If A Co. were to borrow money from B Co. and B Co. were to assign the loan to a bank, A Co. will continue to be entitled to deduct the interest provided there is no novation.
Where Purchaserco borrows money from a bank to acquire all the outstanding shares of Opco, following which its shareholders exchange their shares for shares of Opco, Purchaserco is wound up, and the debt of Purchaserco is assumed by Opco, Opco will not be entitled to deduct the interest on the assumed debt.
Where on an s. 85(1) roll of real estate with excess mortgage debt, the transferor gives the transferee a promissory note in the amount of the excess debt, the interest on the assumed mortgage debt will be deductible.
