Tax court of Canada | Tax | Income tax | Capital gains and losses
Taxpayers each owned 25 percent of company and received letters from Canada Revenue Agency (CRA) that it was considering assessing them personally as directors for company’s unremitted GST/HST and source deductions. Each paid one-half of unremitted amounts directly to CRA and later claimed allowable business investment losses (ABIL) of $606,000 with respect to amounts they paid directly to CRA. Claims were denied and taxpayers appealed. Appeals dismissed. Language in demand letter was more consistent with company’s obligation being statutory right in Income Tax Act (ITA) or Excise Tax Act or subrogated indebtedness than loan to company. It was not possible to conclude on balance of probabilities that debt or other obligation owed by company to taxpayers was acquired by them for purpose of earning income. This was fatal to possible success of these appeals given that s. 40(2)(g)(ii) of ITA deems their loss to be nil on disposition of debt or other right unless it was acquired for income earning purpose. Taxpayers had not provided sufficient credible, consistent or corroborated evidence to establish on balance of probabilities facts needed to support their ABIL claims and had also not established that their claims against company were debts which was required by deemed disposition rule for bad debts and by definition of ABIL.
Grubner v. The Queen (2018), 2018 CarswellNat 726, 2018 TCC 39, Patrick Boyle J. (T.C.C. [General Procedure]).
