1 February 1991 T.I. (Tax Window, Prelim. No. 3, p. 27, ¶1115)

Where the taxpayer, who holds all the preference shares of a holding company which in turn holds all the shares of Opco arranges to borrow money and lend it directly to Opco at no interest, there will be no conferral of a benefit on the holders of the common shares of Holdco (his children).

An individual, who holds the preference shares of a holding company whose common shares are held by his children, borrows money at 13% and lends it directly to Opco (whose shares are held by Holdco) at no interest, he will be entitled to deduct the interest expense if he meets all the conditions of paragraph 7 of IT-445.