Principal Issues: 1. Does the fact that a joint line of credit is secured by a property which the taxpayer contributed most of the capital for, in and of itself, result in attribution to the taxpayer pursuant to 74.1(1)?
2. Does the spouse's use of the funds drawn from the joint line of credit constitute an indirect transfer under subsections 56(4.1) or 56(2)?
3. Does the fact that the line of credit is registered jointly in the taxpayer's and the spouse's name, in and of itself, result in 74.5(7) applying?
4. With respect to the deductibility of interest under subsection 20(1), how would the interest be allocated between the spouses?
Position: 1. No. 2. Generally no. 3. Generally yes. 4. General comments given.
Reasons: 1. Supplying collateral for a loan does not constitute a transfer or a loan. 2. Where the taxpayer has made no loan to the spouse, 56(4.1) would not apply. Where the taxpayer has not directed the issuers to do something and the investment income would not otherwise be the taxpayer's because the spouse is the legal holder of the investments, 56(2) would not apply. 3. Where the taxpayer is obligated, either absolutely or contingently, to ensure the repayment, in whole or in part, of the joint line of credit or of any part of any interest payable on the joint line of credit, 74.5(7) would apply. 4. It is a question of fact.