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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
TAX SHELTERS: 237.1(1)
QUESTION 21
A tax shelter is essentially defined to be an investment in respect of which the losses and other deductions available to an investor may exceed the cost of the investment. In determining the deductions available to an investor, is interest expense incurred by the investor to make the investment to be considered? Does it make any difference if the indebtedness is to an arm's length party (e.g. a financial institution) or to a person related to the investment vehicle (e.g. the operator, general partner, promoter, etc.)?
DEPARTMENT'S POSITION
As indicated in Questions 28 and 53 of the 1989 and 1990 Conference Report of the Canadian Tax Foundation, respectively, interest expense that is represented to be deductible in computing income or taxable income in respect of an interest in a property will be included under the term "any other amount" in subparagraph (a)(ii) of the tax shelter definition in subsection 237.1(1). The Department will assume that it is reasonable to expect that investors will take advantage of amounts represented, either explicitly or by simple reference thereto, to be deductible if such representation is made either as part of the tax shelter package or on verbal or written basis. Our response remains the same regardless of whether the indebtedness by the investor is to an arm's length party or to a person involved in promoting, managing or operating of the property.
C.Bowen
June 10, 1993
931694
CPTS June 17, 1993
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