26 March 1992 External T.I. 5-913338

Where a holding company assumes all of the debt associated with a property acquired by it from its subsidiary, interest on that debt will be deductible provided the property is used by the holding company for the purpose of earning income, even though for purposes of an s. 85(1) election, a substantial portion of that debt was assumed as consideration for a promissory note of the subsidiary rather than as payment for the transferred property.

Where a holding company assumes all of the debt associated with a property acquired by it from its subsidiary, interest on that debt will be deductible provided the property is used by the holding company for the purpose of earning income, even though for purposes of an s. 85(1) election, a substantial portion of that debt was assumed as consideration for a promissory note of the subsidiary rather than as payment for the transferred property.