12 December 1989 Ministerial Correspondence 58974 F - Deductibility of Interest on Money Borrowed and Reloaned Interest-free to Controlled Corporation

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.

Dear Sirs:

Re:  Paragraph 7 of Interpretation Bulletin IT-445 Paragraph 20(1)(c) and Section 245 of the Income Tax Act David Scott v. MNR, 89 DTC 218

This is in reply to your letter dated October 24, 1989, in which you requested our opinion on a situation involving the deductibility of interest on money borrowed by an individual and reloaned interest-free to a corporation controlled by the individual.

As the situation described in your letter appears to involve an actual situation with identifiable taxpayers, we are unable to comment on it specifically except in the context of an advance ruling.  However, we offer the following general comments which may be of assistance to you.

The Scott case does not represent a change in the Department's position.  The Department will continue to follow the administrative position set out in paragraph 7 of Interpretation Bulletin IT-445 provided the conditions set out n the bulletin are met.  Whether a particular loan situation results in any undue tax advantage being conferred is a question of fact.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate