Mortgage interest as a deduction in Canada

QUESTION: I read your Nov 2001 paper and have a question.  Is it possible that CCRA would argue 
that you should have used business income to pay business expenses and that you just shuffled
things around for the tax deduction? Has this been challenged? Also, do all buiness expenses qualify?
david ingram replies:

Sure, anything is possible.  However, in 42 years in this business I have never seen it happen.

It has been challenged several times that I know of and everyone has won as long as they clearly show that the BORROWED money was used to pay the business expenses.  Bulletin IT-533 speaks to this as well.

What does not work is when you try and claim interest because you "could" have used it for business purposes.  You need a paper trail.

And it is obvious that you shuffled things around for the tax deduction.  That is good planning.

All and any business expenses qualify,. �