Tax wiki
s. 21
PART I — Income Tax · DIVISION B — Computation of Income · SUBDIVISION B — Income or Loss from a Business or Property · Deductions
Cost of borrowed money
Not yet annotated · Text current to 2026-06-21 · section last amended 2004-08-31
Current text
Where in a taxation year a taxpayer has acquired depreciable property, if the taxpayer elects under this subsection in the taxpayer’s return of income under this Part for the year,
in computing the taxpayer’s income for the year and for such of the 3 immediately preceding taxation years as the taxpayer had, paragraphs 20(1)(c), 20(1)(d), 20(1)(e) and 20(1)(e.1) do not apply to the amount or to the part of the amount specified in the taxpayer’s election that, but for an election under this subsection in respect thereof, would be deductible in computing the taxpayer’s income (other than exempt income) for any such year in respect of borrowed money used to acquire the depreciable property or the amount payable for the depreciable property; and
the amount or the part of the amount, as the case may be, described in paragraph 21(1)(a) shall be added to the capital cost to the taxpayer of the depreciable property so acquired by the taxpayer.
Borrowed money used for exploration or development
(2)Where in a taxation year a taxpayer has used borrowed money for the purpose of exploration, development or the acquisition of property and the expenses incurred by the taxpayer in respect of those activities are Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses, foreign resource expenses in respect of a country, or foreign exploration and development expenses, as the case may be, if the taxpayer so elects under this subsection in the taxpayer’s return of income for the year,
in computing the taxpayer’s income for the year and for such of the three immediately preceding taxation years as the taxpayer had, paragraphs 20(1)(c), (d), (e) and (e.1) do not apply to the amount or to the part of the amount specified in the taxpayer’s election that, but for that election, would be deductible in computing the taxpayer’s income (other than exempt income or income that is exempt from tax under this Part) for any such year in respect of the borrowed money used for the exploration, development or acquisition of property, as the case may be; and
the amount or the part of the amount, as the case may be, described in paragraph (a) is deemed to be Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses, foreign resource expenses in respect of a country, or foreign exploration and development expenses, as the case may be, incurred by the taxpayer in the year.
Borrowing for depreciable property
(3)In computing the income of a taxpayer for a particular taxation year, where the taxpayer
in any preceding taxation year
made an election under subsection 21(1) in respect of borrowed money used to acquire depreciable property or an amount payable for depreciable property acquired by the taxpayer, or
was, by virtue of subsection 18(3.1), required to include an amount in respect of the construction of a depreciable property in computing the capital cost to the taxpayer of the depreciable property, and
in each taxation year, if any, after that preceding taxation year and before the particular year, made an election under this subsection covering the total amount that, but for an election under this subsection in respect thereof, would have been deductible in computing the taxpayer’s income (other than exempt income) for each such year in respect of the borrowed money used to acquire the depreciable property or the amount payable for the depreciable property acquired by the taxpayer,
if an election under this subsection is made in the taxpayer’s return of income under this Part for the particular year, paragraphs 20(1)(c), 20(1)(d), 20(1)(e) and 20(1)(e.1) do not apply to the amount or to the part of the amount specified in the election that, but for an election under this subsection in respect thereof, would be deductible in computing the taxpayer’s income (other than exempt income) for the particular year in respect of the borrowed money used to acquire the depreciable property or the amount payable for the depreciable property acquired by the taxpayer, and the amount or part of the amount, as the case may be, shall be added to the capital cost to the taxpayer of the depreciable property.
Borrowing for exploration, etc.
(4)In computing the income of a taxpayer for a particular taxation year, where the taxpayer
in any preceding taxation year made an election under subsection 21(2) in respect of borrowed money used for the purpose of exploration, development or acquisition of property,
in each taxation year, if any, after that preceding taxation year and before the particular year, made an election under this subsection covering the total amount that, but for that election, would have been deductible in computing the taxpayer’s income (other than exempt income or income that is exempt from tax under this Part) for each such year in respect of the borrowed money used for the exploration, development or acquisition of property, as the case may be, and
so elects in the taxpayer’s return of income for the particular year,
the following rules apply:
paragraphs 20(1)(c), (d), (e) and (e.1) do not apply to the amount or to the part of the amount specified in the election that, but for the election, would be deductible in computing the taxpayer’s income (other than exempt income or income that is exempt from tax under this Part) for the particular year in respect of the borrowed money used for the exploration, development or acquisition of property, and
the amount or part of the amount, as the case may be, is deemed to be Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses, foreign resource expenses in respect of a country, or foreign exploration and development expenses, as the case may be, incurred by the taxpayer in the particular year.
Reassessments
(5)Notwithstanding any other provision of this Act, where a taxpayer has made an election in accordance with the provisions of subsection 21(1) or 21(2), such reassessments of tax, interest or penalties shall be made as are necessary to give effect thereto.
Source: Justice Laws Website. Not an official version.
Historic text
This section has not been amended since the start of the point-in-time record on 31 August 2004.
Earlier versions: Justice Laws point-in-time versions of the Act (from 31 August 2004), and CanLII (under “Versions”). On Justice Laws, each version of section 21 links to the one before it.
Enacting and amending legislation
- R.S., 1985, c. 1 (5th Supp.), s. 21; 1994, c. 7, Sch. II, s. 16; 2001, c. 17, s. 15
Text before 2004 is found in the annual Statutes of Canada cited above. Application and coming-into-force provisions are not part of the consolidation; see the amending Acts.
Cross-references
Citation
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 21.