Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Deductibility of interest on borrowing to acquire mutual funds
Position: Generally deductible
Reasons: Ludco decision decided on its particular facts
XXXXXXXXXX 2000-003643
C. Savage
Attention: XXXXXXXXXX
July 17, 2000
Dear XXXXXXXXXX:
Re: Deductibility of Interest and Carrying Charges on Funds
Borrowed to Purchase Units of a Canadian Mutual Fund
This is in response to your letter of July 5, 2000 addressed to Mr. Claude Englehart of the Technical Applications Section of the Agency. As your request seeks confirmation of the Agency's position with respect to the deductibility of interest following the 1999 Federal Court of Appeal decision re Ludco, it was forwarded to this Branch for reply.
Since the 1999 decision in Ludco, we have reiterated our position with respect to deductibility of interest on funds borrowed to acquire common shares on several occasions including Technical Interpretation 9917535 dated June 4, 1999 to which you refer in your letter and Income Tax Technical News No. 18 which contains our response to a question at the 1999 Canadian Tax Foundation. Neither of these responses referred to borrowing to invest in mutual funds. In document 1999-0014010, however, we did make reference to mutual funds. In that document we responded to questions concerning the Ludco decision and stated:
"It would be unusual for these facts to be present in the normal share investment of either a public or private company or units of a mutual fund."
Our position with respect to borrowing to acquire common shares applies equally to borrowing to acquire units in a mutual fund.
As discussed with you before you wrote to Mr. Englehart, if particular taxpayers feel they are not being assessed in accordance with this position they should address their concerns either to the applicable Tax Services Office or to Mr. Englehart.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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