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 a partner in the Toronto office of Thorsteinssons LLP. Florence’s practice focuses on all aspects of taxpayer representation and tax.  She assists her clients in managing and resolving tax audit and appeal disputes and represents her clients… more »