A corporation has a critical illness insurance policy ("CII policy") that it purchased for its sole shareholder. This policy was assigned as security at the request of the lender (by way of a movable hypothec) in connection with a loan taken out to earn income from a business or property. Does CRA agree with the ARQ conclusion in Interpretation Letter 19-045061-001, dated January 28, 2020 that a taxpayer, in computing business or property income could deduct, as a guarantee expense, the premiums on a CII policy contracted by it and assigned to the lender at the latter's request under the Quebec equivalent of s. 20(1)(e.1)?
CRA indicated that, no, its position remained that premiums payable in respect of a CII policy assigned as security for a loan of the corporation cannot be deducted in computing its income from a business or property pursuant to s. 18(1)(b) since they constitute capital expenditures, and that they are not deductible pursuant to s. 20(1)(e), (e.1) or (e.2) – and that this position would not change if the CII policy was assigned to the lender by naming the lender as the beneficiary of the policy or by way of a movable hypothec.