Interest Income

Cases

Western Union Insurance Co. v. The Queen, 83 DTC 5388, [1983] CTC 363 (FCTD)

In 1976 the taxpayer general insurance company received the full amount due to it under a mortgage loan of $1,125,000 made by it in 1974, consisting of repayment of the $800,000 actually advanced by it to the borrower in 1974, and a "bonus" of $325,000. Although the bonus was received by the taxpayer as part of its money-lending business and was thus taxable, the loan had not been a highly-risky one and the bonus accordingly should have been amortized over the term of the loan rather than included only in the taxpayer's 1976 income.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt sending of cheque to sender's lawyers 22
Tax Topics - Income Tax Act - Section 76 42

The Queen v. Roynat Ltd., 81 DTC 5072, [1981] CTC 93 (FCTD)

An amount which when paid might not constitute an interest expense to the payor because it was paid pursuant to a contract of suretyship or indemnity nonetheless will constitute interest income to the recipient if it was calculated as a percentage of a capital sum loaned and also proportionately to the length of time that the capital sum remained outstanding.

See Also

Doulis v. The Queen, 2014 DTC 1054 [at 2933], 2014 TCC 26 (Informal Procedure)

tax arrears interest is not a business expense

Lamarre J dismissed the taxpayer's arguments that he should be able to deduct interest on tax arrears as a business expense. Such deductions were prohibited by s. 18(1)(t).

In any event, the interest payments would not have been deductible under s. 20(1)(c). There was no borrower-lender relationship with the Crown as CRA did not agree to lend money to the taxpayer and the taxpayer instead owed tax under the Act, and there was no contractual agreement between the two parties (paras. 13-14).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(t) tax arrears interest is not a business expense 82
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) tax arrears interest is not a business expense 82

Ditchfield v. Sharp, [1983] BTC 360 (C.A.)

On February 26, 1970 the taxpayers purchased a non-interest bearing note that was guaranteed as to 75% of its principal amount by the Rothschilds. The finding of fact by the commissioners that the gain realized by the taxpayers when the note matured 3 years later was of an income nature, was upheld. [C.R.: 9 - "Timing"]

Administrative Policy

91 C.R. - Q.53

Review of IT-114 has been deferred pending the outcome of the Department of Finance study on the interest deduction.

87 C.R. - Q.51

IT-114 is currently under review.