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.
1993 CANADIAN PETROLEUM TAX SOCIEY ROUND TABLE
INTEREST EXPENSE
QUESTION 36
Interest is deductible pursuant to 20(1)(c)(ii) in respect of an amount payable for property related to a business. 20(1)(c)(ii) is presumably considered necessary by the Department of Finance on the grounds that an unpaid purchase price is not "borrowed money", so that any interest charged by suppliers on overdue accounts would not be deductible, but for 20(1)(c)(ii). Many accountants and lawyers charge interest on overdue accounts. These accounts are typically not in respect of purchased property, but for services rendered. Is such interest deductible?
DEPARTMENT'S POSITION
As stated at the Revenue Canada Panel of the 1992 Corporate Management Tax Conference, interest on accounts payable for service costs which are currently deductible expenses would be deductible under section 9.
Subparagraph 20(1)(c)(ii) would not apply in this instance, since such accounts payable do not constitute borrowed money and do not form part of the acquisition cost of property.
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