The following provisions apply where relief has been claimed in respect of loans to buy an interest in a partnership (see ¶287-005).

Recovery of capital

Where, at any time after the loan is used, the individual recovers any amount of capital from the partnership, they will be treated as having at that time repaid an equal amount of the loan, whether he actually used the capital to repay the loan or not (ITA 2007, s. 406(1), (2)). As a result, the allowable interest will be reduced to such part of the total interest paid as would have been paid had the capital recovered been used to repay the loan (ITA 2007, s. 406(3), (4)).

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