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:
Where a debt obligation was used for both personal and income producing purposes, does all the debt qualify as a "commercial debt obligation" for purposes of that definition in the draft legislation to amend section 80?
Position TAKEN:
Treat the total debt as two separate obligations pursuant to new subsection 248(27). As such the portion of the debt obligation with respect to the personal borrowing will not be included in the definition of "commercial debt obligation".
Reasons FOR POSITION TAKEN:
Draft legislation: definition of commercial debt obligation in subsection 80(1) and interpretation of subsection 248(27).
942951
XXXXXXXXXX S.J. Tevlin
Attention: XXXXXXXXXX
January 3, 1995
Dear Sirs:
Re: Section 80
We are writing in response to letter dated November 16, 1994 wherein you requested our opinion with respect to the interpretation of the draft legislation released July 12, 1994 (the "draft legislation") to amend section 80 of the Income Tax Act. In particular you have described a situation where a single debt exists, part of which was borrowed to earn income and part which was borrowed for personal use (therefore only part of the interest was deductible).
You have asked whether the total amount of the above debt obligation would be included in the definition of "commercial debt obligation" found in subsection 80(1) of the draft legislation.
In this regard we offer the following comments.
It is our opinion that the application of new subsection 248(27) of the draft legislation, to the situation described above, will result in that portion of the total debt obligation for which interest would not be deductible in computing taxable income being a separate obligation, and as such that portion would not be an amount described in the definition of commercial debt obligation.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990 and are not binding on Revenue Canada, Taxation.
Yours truly,
for Director
Financial Industries Division
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