15 May 1990 Ruling 5900553 F - Deductibility of Interest Paid on Funds Borrowed from Self-directed RRSP

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.

May 15, 1990

19(1)

This is in reply to your letter of April 24, 1990 concerning the deductibility of interest paid on funds borrowed from a self-directed registered retirement savings plan ("RRSP").

Your query obviously relates to a proposed transaction involving specific taxpayers.  As explained in Information Circular 70-6R, a copy of which is enclosed for your perusal, the Department is not prepared to provide written opinions on proposed transactions other than in reply to advance ruling requests submitted in the manner set out in that Circular. We nevertheless offer the following general comments.

Generally speaking, interest not in excess of a reasonable amount is deductible under paragraph 20(1)(c) of the Income Tax Act where it can be shown that the borrowed funds are being used to earn income from a business or property.  The fact that the funds are borrowed from an RRSP on the security of a mortgage on the annuitant's principal residence would not of itself cause the interest on the borrowed funds not to be deductible.

The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 24 of Information Circular 70-6R.  We trust however that they are of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate