underline;">: Q.4(a). Would earning interest on borrowed money for a short period after the borrowing and before it can be employed to acquire excluded property cause s. 95(2)(i) to be inapplicable. After affirming 95-5293 (below), CRA stated:
[A] brief period… after the receipt of borrowed funds… and [before] their deployment for a qualifying purpose or after the receipt of proceeds on disposition of excluded property and the use of those proceeds for the repayment of a related debt would not automatically prevent paragraph 95(2)(i) from applying… . However…the taxpayer should be prepared to establish that the brief delay could not practically have been avoided and was not attributable to financial considerations like a desire to earn a return from a non-qualifying investment, to avoid temporary cash flow issues or because of exchange rate considerations.
Q.4(b)
Would s. 95(2)(i) inapplicable if the borrowed money is used to acquire property such as shares that does not qualify as excluded property for a very short period of time, but the taxpayer takes immediate steps to ensure that the shares qualify, for example, by disposing of non-qualifying assets? CRA stated:
[S]teps can be undertaken to restructure or dispose of non-qualifying assets as part of the pre-acquisition structuring or immediately after the acquisition [from the third party]. If the taxpayer takes steps to ensure that the shares qualify as excluded property immediately after the acquisition, for example by disposing of non-qualifying assets, and such shares qualify as excluded property within the same day they are acquired and the related debt has been incurred, we would consider paragraph 95(2)(i) to apply.