26 February 1990 Ministerial Correspondence 59484 F - Interest Deductibility

By services, 18 January, 2022
Official title
Interest Deductibility
Language
French
CRA tags
20(3), 20(1)(c)(i)
Document number
Citation name
59484
Severed letter type
Ministerial Correspondence
d7 import status
Drupal 7 entity type
Node
Drupal 7 entity ID
633048
Extra import data
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"field_release_date_new": "1990-02-26 07:00:00",
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Main text
19(1) File No. 5-9484
  Peter Lee
  (613) 957-2745

February 26, 1990

Dear Sirs:

Re:  Interest Deductibility

This is in reply to your letter of January 24, 1990, wherein you requested our opinion regarding the deductibility of interest with respect to a debt assumed in repayment of money previously borrowed.

In a hypothetical situation, a debt of a company (B Co.) to an arm's length person would be assumed by a related company (A Co.) in repayment of money previously borrowed by A Co. from B Co. It is our opinion, based on the comments of Mr. Justice Estey in M.N.R. v. T.E. McCool Ltd., 49 DTC 700(SCC), that the assumed debt would not be "borrowed money" for the purposes of subsection 20(3) and subparagraph 20(1)(c)(i) of the Act. There is no other provision of the Act nor does the Department have an administrative policy which would allow A Co. to deduct interest with respect to the assumed debt.

Our opinion is provided in accordance with the practice described in paragraph 24 of Information Circular 70-6R.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate