Re: Paragraphs 149.1(3)(d) & 149.1(4)(d) of the Income Tax Act
This is in reply to your telephone enquiry on May 6, 1991, concerning a letter received by your division regarding the technical interpretation of the above mentioned provisions.
The situation set out by 19(1) follows:
24(1)
Specifically, 19(1) asked if the above situation would meet the debt requirements under the provisions of paragraph 149.1(3)(d) and 149.1(4)(d) so as not to cause the revocation of the foundations' registration.
Paragraphs 149.1(3)(d) and 149.1(4)(d) allow the Minister to revoke the registration of a public or a private foundation, if the foundation "incurred debts, other than debts for current operating expenses, debts incurred in connection with the purchase and sale of investments and debts incurred in the course of administering charitable activities."
In our opinion, the debts which are excepted by paragraphs 149.1(3)(d) and 149.1(4)(d) of the Act are those which arise directly in the course of acquiring investments or incurring operating expenses in the course of administering charitable activities. We do not consider a debt to be excepted when it arises in the course of borrowing money unless it is incurred directly in the process of acquiring investments or in funding continued operations. We would not consider a debt to be excepted even where proceeds from borrowings were being used to discharge debts which were, when incurred, excepted debts.
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch