MacKay v. The Queen, 2003 DTC 748 (TCC)

After a corporation of which the taxpayer was a significant shareholder entered into a period of financial difficulty, the taxpayer followed the practice of each year lending funds to the corporation on a non-interest-bearing basis and then writing off the amount of the loan at year-end.

In finding that the amounts advanced each year were a bad debt at the end of the year, Mogan T.C.J. accepted the evidence of the taxpayer that in light of depressed conditions in the local real estate market a sale of the property would have produced proceeds of disposition sufficient to pay only debts of the corporation owing to third party creditors, leaving nothing for the taxpayer.

After a corporation of which the taxpayer was a significant shareholder entered into a period of financial difficulty, the taxpayer followed the practice of each year lending funds to the corporation on a non-interest-bearing basis and then writing off the amount of the loan at year-end.

Mogan T.C.J. found that deduction of ¾ of these losses as allowable business investment losses was not precluded by s. 40(2)(g)(ii) in light of the decision in Business Art Inc. v. MNR, 86 DTC 1842 (TCC).