McLaws v. Minister of National Revenue, 72 DTC 6149, [1972] CTC 165, [1974] S.C.R. 887 -- summary under Paragraph 20(1)(c)

The taxpayer provided his personal guarantee to the bank when it was threatening to call the loans it had made to a corporation owned by the taxpayer. The portion of the payments which the taxpayer later made to the bank pursuant to his guarantee that was attributable to the accrued interest due to the bank by the corporation, was not deductible under s. 11(1)(c) of the pre-1972 Act. Hall J. noted that "the interest paid by the appellant was not on an advance made to him but was paid on the principal sum remaining unpaid under his guarantee" (page 1653), and therefore was not paid on borrowed money used by the taxpayer for the purpose of earning income.