3 May 1990 External T.I. 59660 F - Interest on Money Borrowed to Acquire Life Insurance Policy

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.

Attention    19(1)

May 3, 1990

Dear Sirs:

We are writing in reply to your letters of February 22 and April 20, 1990.

You refer to a life insurance policy which is designed to provide both life insurance coverage and cash accumulation and which is an exempt policy as defined in subsection 306(1) of the Income Tax Regulations to the Income Tax Act ( the "Act").  You enquire whether the policyholder would be entitled to a deduction under paragraph 20(1)(c) of the Act in respect of borrowed money used to fund the premiums under the policy.

Paragraph 20(1)(c) of the Act specifically denies a deduction for interest expense on borrowed money for the acquisition of a life insurance policy (except a life insurance policy that is an annuity contract as described in subparagraph 20(1)(c)(iv) of the Act).

We hope this is of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate