u/Anssam2boyz

Hello folks,

For those Canucks who have or are about to invest in the leveraged FCNR trade, what is your opinion of CRA view of tax deductibility of interest?

My question arises from the following -

1. There will be a sudden and large jump in foreign assets on the T1135, relative to
   Last year
2. Similarly there will be a large jump in foreign income earned AND carrying cost.

What are the chances that CRA disallows interest deductibility? Any views?

Those who participated in the 2013 trade- what was your experience with CRA?

Obviously - I’ll be scrupulous with papering the deal, but am concerned about CRA risk.

Thank you.

Hi folks,

Just to clear my mind on the FCNR leverage deal -

1. Bank is offering 9x loan on my FCNR, to create a gross FCNR of 10x.
2. Loan int rate is fixed and the duration matches that of the FCNR.
3. There is a positive spread of approx 1pct point in my favour.
4. The loan is without recourse.
5. Lending bank and asset holding bank are same. I’m comfortable with the Bank name.
6. I report the interest income on the gross FCNR as well as interest expense on the loan amount to CRA and pay tax on the difference.
7. The gross FCNR is reported on my T1135,

Would really appreciate your pointing out the risks in this and any gaps that I have missed.

FYI - FCNR is a USD deposit in Indian Banks.

Thanks