Borrowing to invest - proving funds used solely for income generating

btcoma wrote: ↑Thank you. For record keeping, is the bank statement (showing the funds obtained from the refinance) and the brokerage statement (showing funds deposited) sufficient?

btcoma wrote: ↑ the brokerage statement (showing funds deposited) sufficient?

Where money is borrowed, the use of the money must be established and the purpose of that use must be to earn income.
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1.32 In determining what borrowed money has been used for, the onus is on a taxpayer to trace or link the borrowed money to a specific eligible use, giving effect to the existing legal relationships.
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1.69 Based on Ludco, where an investment carries a stated interest or dividend rate, the income-earning test will be met "absent a sham or window dressing or similar vitiating circumstances"...
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1.70 Where an investment does not carry a stated interest or dividend rate, such as some common shares, it is necessary to consider whether the purpose test is met. Generally, the CRA considers interest costs in respect of funds borrowed to purchase common shares to be deductible on the basis that at the time the shares are acquired there is a reasonable expectation that the common shareholder will receive dividends. However, it is conceivable that in certain fact situations, such reasonable expectation would not be present. If a corporation has asserted that it does not pay dividends and that dividends are not expected to be paid in the foreseeable future such that shareholders are required to sell their shares in order to realize their value, the purpose test will not be met. However, if a corporation is silent with respect to its dividend policy, or its policy is that dividends will be paid when operational circumstances permit, the purpose test will likely be met. Each situation must be dealt with on the basis of the particular facts involved. These comments are also generally applicable to investments in mutual fund trusts and mutual funds.

yvrbanker wrote: ↑ No, I have to disagree with @xgbsSS . Depositing funds does not constitute an investment that allows claiming the interest. The funds need to be actually invested into something that generates income/dividends or at least expected to do so.

This appears to be one of heavily audited areas. The CRA document on interest deductibility mentions lots of court decisions and fine details.

xgbsSS wrote: ↑ Sorry, my post was just referring to the record keeping requirement for CRA.

btcoma wrote: ↑but knowing that interest from the borrowed money invested in a TFSA is not tax-deductible, would you invest the borrowed money in a taxable account and then use the potential tax-return and dividends to fund the TFSA? Or is the advice here always max out the TFSA first?

yvrbanker wrote: ↑ Sorry for calling you out. You have a reputation for giving a detailed and accurate advice, so I thought it's important to clarify this one. Broker statements should be indeed enough, just not the way OP asked. The statements should cover not only the deposit, but also the subsequent transactions. The interest expense can be claimed only since the purchase of qualifying investments, on the invested amount only.