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.
Principal Issues:
Deductibility of interest
Position TAKEN:
Interest not deductible
Reasons FOR POSITION TAKEN:
No expectation of profit
XXXXXXXXXX 941995
September 6, 1994
Dear Sir\Madam:
Re: Interest Deductibility
We are writing in response to your letter of May 1, 1994 wherein you requested our comments as to the deductibility of interest on borrowed money used to acquire a mutual fund investment which generates almost all capital gains, rather than interest or dividend income.
The situation described in your letter relates to a factual transaction, and should therefore be discussed with your local district taxation office who has responsibility of evaluating completed transactions.
We will, however, provide the following general comments.
In our opinion when there is no expectation of profit from an investment, interest expense incurred in financing that investment is not deductible. For this purpose, capital gains do not constitute income.
Consequently, interest expense which relates to an investment which yields capital gains, and is not expected to produce net income, would not be deductible.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular IC-70-6R2 and are not binding on Revenue Canada, Taxation.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1994
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1994
Email this Content