D
E
Taylor:—These
appeals
for
the
year
1979
were
heard
on
common
evidence
in
Toronto,
Ontario,
on
May
16,
1983.
The
essence
of
the
dispute
was
related
by
the
Minister
of
National
Revenue
in
the
reply
to
notice
of
appeal:
(using
that
from
the
file
of
Shirley
Alexander)
4.
The
Respondent,
in
so
assessing
and
confirming,
relied
upon
the
following
findings
or
assumptions
of
fact:
(a)
prior
to
August
31,
1978,
the
Appellant
and
her
spouse
operated
a
business
in
partnership
on
an
equal
basis;
(b)
in
1977,
the
Appellant
and
her
spouse
borrowed
the
sum
of
$25,000.00
from
the
bank
(by
way
of
a
five
year
loan)
to
be
used
for
the
purpose
of
gaining
or
producing
income
in
the
business;
(c)
on
August
31,
1978
the
business
was
dissolved
with
the
result
that,
as
at
such
date,
operations
ceased;
(d)
as
at
August
31,
1978,
the
amount
of
$20,030.00
remained
outstanding
on
the
loan;
(e)
in
1978,
subsequent
to
August
31,
the
Appellant
and
her
spouse
mortgaged
their
residence.
The
mortgage
was
for
fifteen
(15)
years;
funds
raised
thereby
were
used
to
pay
off
the
bank
loan.
(f)
the
mortgage
interest
paid
by
the
Appellant
and
her
spouse
is
not
interest
on
borrowed
money
used
for
the
purpose
of
earning
income
from
a
business
or
property.
There
was
no
fundamental
difference
of
opinion
with
regard
to
the
facts
and
counsel
for
the
respondent,
in
support
of
the
assessments,
referred
the
Board
to
certain
jurisprudence
from
which
I
quote
as
follows:
Trans-Prairie
Pipelines
v
Minister
of
National
Revenue,
70
DTC
6351,
[1970]
CTC
537,
at
pages
6354
and
541
respectively:
Surely,
what
must
have
been
intended
by
section
11
(1
)(c)
was
that
the
interest
should
be
deductible
for
the
years
in
which
the
borrowed
capital
was
employed
in
the
business
rather
than
that
it
should
be
deductible
for
the
life
of
the
loan
as
long
as
its
first
use
was
in
the
business.
Lyle
A
Meredith
v
Her
Majesty
The
Queen,
75
DTC
5412,
[1975]
CTC
570
at
pages
5417,
5418
and
578
respectively:
While
the
obligation
to
pay
the
interest
on
the
loan
continued
throughout
the
plaintiff’s
1969
taxation
year,
the
money
borrowed
was
not
being
used
in
that
year
for
the
purpose
of
producing
income
from
a
business
in
that
year.
I
cannot
refrain
from
pointing
out
that
the
plaintiff’s
submission
that
the
deductions
claimed
by
him
are
proper
is
susceptible
of
being
construed
as
an
admission
that
they
were
expenditures
laid
out
for
the
purpose
of
producing
income
from
a
business.
The
business
of
operating
the
fishing
ponds
had
come
to
an
end.
The
question
would
then
arise
as
to
what
the
business
was
.
.
.”
Counsel
for
the
Minister
also
pointed
out
that
these
appellants
appeared
to
consider
the
total
amount
at
issue
(some
$20,030)
as
a
“loss”
and
thought
that
in
some
manner
it
should
be
deductible.
That
was
not
the
case
according
to
counsel
since
the
Income
Tax
Act
provided
relief
to
a
taxpayer
for
capital
—
either
personal
or
borrowed
—
which
was
injected
into
a
business,
because
the
capital
so
injected
was
used
to
acquire
assets,
either
inventory
as
a
direct
expense,
or
fixed
assets
which
were
depreciable;
or
to
pay
for
business
expenses
—
and
any
losses
resulting
from
such
operations
were
appropriately
deductible
from
income.
Further,
at
the
termination
of
a
business,
there
were
provisions
in
the
Act
for
a
‘terminal
loss”.
Counsel’s
view
was
that
to
allow
a
further
loss
(such
as
the
$20,030
in
this
matter)
could
easily
lead
to
a
duplication
of
deductions
already
provided
for
and
taken
under
the
Act.
On
the
specific
point
at
issue,
counsel
for
the
Minister
proposed
that
the
only
conclusion
to
reach
from
the
judgments
of
the
Courts,
(supra),
was
that
the
termination
of
the
business
brought
to
an
end
any
right
to
deduct
interest
payments
as
provided
for
under
paragraph
20(1
)(c)
of
the
Act.
The
position
of
the
respondent
is
correct.
For
the
taxation
year
under
appeal,
the
appellants
have
not
shown
that
there
remained
a
“source”
(subsection
20(1))
from
which
the
interest
payment
at
issue
could
be
deducted.
The
business,
as
indicated,
had
been
terminated
and
the
carrying
charges
from
the
financial
obligations
incurred
in
connection
therewith,
could
not
be
re-directed
and
deducted
from
other
income,
such
as
employment
income.
The
appeals
are
dismissed.
Appeals
dismissed.