ARTICLE · 17 OCTOBER 2014

Miss Take Part 2: Restructuring For Interest Deductibility

MNP LLP

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When we first met Miss Take a couple of years ago, she had made the unfortunate error of borrowing to acquire a new principal residence.

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When we first met Miss Take a couple of years ago, she had made the unfortunate error of borrowing to acquire a new principal residence. She did not realize that the interest on the borrowed funds would not be deductible against the income from her rental property (her former principal residence). Even though the borrowing was against the equity in her rental property, the direct use of the funds was to acquire a new personal home, so the interest on this borrowing was not deductible.

As that previous article mentioned, some restructuring to obtain interest deductibility is possible with the right planning. But once the error has been made, can it be fixed?

Miss Take did not want to involve other individuals to help her with her planning, so she decided to investigate other options. After talking with her advisor, they came up with the following plan:

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