Laliberté v. R., 98 DTC 6604, [1999] 2 CTC 178 (FCA) -- summary under Paragraph 20(1)(c)

The taxpayer's husband borrowed $20,000, on the security of a mortgage on a rental property, to pay legal costs in connection with a civil suit unrelated to the rental property, with the taxpayer guaranteeing her husband's loan. The taxpayer borrowed $20,000 pursuant to a second mortgage loan on the property and used the proceeds to pay off the first loan to her husband and, later, repossessed the rental property pursuant to the second mortgage. In finding that the interest paid by the taxpayer on the second mortgage loan was not deductible, Létourneau J.A. noted that the effect of the taxpayer repaying the $20,000 initial loan was to release her from her obligation as guarantor in relation to a personal loan. Accordingly, the second loan did not satisfy the income-producing purpose test.