12 October 1990 External T.I. 9023655 F - Incurred Debts

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.

Attention  19(1)

October 12, 1990

Dear Sirs:

This is in reply to your letter of August 29, 1990 concerning the application of paragraph 149.1(4)(d) of the Income Tax Act (the "Act") where a Canadian resident loans funds to a private foundation which he has established and the funds are invested (i.e. T-Bills, bonds, equities).

Specifically, you requested our views whether the loan described above would be considered, for purposes of paragraph 149(4)(d) of the Act, a debt incurred in connection with the purchase and sale of investments.

In our view the private foundation by borrowing the funds could for purposes of paragraph 149.1(4)(d) of the Act be considered to have "incurred debts", provided there is a legal liability to repay the loans.

In any specific case the determination as to whether debts are incurred "in connection with" the purchase and sale of investments is a question of fact to be determined on the basis of all the details in that case. In our view the words "in connection with" contemplate a direct relationship between the incurring of the debt and the purchase and sale of investments.

We trust this will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch