CRA confirms deductibility of interest on funds borrowed to finance share repurchase under “fill-the-hole” theory

Paragraph 1.48 of Folio S3-F6-C1 provides that an interest expense on borrowed money used to redeem shares or return capital may be deductible if the borrowed money replaces capital previously used to earn income from a business or property. In 2015-0621401I7, the CRA confirmed that a share repurchase for cancellation may also qualify for “fill-the-hole” treatment as described in paragraph 1.48 of Folio S3-F6-C1.

Prepared by: Florence Sauve

Florence Sauve is an associate practicing in the firm’s Toronto office. Her practice focuses on all aspects of taxpayer representation and tax litigation and also includes personal and corporate tax planning. Before joining Thorsteinssons LLP, Florence clerked at the Tax… more »