Investment Loan -

Expert:         taxman at centa.com
Date:           Monday October 09, 2006
Time:           05:33 PM -0400
QUESTION:
Hello,
My husband and I are interested in purchasing Limited Parternership units
through a company who is raising capital to purchase land for their company
here in Alberta.  They had numerous offerings and are all fully financed and
some have already been paid back to investors.  The rate of return is 12%
and interest paid quarterly. The average term is about 2 years.  Our
question:  If we use borrowed funds (ie: line of credit), is the interest on
the LOC tax deductable?  Will this off-set the interest we earn on the
investmenrt?
Thank you for your assistance.
Kind Regards,
==============================================
david ingram replies:
If you are borrowing the money to invest for high interest returns, the
interest on the loan is deductible.
You should read the November newsletter in the top left hand box at
www.centa.com and the CRA Bulletin, IT-533 which you can find at:
 http://www.cra-arc.gc.ca/E/pub/tp/it533/it533-e.html
Now, I can give you a list of a few hundred people who did essentially the
same thing you are proposing to do when they invested with ERON Mortgage
Corporation in Vancouver.  There are a lot of economists who are convinced
that most of the bubble has taken place.
It would not take much of a downturn in the market for the situation you
mention to turn disastrous.
hope this helps
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