Principal Issues: Where an individual borrows money from a financial institution and subsequently loans the borrowed funds to another party, is the interest expense incurred by that individual fully deductible for income tax purposes when the interest expense incurred exceeds the interest income earned.
Position: As noted in paragraph 10 of IT-533, income earned need not be in excess of interest paid, but draft legislation Income Tax Act should be considered.
Reasons: Until the Department of Finances review of the October 2003 legislative proposals is complete, and the results are made available to the public, we cannot comment further on their impact on interest deductibility.