A wife pays interest under a line of credit that her husband used to buy shares in a business. Can the wife deduct the interest? Not according to Bernacchi v. The Queen, 2010 TCC 306, unsurprisingly:
All in all, I am unable to conclude that there is a link between the interest paid by the Appellant and an income-earning purpose. While in 2005, 2006 and 2007 she paid interest on the line of credit pursuant to a legal obligation to do so, that obligation is traceable to the equalization arrangements under the Separation Agreement rather her use of that money to earn income from a business in her own right. The interest paid was on borrowed money used, not by her, but by her former spouse to purchase shares in his Bakery business. Accordingly, the criteria under subparagraph 20(1)(c)(i) are not satisfied and the appeals must be dismissed.
