Prejudgment and post judgment interest that was paid by a corporation in respect of the lapse of time between the departure of a shareholder and the final redemption of its shares would not be deductible under s. 20(1)(c) as there would be no property acquired for the purpose of gaining or producing income and the interest would not have accrued on borrowed money used for the purpose of earning income before the shares were redeemed. However, interest expense accrued on the portion of the bank loan that was used to pay the redemption amount of the shares would be deductible under s. 20(1)(c)(i) to the extent that the funds were used to return capital on the shares (there being no accumulated profits).