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.
| 19(1) |
File No. 5-9484 |
| |
Peter Lee |
| |
(613) 957-2745 |
February 26, 1990
Dear Sirs:
Re: Interest Deductibility
This is in reply to your letter of January 24, 1990, wherein you requested our opinion regarding the deductibility of interest with respect to a debt assumed in repayment of money previously borrowed.
In a hypothetical situation, a debt of a company (B Co.) to an arm's length person would be assumed by a related company (A Co.) in repayment of money previously borrowed by A Co. from B Co. It is our opinion, based on the comments of Mr. Justice Estey in M.N.R. v. T.E. McCool Ltd., 49 DTC 700(SCC), that the assumed debt would not be "borrowed money" for the purposes of subsection 20(3) and subparagraph 20(1)(c)(i) of the Act. There is no other provision of the Act nor does the Department have an administrative policy which would allow A Co. to deduct interest with respect to the assumed debt.
Our opinion is provided in accordance with the practice described in paragraph 24 of Information Circular 70-6R.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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