Date: 20021206
Docket: 1999-4399-IT-G
BETWEEN:
DONALD G. MacKAY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
(Delivered orally from the Bench at
Kitchener, Ontario, on October 30, 2002)
Mogan J.
[1] At all relevant times, the Appellant was a shareholder in 426783 Ontario Limited ("the Company"). The three taxation years under appeal are 1994, 1995 and 1996. In those years, the Appellant loaned to the Company the amounts of $121,138, $120,839 and $127,614, respectively. When reporting his income for those years, the Appellant reported the loans as business investment losses, and he deducted an allowable business investment loss in each year with respect to those amounts. In the reassessments under appeal, the Minister of National Revenue disallowed the deduction of the allowable business investment losses. The Appellant has appealed from those reassessments. The primary issue before the Court is whether the above amounts may be regarded as business investment losses.
[2] The Appellant was born and raised in Port Elgin, Ontario, a small town near Southampton on Lake Huron. He graduated from dentistry in 1976 and went back to Port Elgin to practice dentistry. He and his wife became involved in the affairs of the town. His wife was on the town council and, in 1981 he (either alone or with others) purchased a medical building. Around 1983, he and a friend, Donald McCulloch, assembled a group of people to build a sports facility which would have primarily squash courts and racquetball courts. They assembled 21 investors who became shareholders of the Company. The Appellant and Donald McCulloch were each 25% shareholders and the 19 other individuals collectively owned the remaining 50% of the shares.
[3] In 1983, the shareholders paid $400,000 for preference shares of the Company. The Company used this subscribed capital and some borrowed money to build the sports facility. It was completed in 1983 or 1984 at a cost of approximately $900,000. The facility consisted of two squash courts, three racquetball courts, a large weight room, a daycare centre for the members, a restaurant of 90 seats and a banquet hall of 300 seats. The sports facility was owned by the Company but operated under the name Lakeshore Racquet and Recreation Centre (referred to hereafter as "LR & R).
[4] When LR & R was running at peak, it would require a staff of 40 people, but many of them would have been part-time employees. According to the Appellant's evidence, there were about 15 full-time employees. The LR & R had an advantage in the sense that there were no other racquetball facilities in the Town of Port Elgin. The Company was in some financial difficulty from the time it opened in 1983 or 1984 until 1990 because there were operating losses each year in the range of $20,000. The Appellant regarded those losses as manageable.
[5] In order to put the Company on a better financial footing, the original shareholders agreed in 1989 to put another $400,000 into the Company for fresh shares and to use the fresh capital to pay off the bank and get rid of a very onerous loan. At that point in time, they had collectively invested about $800,000 in the Company. As stated, the two significant shareholders were the Appellant and Mr. McCulloch each with 25% of the shares.
[6] In 1990, the Company hired a new manager with the expectation that the losses could be turned around. There was a significant external event which happened in 1990 having a direct effect on the economy of Port Elgin and also on the Company. A new government was elected in Ontario which had promised to close down all nuclear power plants. Soon after the new government took office, there were moves to close down the Bruce Nuclear Power Station which is very close to the Town of Port Elgin. There were significant layoffs of employees. The Appellant stated that in the preceding 20 years, the Bruce Nuclear Station had been a significant employer in and around the Town of Port Elgin; and the economy of the town was very much tied to the Bruce Nuclear Station. Once the Ontario government announced that it would close down and mothball all or a substantial part of the Bruce Nuclear Station, people in the town tended to stop spending money; they became more careful; they used LR & R less, and the Company got into significant financial difficulties.
[7] The new manager hired in 1990 was not effective, and some of the staff were less than honest. The shareholders did not realize this at the time and so, over the next three or four years from 1990 to 1994, the Company was in real difficulty losing approximately $100,000 a year. By 1991, with the slowdown of the economy in Port Elgin, most of the other shareholders had lost confidence in putting more money into the Company. They wanted to keep it running in the hope that they would get their initial investment back, but they could not afford to keep financing annual losses in the range of $100,000.
[8] The Appellant made a business decision that he would attempt to finance the LR & R operations because he thought that the economy of the town would eventually turn around and that the Company could be made profitable. In 1990 or 1991, the Appellant started making substantial advances to the Company in the range of $100,000 each year. He claimed those advances as business investment losses and the corresponding deductions were permitted by Revenue Canada. He described the manner in which he computed the amount of the loss. The fiscal period of the Company ended on September 30. The Appellant would determine the amount of money he advanced to the Company in its 12-month fiscal period ending in a particular year, for example 1992, and when he filed his income tax return for 1992 in the spring of 1993, he would claim 75% of that amount as an allowable business investment loss. That is the pattern he followed each year from 1991 to 1996. As stated, Revenue Canada accepted 75% of those amounts loaned to the Company as allowable business investment losses for each year until sometime in the calendar year 1997 when the character of the amounts loaned to the Company was challenged by Revenue Canada. Later in 1997, reassessments were issued to the Appellant disallowing the deduction of allowable business investment losses for 1996 and the two preceding years, 1995 and 1994.
[9] The Appellant objected to those assessments and ultimately appealed to this court: the appeals I am hearing today. The definition of "business investment loss" in section 39 of the Income Tax Act is as follows (excluding words that I do not regard as relevant):
39(1) For the purposes of this Act,
...
(c) a taxpayer's business investment loss for a taxation year from the disposition of any property is the amount, if any, by which the taxpayer's capital loss for the year from a disposition after 1977
(i) to which subsection 50(1) applies, or
(ii) ...
of any property that is
(iii) a share of the capital stock of a small business corporation, or
(iv) a debt owing to the taxpayer by a Canadian-controlled private corporation ... that is
(A) a small business corporation,
(B) ...
exceeds the total of
(v) ...
50(1) For the purposes of this subdivision, where
(a) a debt owing to a taxpayer at the end of a taxation year ... is established by the taxpayer to have become a bad debt in the year, or
(b) a share ... of the capital stock of a corporation is owned by the taxpayer at the end of a taxation year and
(i) ...
(ii) ...
(iii) at the end of the year,
(A) the corporation is insolvent,
(B) ...
and the taxpayer elects in the taxpayer's return of income for the year to have this subsection apply in respect of the debt or the share, as the case may be, the taxpayer shall be deemed to have disposed of the debt or the share, as the case may be, at the end of the year for proceeds equal to nil and to have reacquired it immediately after the end of the year at a cost equal to nil.
The above definition and the terms of subsection 50(1) provide that a debt which has become a bad debt may be regarded as a business investment loss.
[10] The Appellant's position is that the amounts he loaned to the Company had in fact become bad debts at the end of each of its fiscal years. Because there was no possibility of recovering the amounts loaned as at September 30 in any particular fiscal year, those amounts should be regarded as business investment losses. Revenue Canada takes the position that, as long as the Company was operating, those amounts could not be regarded as bad debts and the Appellant should have made an attempt to collect on them either by putting the Company out of business or into bankruptcy.
[11] After 1991, the Appellant was the only shareholder financing the operation of the Company. He made it clear, however, that the other shareholders had not given up on their investment; they had only given up on their ability or willingness to put more money into the Company. There were shareholders' meetings each year which he said were well-attended. Each year, they heard a report on how the Company was doing; they elected a board of directors with different individuals except for the Appellant and Mr. McCulloch, the other substantial shareholder, who were always re-elected to the board. And so at all relevant times, the Appellant was a director of the Company but the other directors rotated on and off as elected by the shareholders. The other directors took an active role in the operation of the Company from its inception until around 1997.
[12] The Appellant said that the board of directors took an active role to the point that, in 1994, they fired the person who was the manager of the club and they determined at that time that they could not afford to hire a new manager. They formed an "operating committee" composed of the bookkeeper, the head of maintenance, the receptionist, and the banquet manager, and they caused that committee to operate the club, reporting directly to the board. The Appellant's evidence is, however, that because he was the sole director who was financing the operation of the Company, the operating committee would usually come to him on a day-to-day basis if there were problems, but they would report to the board of directors from time to time as the directors met.
[13] The Company continued on that basis from the time the new committee was put in place in 1994 until early 1997 when a truly significant event happened. There had been a period of cold and snow in the early part of February 1997 followed by several days of excessive rain and flooding in the Town of Port Elgin. The flooding was disastrous. It flooded the building in which the Company operated LR & R and it did significant damage to the hardwood floors of the squash courts and racquetball courts. They were under water.
[14] The Company was not able to operate its sports facilities but it was able to operate the banquet hall on the upper floor which had not been damaged by the flood. The Company was effectively out of business from February 21, 1997 until the end of the year. As a consequence of the flooding, a number of things happened. There was an allegation that the Town had arranged its storm sewer or gutter facility in such a way that it caused the excessive water in that part of the Town to be diverted onto the Company's property. Also, for the first time in many years, the snow had been removed from the streets of the town and stored on the land adjoining the LR & R facility. The result was that when the rain started with milder weather, the snow melted and contributed to the flooding which damaged the Company's building. The Company commenced legal proceedings against the Town of Port Elgin for negligence and contributing to the damage to the facility by the way it had channelled the surplus waters off the streets, and had stored the snow without permitting or allowing for adequate drainage when the snow melted.
[15] After the flood in February 1997, a significant number of the other shareholders simply gave up on their investment and concluded that they would never get their money back from the Company. The LR & R building was totally shut down from February until November 1997 and no one was willing to put any more money into the Company. At that point in time, the Appellant had invested several hundred thousand dollars on loans to the Company; and he was clearly the individual among all shareholders who had the most to lose if the facility was to be sold as a damaged building, using the proceeds of disposition to pay municipal taxes which had gone into arrears of about $150,000 and to pay a loan from the Business Development Bank which the Appellant described as a "bank of last resort".
[16] The Appellant and his wife felt that their investment in the Company was too significant to walk away from. They decided that they would put their own money into the building to rehabilitate it and get the facility running again. The Appellant's wife agreed to give up her employment elsewhere in the Town of Port Elgin to manage the racquet club for no consideration but they would not open the banquet facility. Also, the Appellant would work two or three evenings a week in the bar at the club for no consideration to reduce the operating costs.
[17] With his own capital, the Appellant caused the building to be repaired in the last two months of 1997 and the early months of 1998, and the facility was reopened for business. The building, however, was still owned by the Company and there were still minority shareholders, even though they had given up on ever getting back any money for their shares. The Appellant decided that if he was going to put in fresh capital following the flood damage, and if no one else was going to make a contribution, he should own the building. In the latter months of 1999, there was an agreement entered into between the Company and a new company incorporated by the Appellant alone (or with his wife and children) identified as 1117636 Ontario Limited which I shall simply refer to as the "New Corporation".
[18] An agreement of purchase and sale was signed in December 1999 under which the Company sold the real estate, the land and building, to the New Corporation for $400,000. The transaction could not be closed or effected in December 1999 because of the ongoing litigation against the Town of Port Elgin. That litigation was settled in the spring of 2000. Following the settlement, the transfer of the property took place in June 2000 when the Company transferred the land and building to the New Corporation. According to the Appellant's evidence, the New Corporation continues to manage that facility to this day.
[19] The Company used the proceeds of sale in the amount of $400,000 to pay the Business Development Bank about $178,000, the Town of Port Elgin municipal tax arrears of about $110,000, and to pay the balance of about $111,000 to the Appellant with respect to the many loans he had made to the Company. He stated in evidence that he thinks that his New Corporation paid too much for the building, but the purchase amount was suggested by someone representing Revenue Canada who wanted to ensure that the property was transferred at "fair market value". In any event, the total consideration was $400,000.
[20] That is the history of the racquet sports facility in Port Elgin and the way it was operated over the years. I now return to the years under appeal. There was put before the Court as exhibits two binders of documents: Exhibit R-1 containing 19 documents with separate tabs, and Exhibit R-2 containing additional documents numbered from 20 to 41. The documents which impress me most are the income tax returns of the Company for the fiscal years ending September 30, 1994, 1995, 1996 and 1997 which appear at tabs 11, 12, 13, and 14 of Exhibit R-1.
[21] The Appellant stated that the actual amounts which he loaned to the Company have never been contested by Revenue Canada. The only issue before the Court is the character of those amounts and whether they can be regarded as business investment losses. I will refer briefly to the financial statements of the Company as they appear in the corporate income tax returns. Tab 11 is the financial statements at September 30, 1994 showing assets at a book value of approximately $560,000; total liabilities of $492,000; capital stock of $1,124,000; a deficit of $1,056,000; and a net shareholder equity of $68,000, which causes the liability side of the balance sheet to match the assets.
[22] I noted that there were no "shareholder loans" among the liabilities. I should have thought that the Appellant's advances to the company from 1990 or 1991 up to and including 1994 would have made a significant shareholder loan on the books of the company. But the statement of operations for September 30, 1994, shows revenue of $416,000, expenses of $625,000, for an operating loss of approximately $209,000. Then there is a notation, "gain on settlement of debt, $121,138," and an adjusted loss of $76,000. That amount ($121,138) is precisely what the Appellant claims to have advanced to the Company in 1994. Also, there is a note beside the, "gain on settlement of debt." which explains that this amount relates to a write-off of a loan payable to a shareholder.
[23] The Appellant explained the absence of any "shareholder loans" on the balance sheet as follows. At the end of each fiscal year after he looked at the financial status of the Company, he concluded that it was virtually impossible to expect his loans to be repaid because of the debts of the Company and its assets which were encumbered by debt. Therefore, he wrote off the loans and informed the auditors of the Company so that they would put this notation in the financial statements. That is why there was no entry for "shareholder loans" on the balance sheet of the Company. What I have described for the financial statements of the Company in 1994 happened also in 1995 and 1996. The relevant amounts are that at September 30, 1995 the statement of operations, which shows the loss in the year, also contains this notation, "gain on settlement of debt, $120,839," which is the precise amount the Appellant loaned to the Company in that fiscal period. Also, there is the same notation for note 10 in the financial statements that it relates to the write-off of a loan payable to a shareholder and, of course, the Appellant is the shareholder. And for the fiscal year ending September 30, 1996, the same thing happened and on the statement of operations, there is the same notation, "gain on settlement of debt, $127,615," which is the amount the Appellant loaned to the Company in that year. The same note 10 to the financial statements states that a shareholder had written off the debt.
[24] The Appellant stated that he went through this process of writing off his debt each year because there was so little opportunity to recover his money from the Company which was operating at a loss, quite apart from his writing off the debt. The economy of Port Elgin was in a disastrous state because of the closing of the nuclear power station. He stated that in the period under appeal (1994, 1995 and 1996) the Chamber of Commerce in Port Elgin recorded that there were 80 vacant business facilities on the main street of Port Elgin. That is 80 facilities that might otherwise have been a retail store, a shop, a professional office, etc.
[25] He said there was no market for real estate and, in 1994, 1995 and 1996, the only significant real estate sold on the main street of Port Elgin was a bowling alley and a movie theatre. They were both sold under a power of sale and, in each case, the proceeds of sale were less than the debts encumbering those properties. He said that the property of the Company was similarly encumbered, the economy was in a depressed state, and if the Company had put the property up for sale, it would not have recovered enough money to pay the shareholders anything or to pay him anything, and the money would have gone to the Business Development Bank and also to the Town of Port Elgin because the company had ongoing arrears of municipal taxes in the range of $150,000. He said that they tried to keep the tax debt to the Municipality down to approximately $150,000. He said if you added the amount owing on the mortgage and the amount owing on the municipal debt, the proceeds from the sale of the building would not have left anything to pay him as a principal shareholder-creditor or to pay to the shareholders anything with respect to their shareholder investments.
[26] I was impressed with the credibility of the Appellant as a witness. He is lucid and intelligent. He appears to be a reflective and prudent man, not the kind to run up debts foolishly, but with enough common sense to know when to try and stay the course in difficult circumstances. He made an attempt to stay the course with this Company through the years under appeal up to and including the flood in 1997.
[27] The real question is whether the amounts owed to the Appellant in the years under appeal were bad debts. Counsel for the Respondent relies on the decision of the Federal Court of Appeal in Flexi-Coil Ltd. v. The Queen, 96 DTC 6350. It is a unanimous decision in which MacGuigan J.A. delivered the reasons for the Court. I find the decision in Flexi-Coil to be distinguishable because the corporate taxpayer in that case was attempting to claim bad debts with respect to amounts it was owed by two foreign subsidiaries, a Swiss subsidiary which was 100% owned by the Canadian taxpayer corporation and the other being a United Kingdom subsidiary which was 75% owned by the Canadian taxpayer corporation. In that case, the Canadian taxpayer corporation's appeal was dismissed in the Tax Court and a subsequent appeal to the Federal Court of Appeal was also dismissed. On the facts, I would say that the Flexi-Coil case is easily distinguished because the Court was not satisfied that, when two foreign subsidiaries were so dominated by a Canadian parent company, the parent company had proven that the amounts it had loaned to the subsidiaries were not recoverable. The Court found that the Canadian parent company simply had not proved that the loans owing by the subsidiaries could not be recovered. In other words, Flexi-Coil had not proved that its debts were bad debts. The case is useful, however, because the Federal Court of Appeal quotes from an observation of the trial judge who stated: "The question of when a debt becomes bad is a question of fact to be determined according to the circumstances of each case. Primarily, a debt is recognized to be bad when it has been proved uncollectible in the year". Therefore, the question before me is a question of fact as to whether the amounts owing to the Appellant by the Company were bad at the end of each respective taxation year under appeal.
[28] The only evidence in this case was given by the Appellant. There was no evidence other than his own with respect to the value of the LR & R facility; and I accept his evidence that its value was not adequate to discharge the Company's debts to the Business Development Bank and the Town. The Appellant owned a home in Port Elgin. He also was the co-owner of a medical building. There is no reason to doubt that he would have some sense of real estate values within the Town. His description of the economy of Port Elgin is not disputed. He said that during his negotiations with Revenue Canada after filing the Notices of Objection, he provided them with more than one newspaper article from the newspaper in Port Elgin with statements from the Chamber of Commerce decrying the bad economic situation in the Town, the poor business facilities, the fact that there were 80 places of business closed on the main street and that the real estate market was in a severe recession.
[29] He provided that information to Revenue Canada to show that the underlying value of the business and the real estate within the Company was not adequate to pay off the debts of the Company. I have no hesitation in finding that the Company was not able to pay back to the Appellant the amounts he loaned to the Company in its fiscal year ending September 30, 1994. I am satisfied that that amount of $121,138 could not have been repaid to the Appellant on December 31, 1994. Similarly, I am satisfied that the $120,839 which he loaned to the Company in its fiscal period ending September 30, 1995, could not have been paid back to him by the Company on December 31, 1995. And further, I am satisfied that the amount of $127,614, which he advanced to the Company in its 1996 fiscal period could not have been repaid to the Appellant on December 31, 1996. As such, those amounts were bad debts. They simply could not be repaid by the debtor.
[30] The Appellant appears to have recognized this reality when he caused the debts to be written off on the books of the Company but there is a footnote to that write-off. In 1997, when Revenue Canada challenged the deductibility of those amounts and suggested that they were not business investment losses, the Appellant went back to the Company, the directors and the audit firm that prepared the financial statements and complained that, if he was not going to get the deduction of a business investment loss, then he should have those amounts restated so that they would appear as actual liabilities of the Company owing to him, even though he knew in his heart that there was no possibility in 1997 of the Company repaying those amounts.
[31] As a result, the financial statements for the fiscal period ending September 30, 1997 were changed from what they had been in the three preceding years. On the statement of operations there was no indication that there had been any write-off of a debt. And in note 11 to the financial statements, the auditors state:
Amounts of $121,138, $120,839, and $127,615 were written off in the company's 1994, 1995 and 1996 years respectively. These amounts remain as liabilities of the company, and thus prior years' amounts have been changed to correct this error. As a result, the amount owing to shareholders has been increased by $369,592, and the deficit has increased by $369,592.
In other words, the auditors acknowledge that they have reviewed these amounts and are now recording them as loans from a shareholder.
[32] That restatement of prior year results was caused by the reassessment from Revenue Canada which challenged the Appellant's business investment losses. That restatement did not, however, change circumstances year by year in Port Elgin in 1994, 1995 and 1996. The state of the economy in that Town remained the same whether the 1997 financial statements were adjusted or not. There were the same number of vacant stores on the main street, the same desperate real estate situation, the same minor recession in the Town resulting from the closing of the nuclear power station, the same level of unemployment, and the same losses suffered by the Company.
[33] I am impressed by the extent to which the Appellant attempted to recover his investment. He stated that from 1990 to 1995, he had remortgaged his house, refinanced his line of credit, run up his credit-card debts, borrowed money from friends, and cashed in his RRSPs, all as a means of obtaining funds to inject into the Company in the hope that it would be revived and that he could recover his investments. He said that he was virtually bankrupt apart from the fact that he did have a successful dental practice which is what sustained him throughout, but that his debts were equal to his assets except for the dental practice.
[34] It was suggested by counsel for the Respondent in argument that the Appellant had become emotionally involved with the Company and that, therefore, his decision to continue to invest money in the Company should be given less weight. I observed the Appellant closely and I would be reluctant to conclude that he was the kind of man who became emotionally involved in a commercial operation. Even if the Appellant was in part motivated by his emotions, he was still investing money in a Canadian-controlled private corporation carrying on a business, and the amounts he invested year by year were bad debts. Whether he was driven by emotion or reason, I would say is irrelevant but, having observed the Appellant, I think he was driven by reason. He does not appear to be a person who would get carried away emotionally and throw away the "family fortune" because he had fallen in love with a racquet club business.
[35] There was an alternative argument put forward by the Respondent to the effect that the loans were made without interest and, therefore, they were not made for the purpose of gaining or producing income from a business or property. This argument could be fatal to the Appellant under subparagraph 40(2)(g)(ii) of the Act. In my view, this alternative argument for the Respondent is answered by the decision of this Court in Business Art Inc. v. M.N.R., 86 DTC 1842, in which Rip J. stated at page 1848:
However, even if no interest was chargeable I do not believe that would be fatal to the appellant's alternate submission. The fact that there may have been no interest attached to the debts in question is not relevant in deciding whether they were acquired for the purpose of gaining or producing income. See The Queen v. Lalande and Watelle, 84 DTC 6159 at page 6164. It is not uncommon for a shareholder to lend money without interest and without security to the corporation since he anticipates that the loans will assist the corporation to earn income and to pay him income by way of dividends; the loan is made for the purpose of earning income from a property. Although the shareholder is a creditor of the corporation when he advances money to the corporation the shareholder does not see his advance of money to the corporation and his subscription for shares of the corporation as separate investments in two watertight compartments; rather he sees his money entering two compartments which open up into a single compartment for the use of the corporation. Purchasing shares and advancing money to a corporation are two ways of making an investment in the corporation. This is a sensible interpretation.
... It is not unusual for a person to invest in a corporation by subscribing for share capital and lending money without interest; as far as he is concerned the shares and his loans constitute a single investment and if later on, he is called on to advance further funds without interest he is only increasing his investment. I cannot subscribe to the theory that in such an example the non-interest bearing loans were not incurred for the purpose of earning income from property; if the loans were not advanced the corporation may have become bankrupt and the shares may have become worthless. Clearly the loans were made to earn income from property, that is, to place the corporation in a position where it will be successful and pay dividends.
[36] In Cadillac Fairview Corporation Ltd. v. The Queen, 97 DTC 405, Bowman J. (as he then was) stated at page 412:
... The ultimate purpose of any parent company of a corporate organization is to earn income from its subsidiaries, generally in the form of dividends. To have the treatment of capital losses that it sustains in respect of shares or debts of its subsidiaries depend upon whether interest or guarantee fees are charged is, in today's world of business, simply not an acceptable criterion to apply. That theory has been laid to rest in such cases as Charles A. Brown v. The Queen, FCTD, No. T-2712-91, January 15, 1996, Byram v. The Queen, 95 DTC 5069, Business Art Inc. v. M.N.R., 86 DTC 1842 and National Developments Ltd. v. The Queen, 94 DTC 1061. ...
[37] I find that the Appellant's loans to the Company in the years 1994, 1995 and 1996 were made for the purpose of gaining or producing income. Also, the loans made in each year had become bad debts by the 31st day of December in each respective year. The appeals are allowed, with costs.
Signed at Ottawa, Canada, this 6th day of December, 2002.
|
"M.A. Mogan" |
J.T.C.C.
COURT FILE NO.: 1999-4399((T)G
STYLE OF CAUSE: Donald G. MacKay and
Her Majesty the Queen
PLACE OF HEARING: Kitchener, Ontario
DATE OF HEARING: October 30, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge M.A. Mogan
DATE OF JUDGMENT: December 6, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Shatru Ghan
COUNSEL OF RECORD:
For the Appellant:
Name: N/a
Firm: N/a
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
1999-4399(IT)G
BETWEEN:
DONALD G. MacKAY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on October 30, 2002, at Kitchener, Ontario, by
the Honourable Judge M.A. Mogan
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Shatru Ghan
JUDGMENT
The appeals from assessments of tax made under the Income Tax Act for the 1994, 1995 and 1996 taxation years are allowed, with costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant's loans to 426783 Ontario Limited (operating as "Lakeshore Racquet and Recreation Centre") in the years under appeal became business investment losses within the meaning of paragraph 39(1)(c) of the Act in the following respective amounts:
1994 $121,138
1995 $120,839
1996 $127,614
Signed at Ottawa, Canada, this 6th day of December, 2002.
|
"M.A. Mogan" |
J.T.C.C.