A. P. Toldo - Tax Court of Canada declines to expand the indirect use doctrine in Penn Ventilator

D'Arcy J recognized the proposition that a taxpayer with a money-lending business potentially "may" be able to deduct interest on general principles rather than under s. 20(1)(c).  Furthermore, a taxpayer with sufficient retained earnings or stated capital, and which incurs interest-bearing debt to redeem a shareholder for compelling business reasons, can in this "exceptional fact situation" establish a qualifying indirect use for purposes of interest deductibility under s. 20(1)(c).  However, neither proposition was established on the evidence before him.

Neal Armstrong.  Summaries of A.P. Toldo Holding Corporation v. The Queen, 2013 TCC 416 under s. 20(1)(c) and s. 18(1)(b) - capital expenditure v. expense - financing expenditures.