Tax - Income tax - Business and property income
Taxpayer used line of credit solely to pay outflow of funds related to his accounting business. After taxpayer stopped personally carrying on accounting business, he used line of credit only to repay interest charged by bank. Taxpayer claimed deduction of interest expenses related to line of credit as business expenses for two taxation years after he ceased personally operating business. Minister of National Revenue denied deduction because interest was not generated in respect of expenses related to taxpayer’s business activities. Taxpayer appealed. Appeal allowed. Reassessment was remitted to Minister for reconsideration to allow deduction of interest expenses. Taxpayer did not have to justify deductibility of business expenses since they had been accepted by Canada Revenue Agency in computing taxpayer’s incomes for previous years. Taxpayer was entitled to deduct interest expenses incurred after he ceased to carry on his business personally. Only interest was added to margin after taxpayer ceased carrying on his business. Conditions for application of s. 20.1 (2) of Income Tax Act were met. Borrowed money that remained to be repaid at time taxpayer ceased personally operating business was deemed to have been used by taxpayer to earn income from his business in taxation years in issue.
Moras c. La Reine (2019), 2019 CarswellNat 2032, 2019 CarswellNat 2166, 2019 TCC 111, 2019 CCI 111, Réal Favreau J. (T.C.C. [Informal Procedure]).
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