Bronfman Trust v. The Queen

Holding

Interest on borrowed money is deductible only when the direct and current use of the borrowed money is to earn income from a business or property.

Facts

Bronfman Trust borrowed to make a capital distribution to beneficiaries, freeing up other funds to remain invested in income-producing assets.

Reasoning

Chief Justice Dickson developed the direct-current-use test for interest deductibility. The case has been refined by Singleton and remains a foundation of Canadian interest-deduction jurisprudence.