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 funds borrowed and used to purchase a life insurance policy
Position: Not Deductible
Reasons: Denied by wording of paragraph 20(1)(c).
XXXXXXXXXX 2000-005146
J. P. Dunn
Attention: XXXXXXXXXX
November 2, 2000
Dear Sirs:
Re: Interest Deductibility - Funds Borrowed to Purchase a Life Insurance Policy
We are writing in response to your correspondence of October 6, 2000 in which you had requested the views of Canada Customs and Revenue Agency with respect to the deductibility of interest on funds borrowed which are used to purchase a universal life insurance policy.
The deductibility of interest for income tax purposes is governed by paragraph 20(1)(c) of the Income Tax Act which allows a deduction for interest on borrowed money used for the purpose of earning income from a business or property. Specifically excluded from eligibility for deduction, however, is interest on borrowed money used to acquire a life insurance policy. Accordingly, if money is borrowed to purchase a life insurance policy, the interest paid or payable on those borrowed funds is not deductible for income tax purposes.
We trust that this is the information which you require.
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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