Fiducie Immobilière J.P. – Tax Court of Canada accepts that maintaining rental income could be a good s. 40(2)(g)(ii) purpose

A family trust, which made non-interest-bearing loans to two companies owned directly or indirectly by its sole trustee and another family trust, was prohibited by s. 40(2)(g)(ii) from recognizing capital losses when the loans went bad because, unlike Byram, it did not have any direct or indirect shareholding in the companies. As for an alternative argument that the loans were made for the (income-producing purpose) of preserving rental income (rather than dividend income) from the two companies, St-Hilaire J stated (at para. 29):

[T]here is no reason to exclude rental income from the test of subparagraph 40(2)(g)(ii), which provides that the deduction is nil unless the debt obligation was acquired for the purpose of earning income from a business or property. [emphasis in original]

However, the evidence failed to establish that the trust in fact was leasing property to the two companies.

Neal Armstrong. Summary of Fiducie Immobilière J.P. v. The Queen, 2022 CCI 7 under s. 40(2)(g)(ii).