,canada ,rev5ue ,ag5cy                #a

              ,9come ,tax
          ,9t]pret,n ,bullet9
    
,numb]3 ,,it-#cda;,r#d
,date3 ,febru>y #bf1 #bjjg
,subject3 ,9come tax act
  ,exp5ses ( ,issu+ or ,sell+ ,%>es1
  ,units 9 a ,tru/1 ,9t]e/s 9 a ,"pn]%ip
  or ,syndicate & ,exp5ses ( ,borr[+
  ,m"oy
,ref];e3 ,p>agraphs #bj7#a77e7 & 7e4#a7
  7al sec;n #ba1 ! def9i;n ( 8eligi#
  capital exp5diture0 9 subsec;n
  #ad7#e71 subsec;ns #ah7#i7 & 7#i.a71 &
  p>agraphs #ah7#a77a71 7b71 7c71 7f71 &
  7h71 #bj7#a77b71 7c71 7e4#b7 & 7f71 &
  subp>agraph #ec7#b77c77x7 (! ,9come
  ,tax ,act 7! 8,act077

  ,at ! ,canada ,rev5ue ,ag5cy 7,,cra71
we issue 9come tax 9t]pret,n bullet9s
7,,it's7 9 ord] 6provide te*nical
9t]pret,ns & posi;ns reg>d+ c]ta9     #a
             ,,it-#cda;,r#d          a#a
provi.ns 3ta9$ 9 9come tax law4 ,due 6_!
te*nical nature1 ,,it's >e us$ prim>ily
0\r /aff1 tax speciali/s1 & o!r
9dividuals :o h an 9t]e/ 9 tax matt]s4
,= ^? r1d]s :o pref] a less te*nical
explan,n (! law1 we (f] o!r public,ns1
s* z tax guides & pamphlets4
  ,:ile ! -;ts 9 a "picul> p>agraph 9 an
,,it may relate 6provi.ns (! law 9 =ce
at ! "t !y 7 made1 s* -;ts >e n a
sub/itute =! law4 ,! r1d] %d1 "!=e1
3sid] s* -;ts 9 li<t (! relevant
provi.ns (! law 9 =ce =! "picul> tax,n
ye> 2+ 3sid]$1 tak+ 96a3.t ! e6ect ( any
relevant am5d;ts 6^? provi.ns or
relevant c\rt deci.ns o3urr+ af ! date
on : ! -;ts 7 made4
  ,subject 6! abv1 an 9t]pret,n or
posi;n 3ta9$ 9 an ,,it g5],y applies z
(! date on : x 0 publi%$1 un.s o!rwise
specifi$4 ,if "! is a subsequ5t *ange 9
t 9t]pret,n or posi;n &! *ange is
b5eficial 6taxpay]s1 x is usu,y e6ective
= future assess;ts & reassess;ts4     #b
             ,,it-#cda;,r#d          b#a
,if1 on ! o!r h&1 ! *ange is n fav\ra#
6taxpay]s1 x w norm,y 2 e6ective =!
curr5t & subsequ5t tax,n ye>s or =
transac;ns 5t]$ 96af ! date on : ! *ange
is publi%$4
  ,mo/ ( \r public,ns >e availa# on \r
,web site at3 _+www.cra.gc.ca_:
  ,if y h any -;ts reg>d+ matt]s 4cuss$
9 an ,,it1 pl1se s5d !m to3

  ,9come ,tax ,rul+s ,directorate
  ,policy & ,plann+ ,bran*
  ,canada ,rev5ue ,ag5cy
  ,ottawa ,,on ,k#a;,a #j;,l#e
  
  or 0email at ! foll[+ a4ress3
    _+bulletins@cra.gc.ca_:
  
  ,? v].n is only availa# electronic,y4




                                      #c
                 ,3t5ts              c#a
    
,applic,n
,summ>y
,4cus.n & ,9t]pret,n
  ,g5]al 7p>agraphs #a-c7
  ,five-ye> appor;n;t 7p>agraph #d7
  ,excep;ns 6five-ye> appor;n;t
    7p>agraphs #e-f7
  ,fees t relate only 6a ye> 7p>agraphs
    #g-h7
  ,purpose ( borr[+ m"oy 7p>agraphs
    #i-aa7
  ,transac;ns actu,y 9curr$ 7p>agraphs
    #ab-ac7
  ,tim+ ( deduc;n 7p>agraph #ad7
  ,elec;n 6capitalize exp5ses 7p>agraph
    #ae7
  ,deducti# exp5ses 7p>agraphs #af-ai7
  ,non-deducti# exp5ses 7p>agraphs
    #bj-bb7
  ,deduc;n "u subsec;n #ah7#i.a7
    7p>agraph #bc7
,explan,n ( ,*anges
                                      #d
               ,applic,n             d#a
    
  ,? bullet9 c.els & replaces ,9t]pret,n
,bullet9 ,,it-#cda;,r#c dat$ ,novemb]
#bi1 #aiie4 ,! e6ective date (a "picul>
legislative provi.n 4cuss$ 9 ! bullet9
may 2 9dicat$ 9 ! ,explan,n ( ,*anges
sec;n 7or1 9 "s cases1 9 ! ,4cus.n &
,9t]pret,n sec;n7 (! bullet94 ,h["e1 ":
! bullet9 is sil5t ) respect 6! e6ective
date (a "picul> provi.n1 s* date c 2
obta9$ f ! legisl,n xf4 ,un.s o!rwise
/at$1 all /atutory ref];es "?\t !
bullet9 >e 6! ,act4

                ,summ>y
    
  ,? bullet9 d1ls ) exp5ses 9curr$ 9 !
c\rse ( 7;i7 issu+ or sell+ securities1
7;ii7 borr[+ m"oy & 7;iii7 9curr+1
res*$ul+ or re/ructur+ 9debt$;s4 ,s*
exp5ses >e norm,y deducti# 9 equal
por;ns ov] five ye>s subject 6a pro-rata
reduc;n = %ort tax,n ye>s4
                                      #e
             ,,it-#cda;,r#d          e#a
  ,? bullet9 al d1ls )! provi.n t
ov]rides ! five-ye> appor;n;t = c]ta9
f9anc+ fees 9curr$
--------------------------------------#b
af #aihg t relate only 6a "picul> tax,n
ye> & may 2 deduct$ 9 -put+ 9come = t
ye>4

          ,4cus.n & ,9t]pret,n
    
        ,g5]al 7p>agraphs #a-c7
    
#a4 ,9 -put+ a taxpay]'s 9come =a tax,n
  ye> f a busi;s or prop]ty1 p>agraphs
  #bj7#a77e7 & 7e4#a7 provide =! deduc;n
  ( exp5ses 9curr$ 9 ! c\rse (a
  transac;n ref]r$ 6in p>agraphs #b & #g
  ev5 ?\< ! exp5ses may n o!rwise 2
  deducti# 2c ( p>agraph #ah7#a77a71
  7b71 or 7h74 ,exp5ses t d n meet !
  require;ts ( p>agraph #bj7#a77e7 or
  7e4#a7 may qualify z eligi# capital
  exp5ditures1 provid$ !y meet !
  require;ts ( t def9i;n 9 subsec;n   #f
             ,,it-#cda;,r#d          a#b
  #ad7#e74 ,= details ( ^! require;ts1
  see ! curr5t v].n ( ,,it-#adc1 ,m1n+ (
  ,eligi# ,capital ,exp5diture4
  ,3v]sely1 if a deduc;n = s* exp5ses is
  o!rwise availa# "u ! ,act1 ! rules 9
  p>agraph #bj7#a77e7 d n apply4 ,=
  example1 :5 m"oy borr[$ 3/itutes !
  borr[]'s /ock-in-trade1 co/s 9curr$ 9
  borr[+ m"oy 6be us$ 9 a m"oy-l5d+
  busi;s >e n subject 6! re/ric;ns 9
  p>agraph #bj7#a77e74 ,exp5ses 9curr$ 9
  ^! circum/.es wd norm,y 2 deducti# z
  ord9>y busi;s exp5ses4
#b4 ,p>agraph #bj7#a77e7 provides t a
  taxpay] c deduct an am.t 7o!r ?an an
  8exclud$ am.t07 = c]ta9 exp5ses t >e
  9curr$ 9 ! c\rse (3
  7a7 an issu.e or sale (
    --%>es 9 ! capital /ock (a corpor,n
      0! corpor,n1
    --units 9 a unit tru/ 0! unit tru/1
    --9t]e/s 9 a "pn]%ip 0! "pn]%ip1 or
    --9t]e/s 9 a syndicate 0! syndicate2
                                      #g
             ,,it-#cda;,r#d          b#b
  7b7 a borr[+ ( m"oy us$ 0! taxpay] =!
    purpose ( e>n+ 9come f a busi;s or
    non-exempt 9come f prop]ty2
  7c7 9curr+ 9debt$;s t is an am.t paya#
    = prop]ty 7o!r ?an an 9t]e/ 9 a life
    9sur.e policy7 acquir$ =! purpose (
    ga9+ or produc+ 9come f a busi;s or
    =! purpose ( ga9+ or produc+ non-
    exempt 9come f prop]ty2
  7d7 an assump;n (a debt oblig,n 0!
    taxpay] 9 respect (a borr[+ describ$
    9 7b71 or an am.t paya# describ$ 9
    7c71 abv2 or
  7e7 res*$ul+ or re/ructur+ a debt
    oblig,n (! taxpay] 9 respect (a
    borr[+ describ$ 9 7b71 or an am.t
    paya# describ$ 9 7c71 abv1 t
    provides =3
    --! modific,n (! t]ms or 3di;ns (!
      debt oblig,n1
    --! 3v].n (! debt oblig,n 6a %>e or
      ano!r debt oblig,n1 or
    --! sub/itu;n (! debt oblig,n )a %>e
      or ano!r debt oblig,n4          #h
             ,,it-#cda;,r#d          c#b
  8,exclud$ am.t0 m1ns3
  --an am.t pd or paya# on a3.t (
    pr9cipal or 9t]e/ =a debt oblig,n2
  --an am.t t is 3t+5t or dep5d5t on !
    use ( or produc;n f prop]ty2 or
  --an am.t t is -put$ 0ref];e 6rev5ue1
    pr(it1 ca% fl[1 -mod;y price or any
    o!r simil> crit]ion or 0ref];e
    6divid5ds pd or paya# 6%>ehold]s (
    any class ( %>es (a corpor,n4
#c4 ,specific,y 9clud$ 9 ! exp5ses
  deducti# "u p>agraph #bj7#a77e7 >e
  -mis.ns1 fees1 or any o!r am.ts 7: wd
  9clude a bonus7 pd or paya# =1 or on
  a3.t (1 s]vices r5d]$ 0a p]son z a
  salesp]son1 ag5t1 or d1l] 9 securities
  7e4g4 9 an ag5cy be/ ef=t place;t7 9 !
  c\rse (! issu.e1 sale or borr[+4





                                      #i
          ,five-ye> appor;n;t        d#b
             7p>agraph #d7
    
#d4 ,exp5ses 9curr$ 9 transac;ns
  describ$ 9 p>agraph #b >e norm,y only
  deducti# 9 equal por;ns ov] five ye>s
  7"h9af ref]r$ 6z 8! five-ye> appor;n;t
  rule074 ,! deduc;n 9 a tax,n ye> = s*
  an exp5se is re/rict$ 6! l1/ (3
  7a7 #bj@3p (! exp5se2
  7b7 ! propor;n ( 7a7 abv t ! numb] (
    "ds 9 ! tax,n ye> is ( #cfe2 &
  7c7 ! am.t1 if any1 0: ! exp5se exce$s
    ! total ( ea* am.t deducti# 9
    respect (! exp5se 9 -put+ 9come =a
    prec$+ tax,n ye>4
  ,if a corpor,n : has an undeduct$
  bal.e ( s* an exp5se is w.d-up 9to1 or
  amalgamat$ )1 ano!r corpor,n1 ! p>5t
  corpor,n1 or new corpor,n1 z ! case
  may be1 may 3t9ue 6deduct ! exp5se ov]
  ! bal.e (! five-ye> p]iod4 ,a taxpay]
  :o fails 6deduct ! maximum all[a# 9 a
  tax,n ye> = an exp5se "u p>agraph
  #bj7#a77e7 _c c>ry =w>d !          #aj
             ,,it-#cda;,r#d          e#b
  undeduct$ por;n 6a subsequ5t tax,n
  ye>4 ,example3 ,a unit tru/ 9curs unit
  issue co/s1 : >e deducti# at a maximum
  rate ( #bj@3p p] ye> "u p>agraph
  #bj7#a77e74 ,h["e1 ! tru/ is w.d up 2f
  f\r ye>s h elaps$ &a bal.e ( issue
  co/s repres5t+ m ?an #bj@3p (! orig9al
  issue exp5se rema9s 6be deduct$ 9 xs
  f9al tax,n ye>4 ,9 ! ye> ( w9dup1 !
  deduc;n 0! tru/ wd 2 limit$ 6t
  propor;n ( #bj@3p (! orig9al exp5se t
  ! numb] ( "ds 9 ! f9al ye> is ( #cfe4
  ,"!=e1 ! tru/ wd n 2 a# 6deduct !
  bal.e (! unit issu.e co/s4

     ,excep;ns 6five-ye> appor;n;t
            7p>agraphs #e-f7
    
#e4 ,if1 9 a "picul> tax,n ye>1 a
  taxpay] settles or ext+ui%es all debt
  oblig,ns =a borr[+ or an
--------------------------------------#c
  9debt$;s describ$ 9 p>agraph #b 7b7 or
  7c71 o!rwise ?an z "p (a s]ies (   #aa
             ,,it-#cda;,r#d          a#c
  borr[+s or o!r transac;ns & repay;ts1
  ! bal.e (! exp5ses t 0 n deducti# 9 a
  previ\s tax,n ye> 2c (! five-ye>
  appor;n;t rule w 2 deducti# 9 t
  "picul> tax,n ye> 0virtue (
  subp>agraph #bj7#a77e77;v74 ,h["e1 ?
  subp>agraph w only apply if ! taxpay]
  settles or ext+ui%es all debt oblig,ns
  = 3sid],n t does n 9clude any unit1
  9t]e/1 %>e1 or debt oblig,n (3
  7a7 ! taxpay]2
  7b7 any p]son ) :om ! taxpay] does n
    d1l at >m's l5g?2 or
  7c7 any "pn]%ip or tru/ ( : ! taxpay]
    or a p]son describ$ 9 7b7 abv is a
    memb] or b5efici>y4
  ,=a debt oblig,n 6be 8settl$ or
  ext+ui%$10 all liabil;y = pay;t m/ 2
  t]m9at$4 ,pay;t1 c.ell,n1 set-(f1
  sub/itu;n ( debtors1 & rel1se >e
  examples ( "s possi# m1ns ( settle;t4
  ,a debt or oblig,n is n settl$ :5 a
  cr$itor ab&ons 8 or h] "r 65=ce pay;t
  or 2comes /atute-b>r$ f 5=c+ 8     #ab
             ,,it-#cda;,r#d          b#c
  or h] "r 6pay;t4 ,h["e1 a settle;t
  does o3ur :51 0/atute1 ! debtor's
  actual liabil;y 6pay is ext+ui%$ af a
  specifi$ p]iod ( "t has elaps$4 ,!
  -;ts 9 ! curr5t v].n ( ,,it-#aai1
  ,debts ( ,%>ehold]s1 ,c]ta9 ,p]sons )
  ,%>ehold]1 reg>d+ :e!r a repay;t is "p
  (a s]ies ( loans or o!r transac;ns &
  repay;ts >e help;l :5 det]m9+ :e!r a
  repay;t is "p (a s]ies ( borr[+s or
  o!r transac;ns & repay;ts "u
  subp>agraph #bj7#a77e77;v74
#f4 ,if a "pn]%ip c1ses 6exi/1 exp5ses
  9curr$ 9 situ,ns describ$ 9 p>agraph
  #b t 7 n deducti# 0! "pn]%ip 9 a tax,n
  ye> prior 6! 4solu;n 2c (! five-ye>
  appor;n;t rule1 w n 2 deducti# 0!
  "pn]%ip b w 2 deducti# ov] ! rema9d]
  (! five-ye> p]iod 9 ! h&s (! "pn]s
  0virtue ( subp>agraph #bj7#a77e77;vi74
  ,s* exp5ses >e allocat$ 6ea* "pn] 9
  propor;n 6! rel,n%ip (! fair m>ket
  value (! "pn]'s 9t]e/ 9 ! "pn]%ip
  immly 2f x c1ses 6exi/ 6! ov]all   #ac
             ,,it-#cda;,r#d          c#c
  fair m>ket value ( all 9t]e/s 9 !
  "pn]%ip at t "t4 ,! adju/$ co/ base 6a
  taxpay] ( an 9t]e/ 9 a "pn]%ip : has
  c1s$ 6exi/ is reduc$ 0! taxpay]'s
  alloc,n "u subp>agraph #bj7#a77e77;vi7
  0virtue ( subp>agraph #ec7#b77c77;x74
  ,if subp>agraph #bj7#a77e77;v7 applies
  6a "pn]%ip 7see p>agraph #e7 9 !
  fiscal p]iod x c1s$ 6exi/1 ! "pn]s w 2
  5titl$ 6deduct ! exp5ses t 7 n
  previ\sly deducti# 0! "pn]%ip1 2c (!
  five-ye> appor;n;t rule1 9 ea* "pn]'s
  f/ tax,n ye> t 5ds af ! "pn]%ip c1ses
  6exi/4

       ,fees t relate only 6a ye>
            7p>agraphs #g-h7
    
#g4 ,p>agraph #bj7#a77e4#a7 provides t
  c]ta9 fees paya# 0a taxpay] 9 a
  "picul> tax,n ye> may 2 deduct$ 9
  -put+ ! taxpay]'s 9come = t ye> if !y
  c r1sonably 2 3sid]$ 6relate only 6t
  ye>1 & >e 9curr$ 0! taxpay] 9      #ad
             ,,it-#cda;,r#d          d#c
  any transac;n describ$ 9 p>agraph #b
  7b7 to 7e74 ,x is a "q ( fact :e!r a
  "picul> fee is r1sonably 3sid]$
  6relate solely 6! ye>4 ,= example1 a
  "o-"t fee relat$ 6a loan )a t]m l;g]
  ?an "o ye>1 s* z a loan-/ructur+ fee
  or loan-place;t fee1 is n r1sonably
  3sid]$ 6relate only 6! ye> 9 : ! loan
  0 made4 ,annual /&by *>ges 9curr$ 0a
  taxpay] 6ma9ta9 a l9e ( cr$it )a
  f9ancial 9/itu;n1 wd g5],y 2 deducti#
  "u p>agraph #bj7#a77e4#a7 9 ! ye>
  9curr$ provid$ ! taxpay] 9t5ds 6use !
  l9e ( cr$it4
#h4 ,! fees deducti# "u p>agraph
  #bj7#a77e4#a7 9clude /&by *>ges1
  gu>antee fees1 regi/r> fees1 transf]
  ag5t fees1 fil+ fees1 s]vice fees1 or
  any simil> fees1 provid$ s* fees >e n3
  --3t+5t or dep5d5t ^u ! use or
    produc;n f prop]ty2
  --comput$ 0ref];e 6rev5ue1 pr(it1 ca%
    fl[1 -mod;y price1 or any o!r simil>
    crit]ion2 or                     #ae
             ,,it-#cda;,r#d          e#c
  --comput$ 0ref];e 6divid5ds pd or
    paya# 6%>ehold]s ( any class ( %>es
    (! capital /ock (a corpor,n4
  
         ,purpose ( borr[+ m"oy
           7p>agraphs #i-aa7
    
#i4 ,if a taxpay] 9curs exp5ses :5
  borr[+ m"oy1 p>agraphs #bj7#a77e7 &
  7e4#a7 require t ! taxpay] use !
  borr[$ m"oy =! purpose ( e>n+ 9come f
  a busi;s c>ri$ on 0! taxpay] or =!
  purpose ( e>n+ non-exempt 9come f
  prop]ty4 ,= example1 ? require;t is
  g5],y met :5 bonds >e issu$ &! proce$s
  >e us$ 6redeem pref]r$ %>es4 ,?
  require;t is al met :51 = example1
  borr[$ m"oy is us$ 6provide "w+
  capital4 ,9 a4i;n1 p>agraphs
  #bj7#a77e7 & 7e4#a7 require t1 if a
  taxpay] 9curs exp5ses 9 ! c\rse (
  9curr+ 9debt$;s t is an am.t paya# =
  prop]ty acquir$1 ! taxpay] m/ acquire
  ! prop]ty =! purpose ( ga9+ or     #af
             ,,it-#cda;,r#d          f#c
  produc+ 9come f a busi;s or non-exempt
  9come f ! prop]ty4 ,^! require;ts >e
  met :5 ! am.t paya# is = deprecia#
  prop]ty acquir$ = use 9 a busi;s or =
  capital prop]ty 7o!r ?an an 9t]e/ 9 a
  life 9sur.e policy7 t e>ns non-exempt
  9come4 ,if m"oy is borr[$ "ply =a
  qualify+ purpose "u p>agraph
  #bj7#a77e7 or 7e4#a7 & "ply = "s o!r
  purpose1 only ! "p (! exp5ses t may
  r1sonably 2 3sid]$ applica# 6!
  qualifi$ purpose is deducti#4
#aj4 ,! deduc;n p]mitt$ 0p>agraph
  #bj7#a77e7 or 7e4#a7 is re/rict$ 6!
  taxpay] :o 5t]s 96a transac;n describ$
  9 p>agraph #b4 ,if = example1 exp5ses
  >e pd 0a p>5t -pany on 2half ( xs
  subsidi>y1 9 3nec;n
--------------------------------------#d
  )! issu.e ( %>es 0xs subsidi>y1 !y >e
  n deducti# 0! p>5t -pany "u p>agraph
  #bj7#a77e74 ,h["e1 provid$ s* exp5ses
  >e reimburs$ 0! subsidi>y 6! p>5t1 &
                                     #ag
             ,,it-#cda;,r#d          a#d
  >e r1sona# 9 ! circum/.es1 !y wd 2
  deducti# 0! subsidi>y4
#aa4 ,a p>5t -pany t is subject 6! tax
  laws (a =eign jurisdic;n may gu>antee
  a ?ird-"py loan ( xs ,canadian
  subsidi>y )\t /ipulat+ ! pay;t (a fee
  0! subsidi>y =! gu>antee giv54 ,if1 z
  a result1 ! tax au?orities (! =eign
  c.try impute a gu>antee fee 6! p>5t
  -pany1 any pay;t 0! ,canadian
  subsidi>y 6xs =eign p>5t =! imput$
  am.t is 9 ! nature (a pay;t >is+ f !
  assess+ ac;n ( ^! tax au?orities & is
  n a deducti# exp5se 9curr$ 9 ! c\rse (
  borr[+ m"oy4

       ,transac;ns actu,y 9curr$
           7p>agraphs #ab-ac7
    
#ab4 ,"u p>agraphs #bj7#a77e7 & 7e4#a71
  a taxpay] seek+ ! deduc;n m/ actu,y
  c>ry \ "o (! transac;ns ref]r$ 6in
  p>agraph #b4 ,"!=e1 :5 s* transac;ns
  >e propos$1 ! taxpay] g5],y _c     #ah
             ,,it-#cda;,r#d          b#d
  deduct any am.t "u ^? p>agraphs if !
  transac;ns >e n c>ri$ \4 ,an excep;n
  6! rule wd 2 9 ! case ( an annual /&by
  *>ge 6ma9ta9 a l9e ( cr$it z expla9$ 9
  p>agraph #g4 ,! fact t a plan =a
  transac;n describ$ 9 p>agraph #b 0
  ab&on$ wd n result 9 a 4all[.e (
  exp5ses relat+ 6t plan if ! transac;n
  is actu,y c>ri$ \ pursuant 6a new
  transac;n plan t 0 sub/itut$ =!
  orig9al "o4

,example #a
  ,a taxpay] has pd -mit;t fees 6a
  f9ancial 9/itu;n ) respect 6a propos$
  loan 6be us$ 6acquire an 9come-produc+
  9ve/;t4 ,! taxpay] subsequ5tly borr[s
  ! m"oy f a di6]5t f9ancial 9/itu;n4 ,!
  -mit;t fee pd 6! f/ f9ancial 9/itu;n
  wd 2 3sid]$ 6be an exp5se 9curr$ 9 !
  c\rse ( borr[+ m"oy )9 ! m1n+ (
  subp>agraph #bj7#a77e77;ii7 if !
  taxpay] us$ ! borr[$ m"oy 6acquire !
  9come-produc+ 9ve/;t4 ,! actual    #ai
             ,,it-#cda;,r#d          c#d
  f9anc+ m/ 2 a sub/itute =! loan
  orig9,y s"\4

,example #b
  ,a corpor,n attempts 6raise m"oy "? !
  issu.e ( debt4 ,! debt proce$s >e 6be
  us$ 0! corpor,n 6f9.e xs busi;s
  activities4 ,! corpor,n 9curs v>i\s
  legal & a3.t+ co/s ) respect 6!
  attempt 6raise m"oy "? ! issu.e (
  debt2 h["e1 ultimately1 ! loan
  transac;n is n c>ri$ \4 ,z s*1 !
  exp5ses 9curr$ d n meet ! require;ts
  =a deduc;n "u p>agraph #bj7#a77e74
  ,assum+ ! borr[$ m"oy wd n h be5 !
  taxpay]'s /ock-in-trade 7z wd 2 ! case
  if ! taxpay] is n a m"oy l5d]71 !
  borr[+ wd h be5 on a3.t ( capital &a
  deduc;n "!( wd 2 d5i$ pursuant
  6p>agraph #ah7#a77b74 ,h["e1 exp5ses
  on a3.t ( capital & 9curr$ =! purposes
  ( ga9+ or produc+ 9come f a busi;s may
  qualify z an 8eligi# capital
                                     #bj
             ,,it-#cda;,r#d          d#d
  exp5diture0 "u t def9i;n 9 subsec;n
  #ad7#e74

#ac4 ,= exp5ses 6qualify "u p>agraph
  #bj7#a77e71 9 3nec;n )! issu.e or sale
  ( %>es1 x is n nec =! taxpay] 6obta9
  a4i;nal capital 0! issu.e or sale (
  %>es4 ,= 9/.e1 a taxpay] may 9cur
  deducti# exp5ses "u p>agraph
  #bj7#a77e7 9 a capital reorganiz,n :5
  %>es ( "o or m new %>e classes >e
  sub/itut$ = %>es ( "o or m old %>e
  classes4

     ,tim+ ( deduc;n 7p>agraph #ad7
    
#ad4 ,an exp5se1 >is+ 9 ! c\rse ( "o (!
  transac;ns ref]r$ 6in p>agraph #b1 w
  2g9 6be deducti#1 "u ! five-ye>
  appor;n;t rule1 9 ! ye> 9 : ! exp5se
  is 9curr$1 or w 2 fully deducti# 9 t
  ye> if p>agraph #bj7#a77e4#a7 7see
  p>agraph #g7 applies 6! exp5se4 ,? wd
  norm,y 2 ! same ye> 9 : !          #ba
             ,,it-#cda;,r#d          e#d
  transac;n takes place4 ,9 c]ta9 cases1
  h["e1 s* an exp5se may 2g9 6be
  deducti# "u p>agraph #bj7#a77e71 or 2
  fully deducti# "u p>agraph
  #bj7#a77e4#a71 9 a ye> 2f ! "o 9 : !
  transac;n took place4 ,= example1 ? wd
  2 ! case :5 an exp5se 6>range = an
  issu.e ( %>es is 9curr$ 9 a ye> prior
  6! "o 9 : ! %>es >e actu,y issu$4 ,9 t
  situ,n1 ! exp5se w norm,y 2 3sid]$ 6be
  9curr$ 9 ! c\rse (! issu.e4 ,an exp5se
  may al 2g9 6be deducti# "u p>agraph
  #bj7#a77e71 or 2 fully deducti# "u
  p>agraph #bj7#a77e4#a71 9 a ye> foll[+
  ! "o 9 : ! actual transac;n takes
  place provid$ "! 0 a -mit;t 69cur a
  future exp5se at ! "t ! transac;n 0
  >rang$4 ,= example1 z a 3di;n (a loan
  agree;t1 a borr[] may 2 requir$ 6pay
  6! l5d]1 =a c]ta9 numb] ( ye>s1 a
  por;n (! rev5ue f ! prop]ty acquir$ )!
  borr[$ m"oy4 ,provid$ !y >e n 9t]e/
  pay;ts or -p5s,n pay;ts =! use (
  borr[$ m"oy1 s* pay;ts wd 2g9      #bb
             ,,it-#cda;,r#d          f#d
  6be a deducti# exp5se 6! borr[] "u
  p>agraph #bj7#a77e7 9 ! ye>s 9 : !y
  2come paya#1 or wd 2 a deducti# exp5se
  9 t ye> if subp>agraph #bj7#a77e77;v7
  applies 7see p>agraph #e74

      ,elec;n 6capitalize exp5ses
             7p>agraph #ae7
    
#ae4 ,if a taxpay] borr[s m"oy =!
  purpose ( acquir+ deprecia# prop]ty1 &
  9curs exp5ses 9 ! c\rse ( borr[+ t
  m"oy t wd o!rwise 2 deducti# "u
  p>agraph #bj7#a77e71 ! taxpay] may
  elect "u sec;n #ba 6capitalize ^!
  exp5ses al;g )! 9t]e/ pd or paya# on !
  borr[+4 ,:5 ^! co/s >e capitaliz$ z a
  result ( an elec;n "u sec;n #ba1 !y =m
  "p (! capital co/ (! deprecia# prop]ty
  subject 6capital co/ all[.e4



                                     #bc
      ,deducti# exp5ses 7p>agraphs    #e
                #af-ai7
    
#af4 ,:5 a corpor,n1 "pn]%ip1 or
  syndicate 5t]s 96a transac;n describ$
  9 p>agraph #b7a71 ! exp5ses li/$ 2l wd
  2 deducti# "u subp>agraph
  #bj7#a77e77;i7 9 -put+ 9come =! ye> 9
  : !y >e 9curr$3
  7a7 legal fees 9 3nec;n )! prep>,n &
    approval (a prospectus p]t95t 6!
    issu.e or sale ( %>es1 units1 or
    9t]e/s2
  7b7 a3.t+ or audit+ fees 9 3nec;n )!
    prep>,n ( reports on f9ancial
    /ate;ts & /ati/ical data = 9clu.n
    in1 or = pres5t,n )1 ! prospectus2
  7c7 ! co/ ( pr9t+ ! prospectus1 new
    %>e1 unit1 or 9t]e/ c]tificates1
    etc2
  7d7 regi/r>s' or transf] ag5ts' fees2
    &
  7e7 fil+ fees *>g$ 0any public
    regulatory body : requires ! fil+ (a
    prospectus = a3ept.e4            #bd
             ,,it-#cda;,r#d          a#e
#ag4 ,subject 6p>agraphs #i & #ab1 !
  foll[+ exp5ses 9curr$ 9 ! c\rse (
  borr[+ m"oy & n o!rwise deducti# "u
  p>agraph #bj7#a77e4#a7 7see p>agraph
  #g71 >e (a deducti# nature "u
  subp>agraph #bj7#a77e77;ii73
  7a7 legal fees 9 3nec;n )! prep>,n &
    approval (a prospectus :5 ! m"oy is
    6be borr[$ 0m1ns ( an issue ( bonds
    or deb5tures2
  7b7 ! co/ ( pr9t+ ! prospectus1 bonds1
    or deb5tures1 etc2
  7c7 a -mit;t fee pd 6a l5d] pursuant
    6an agree;t 2t ! borr[] &! l5d] ":by
    ! l5d] is -mitt$ 6make a specifi$
    am.t ( m"oy availa# 6! borr[] f "t
    6"t z1 & :51 ! borr[] reque/s2
  7d7 an am.t pd 6! gu>antor (a loan ei
    on a p]iodic basis dur+ ! 3t9u.e (!
    loan1 or z a "o-"t pay;t at ! -m;e;t
    (! loan2
  7e7 c]ta9 8s(t co/s0 an 9ve/or 9curs 9
    ! c\rse ( f9anc+ ! 3/ruc;n (a build+
    6be us$ =! purpose ( e>n+        #be
             ,,it-#cda;,r#d          b#e
    9come f prop]ty 9 : ! 9ve/or has !
    b5eficial [n]%ip at ! "t s* co/s >e
    9curr$4 ,! m frequ5tly 5c.t]$ s(t
    co/s 7i4e41 co/s n relat$ 6!
    acquisi;n (! l&1 build+s1 & equip;t7
    t an 9ve/or pays : >e deducti# "u
    p>agraph #bj7#a77e7 >e3
    --mortgage applic,n1 mortgage
      appraisal1 mortgage process+1 &
      mortgage 9sur.e fees1
    --mortgage gu>antee fees 7see 7d7
      abv71
    --mortgage brok]age 7place;t7 &
      f9d]'s fees1 &
    --legal fees relat$ 6mortgage
      f9anc+2
  7f7 promot]'s s]vice fees relat$ 6^?
    s(t co/ exp5ses t >e deducti# "u
    p>agraph #bj7#a77e72
  7g7 c]tific,n fees & c]ta9 o!r exp5ses
    9curr$1 s* z -mis.ns *>g$ 0a bank1 9
    3nec;n )! sale ( bank]s' a3ept.es2 &
  7h7 exp5ses describ$ 9 p>agraph
    #af7b71 7d71 & 7e71 if !y >e     #bf
             ,,it-#cda;,r#d          c#e
    9curr$ 9 ! c\rse ( borr[+ m"oy & n
    o!rwise deducti# "u p>agraph
    #bj7#a77e4#a74
#ah4 ,a corpor,n propos+ 6issue %>es or
  bonds1 a "pn]%ip propos+ 6issue
  9t]e/s1 or a unit tru/ propos+ 6issue
  xs [n units may 5t] 96an agree;t ) an
  "uwrit] :o "utakes 6organize a gr\p (
  ag5ts :o w solicit & make sales on a
  -mis.n basis4 ,! "uwrit] may al agree
  6ma9ta9 ! requir$ records1 4burse ^?
  -mis.ns & p]=m ! nec adm9i/rative &
  cl]ical "w 3c]n+ ! issue1 =a fee or a
  -mis.n4 ,:5 s* a fee or -mis.n is a
  fix$ am.t or is calculat$ ) ref];e 6!
  numb] ( sales or ! sales value (
  -plet$ transac;ns1 !y >e reg>d$ z
  -mis.ns1 fees1 or any o!r am.ts =!
  purposes ( p>agraph #b4
#ai4 ,9 "s cases1 an "uwrit] or d1l] 9
  securities act+ z a pr9cipal may give
  advice or p]=m c]ta9 s]vices 9 !
  capac;y (a f9ancial advis] 6prep>e =
  an issue ( %>es1 9t]e/s1 units1    #bg
             ,,it-#cda;,r#d          d#e
  or bonds4 ,if an am.t is pd or paya#
  6! "uwrit] or d1l] 9 t capac;y1 x wd 2
  deducti# "u ei p>agraph #bj7#a77e7 or
  7e4#a74

         ,non-deducti# exp5ses
           7p>agraphs #bj-bb7
    
#bj4 ,a 4c.t (a debt oblig,n is n
  deducti# "u p>agraph #bj7#a77e71 b may
  2 subject 6! provi.ns ( p>agraphs
  #ah7#a77f7 & #bj7#a77f74 ,:5 a
  corpor,n sells %>es ( xs capital /ock
  at a 4c.t1 or a taxpay] sells tru/
  units or "pn]%ip 9t]e/s at a 4c.t1 !
  4c.t is n an exp5se 9curr$ 9 ! c\rse (
  sell+ %>es1 units1 or 9t]e/s t is
  deducti# "u p>agraph #bj7#a77e7 nor is
  x deducti# "u any o!r provi.n (! ,act4
  ,s-call$ -mis.ns1 fees1 or o!r am.ts
  79clud+ bonuses7 pd or paya# 6a p]son
  6:om ! %>es1 units1 or 9t]e/s 7 issu$
  or sold1 or f :om ! m"oy 0 borr[$1 >e
  norm,y 3sid]$ 6be 4c.ts & >e n     #bh
             ,,it-#cda;,r#d          e#e
  deducti# "u p>agraph #bj7#a77e7 or
  7e4#a74 ,al1 !y d n qualify z eligi#
  capital exp5ditures 7see ! curr5t v].n
  ( ,,it-#adc74 ,h["e1 :5 a p]son act+ z
  a pr9cipal 9 s* a transac;n is an
  "uwrit]1 any r1sona# "uwrit+ fees t >e
  cle>ly associat$ )! transac;n >e
  deducti# "u p>agraph #bj7#a77e71 or "u
  p>agraph #bj7#a77e4#a74 ,"! m/ 2 4t9ct
  evid;e t ! "uwrit] acquir$ ! %>es1
  units1 9t]e/s1 or debt oblig,ns =!
  purpose ( publicly 4tribut+ !m4 ,any
  a4i;nal pay;t1 : is 9 sub/.e a 4c.t1 w
  n 2 deducti#4 ,9 mak+ ? det]m9,n 9 a
  giv5 case1 a -p>ison wd 2 made (!
  normal "uwrit+ practices reg>d+ *>ges
  = s]vices :5 ! "uwrit] acts z an ag5t
  = simil> issu.es1 sales1 or borr[+s4
--------------------------------------#f
  ,fees pd 6an 9ve/;t bank] >e usu,y
  9curr$ 9 ! c\rse ( acquir+ a busi;s
  9volv+ ! acquisi;n ( %>e capital4 ,s*
  co/s %d 2 a4$ 6! co/ (! %>es acquir$
  0! pur*as]4 ,3sequ5tly1 ? type (   #bi
             ,,it-#cda;,r#d          a#f
  exp5se is usu,y n deducti# pursuant
  6subp>agraph #bj7#a77e77;i74
#ba4 ,=eign curr5cy ga9s or losses t
  >ise on ! r1liz,n ( an ex*ange 3v].n
  wd n 2 deducti# "u p>agraph
  #bj7#a77e74 ,fur!rmore1 losses on !
  ex*ange ( curr5cies d n meet ! def9i;n
  ( an 8am.t t is n o!rwise deducti#0 t
  is an exp5se 9curr$ 0a taxpay] 9 !
  c\rse ( borr[+ =! purposes (
  subp>agraph #bj7#a77e77;ii74 ,s*
  ex*ange losses >e 9curr$ 9 respect (a
  repay;t (a borr[+ & n 8in ! c\rse (a
  borr[+ ( m"oy01 ?us fall+ \tside !
  scope ( p>agraph #bj7#a77e74
#bb4 ,exp5ses ( 9corpor,n1 9clud+ legal
  & a3.t+ fees1 & exp5ses ( obta9+ !
  orig9al or supple;t>y lrs pat5t or
  exp5ses ( am5d+ ! orig9al *>t] 7e4g4
  =! purpose ( 9cr1s+ ! -pany's au?oriz$
  capital z a prelim9>y 6! issu.e (
  %>es7 d n qualify =a deduc;n "u
  p>agraph #bj7#a77e74 ,s* exp5ses may1
  h["e1 2 eligi# capital             #cj
             ,,it-#cda;,r#d          b#f
  exp5ditures & h;e =m "p (a taxpay]'s
  cumulative eligi# capital z def9$ "u
  subsec;n #ad7#e74 ,z s*1 !y >e
  deducti# 6! ext5t provid$ 0p>agraph
  #bj7#a77b74 7,see ! curr5t v].n (
  ,,it-#adc47

     ,deduc;n "u subsec;n #ah7#i.a7
             7p>agraph #bc7
    
#bc4 ,subsec;n #ah7#i.a7 d1ls )!
  deductibil;y ( fees pd 6a p]son or
  "pn]%ip 6reduce ! 9t]e/ rate on a debt
  oblig,n1 or z p5alties or bonuses 9
  3sid],n =! repay;t ( all or a por;n (a
  debt oblig,n prior 6xs matur;y4
  ,subsec;n #ah7#i.a7 deems s* pay;ts1
  ei 9 respect ( borr[$ m"oy or on an
  am.t paya# = prop]ty acquir$ 0!
  taxpay]1 6h ! "*i/ics ne$$ =
  deductibil;y "u p>agraph #bj7#a77c7 z
  9t]e/ exp5se1 provid$ ! pay;ts >e made
  9 ! c\rse ( c>ry+ on a busi;s or e>n+
  9come f prop]ty4 ,h["e1 subsec;n   #ca
             ,,it-#cda;,r#d          c#f
  #ah7#i.a7 does n apply 6any fee1
  p5alty1 or bonus t3
  --may r1sonably 2 3sid]$ 6h be5 pd =!
    ext5.n (! t]m (a debt oblig,n or z
    3sid],n =! sub/itu;n or ! 3v].n (a
    debt oblig,n 96ano!r debt oblig,n or
    96a %>e2
  --is 3t+5t or dep5d5t ^u ! use (1 or
    produc;n f1 prop]ty2
  --is -put$ 0ref];e 6rev5ue1 pr(it ca%
    fl[1 -mod;y price1 or any simil>
    crit]ion2 or
  --is -put$ 0ref];e 6any divid5ds pd or
    paya# on any class ( %>es 9 a
    corpor,n4
  







                                     #cb
          ,explan,n ( ,*anges         #g
    
               ,9troduc;n
    
  ,! purpose (! ,explan,n ( ,*anges is
6give ! r1sons =! revi.ns 6an 9t]pret,n
bullet94 ,x \tl9es revi.ns we h made z a
result ( *anges 6! law1 z well z *anges
reflect+ new or revis$ 9t]pret,ns4

                ,ov]view
    
  ,we h revis$ ? bullet9 69corporate !
am5d;ts 6! ,9come ,tax ,act 5act$
0,s4,c4 #bjja1 c4 #ag 7=m]ly bill
;,c-#bb74

       ,legislative & o!r *anges
    
  ,g5],y1 we h rewritt5 ? bullet9
6improve cl>;y & r1dabil;y4
  ,p>agraph #b 0 revis$ 6reflect !
*anges 6p>agraph #bj7#a77e7 z am5d$ 0!
#bjja ,te*nical ,bill1 e6ective =
exp5ses 9curr$ 0a taxpay] af         #cc
             ,,it-#cda;,r#d          a#g
,novemb] #aiii1 o!r ?an exp5ses 9cur$
pursuant 6a writt5 agree;t made 0a
taxpay] 2f ,decemb] #aiii4 ,! pream#
6p>agraph #bj7#a77e7 0 am5d$ 0a4+ 87o!r
?an an exclud$ am.t704 ,! ^ws 2t
subp>agraph #bj7#a77e77ii4#b7 & 7;iii7 h
be5 am5d$ 6delete 8b n 9clud+ any am.t t
is pd or paya# z or on a3.t (! pr9cipal
am.t (! 9debt$;s or z or on a3.t (
9t]e/04 ,a por;n ( ? phrase 0 ess5ti,y
mov$ 6subp>agraph #bj7#a77e77iv4#a74
,subp>agraph #bj7#a77e77iv4#a7 0 a4$
6def9e 8exclud$ am.t04 ,! a4i;n (!
def9i;n ( 8exclud$ am.t0 5sures t
"picipat+ pay;ts >e n deducti# pursuant
6subp>agraph #bj7#a77e77iv4#a74
  ,p>agraph #d 0 revis$ 6provide an
example (a situ,n :5 ! five-ye>
appor;n;t rule wd apply 6d5y ! deduc;n (
issue co/s4
  ,p>agraph #ab 0 revis$ 6expla9 t !
taxpay] seek+ ! deduc;n "u p>agraphs
#bj7#a77e7 & #bj7#a77e4#a7 m/ actu,y 5t]
96! transac;ns ^! p>agraphs          #cd
             ,,it-#cda;,r#d          b#g
describe4 ,we h revis$ ? p>agraph
6provide two examples4 ,! f/ example
a4resses ! deductibil;y (a -mit;t fee pd
6a f9ancial 9/itu;n ) respect 6a propos$
loan :5 a taxpay] subsequ5tly borr[s
m"oy f ano!r f9ancial 9/itu;n4 ,! second
example d1ls )! deductibil;y ( legal &
a3.t+ co/s 9curr$ ) respect 6an ab&on$
attempt 6raise m"oy "? ! issu.e ( debt4
  ,p>agraph #bj 0 revis$ 6add a -;t )
respect 6fees pd 6an 9ve/;t bank] 9 !
c\rse ( acquir+ a busi;s4
  ,new p>agraph #ba has be5 a4$ 6cl>ify
t =eign curr5cy ga9s & losses t >ise on
! r1liz,n ( an ex*ange 3v].n wd n 2
deducti# "u p>agraph #bj7#a77e74







                                     #ce