Walsh,
J:—This
is
an
appeal
from
a
decision
of
the
Tax
Review
Board
dated
February
25,
1977
referring
defendant’s
assessments
for
his
1971
and
1972
taxation
years
back
to
the
Minister
of
National
Revenue
for
reconsideration
and
reassessment.
The
Minister
had
assessed
defendant
on
June
7,
1974
and
after
his
objection
had
confirmed
the
assessments
on
December
8,
1975.
Defendant’s
appeal
against
these
assessments
was
allowed
by
the
Tax
Review
Board.
The
facts
indicate
that
defendant
had
been
president,
principal
shareholder
and
had
devoted
his
full
time
to
the
affairs
of
his
company
known
as
Les
Produits
Franco-Fanco
Products
Ltd
since
its
incorporation
on
December
23,
1964.
Prior
to
that
he
had
been
in
the
business
of
the
manufacture
of
school
bags
since
1943
and
it
was
that
business
which
continued
to
be
carried
on
by
the
company
which
he
founded.
On
October
1,
1968
he
sold
all
his
outstanding
shares
in
the
company
to
Charter
Industries
Ltd
hereinafter
called
Charter
for
a
price
of
$200,000
in
cash
plus
16,666
shares
of
Charter
valued
at
$150,000.
He
was
to
remain
in
charge
of
the
company
in
the
quality
of
president
and
general
manager.
The
business
of
the
company
had
been
very
successful
but
in
1969
and
1970
it
suffered
heavy
losses
in
the
approximate
amounts
of
$290,000
and
$423,000
respectively.
Charter
advanced
money
to
the
company
of
which
$450,000
was
outstanding
and
a
subsidiary
of
Charter,
Charter
Credit
Corporation
loaned
$175,000.
The
financial
difficulties
of
the
company
became
so
acute
that
Charter
on
April
23,1970
agreed
to
sell
back
to
defendant
its
shares
in
the
company
for
$1
and
other
considerations
which
included
the
undertaking
by
defendant
to
guarantee
jointly
and
severally
with
Charter
bank
loans
to
the
company
up
to
an
amount
of
$200,000
which
guarantee
was
to
become
binding
however
only
when
the
indebtedness
of
the
company
was
reduced
from
$550,000
at
the
time
of
the
sale
to
$200,000.
According
to
the
allegations
in
plaintiff’s
statement
of
claim
defendant
further
agreed
to
pay
half
of
the
net
worth,
such
sum
being
half
of
the
aggregate
amounts
owed
to
Charter
Credit
Corporation
and
Charter
by
the
company
plus
the
amount
paid
up
in
respect
of
the
share
capital
outstanding
at
December
31,
1970,
minus
the
accumulated
deficit
established
at
December
31,
1970.
In
the
event
this
totalled
nil
as
the
net
amount.
Plaintiff
claims
that
defendant
knew
that
this
obligation
of
paying
one
half
of
the
net
worth
would
be
minimal
if
not
nil.
Another
condition
of
the
repurchase
of
the
shares
of
the
company
by
defendant
from
Charter
was
that
he
be
transferred
the
benefit
of
the
loans
which
the
company
owed
in
the
approximate
amount
of
$625,000
to
Charter
and
Charter
Credit
Corporation
which
companies
agreed
to
transfer
their
rights
in
the
said
loans
in
favour
of
defendant.
In
1971
and
1972
the
company
made
repayments
to
defendant
of
amounts
totalling
$39,256
and
$28,143
respectively
as
partial
repayment
on
the
said
loans,
although
he
received
no
salary
and
no
dividends
from
the
company
in
1971.
Plaintiff
contends
that
defendant
knew
that
the
transfer
of
the
said
indebtedness
of
the
company
from
the
Charter
companies
to
him
would
permit
him
to
receive
large
sums
of
money.
The
Minister
accordingly
assessed
the
said
payments
to
him
in
1971
and
1972
as
income
arising
from
his
business.
It
is
contended
that
the
purchase
by
defendant
of
the
shares
of
the
company
together
with
the
loans
forms
part
of
the
regular
business
of
the
defendant
or
alternatively
that
such
a
purchase
of
the
shareswith
the
loans
represents
an
adventure
or
concern
in
the
nature
of
trade
by
the
defendant.
The
assessment
for
the
1972
taxation
year
was
based
on
the
provisions
of
the
Income
Tax
Act*
while
the
assessment
for
the
1971
taxation
year
was
based
on
the
former
Income
Tax
Actt,
but
it
is
common
ground
that
nothing
turns
on
this
in
the
present
action.
It
is
defendant’s
position
that
the
payments
so
received
in
1971
and
1972
were
payments
of
principal
on
the
loan
acquired
by
him.
After
his
sale
of
the
shares
of
the
company
to
Charter
in
1968
he
continued
to
work
on
a
full
time
basis
for
it
and
he
and
his
wife
lent
Charter
Industries
Limited
$50,000
to
invest
in
the
company
which
Charter
failed
to
repay
on
its
due
date.
Relying
on
his
management
experience
and
intimate
knowledge
of
the
company
and
its
business
defendant
repurchased
the
outstanding
shares
of
the
company
and
the
loan
position
of
Charter
Industries
Limited
with
the
intent
of
stopping
the
losses,
reviving
the
fortunes
of
the
company,
and
protecting
his
reputation
in
view
of
his
intimate
association
with
it.
He
undertook
to
obtain
a
complete,
full
and
final
release
of
the
guarantee
of
Charter
Industries
Limited
towards
the
Royal
Bank
of
Canada
not
later
than
April
21,
1972,
to
defer
payment
of
the
loan
payable
by
Charter
Industries
Limited,
and
to
join
as
joint
and
several
guarantor
of
the
obligations
of
the
company
to
the
extent
of
$200,000
payable
to
the
Royal
Bank
of
Canada
when
the
indebtedness
was
reduced
to
this
sum.
At
the
time
he
was
unaware
of
the
magnitude
of
the
1970
loss
but
subsequent
to
his
acquisition
of
control
he
was
able
to
arrange
a
further
line
of
credit
with
the
Royal
Bank
of
Canada
and
guarantee
the
obligations
of
the
company
to
the
extent
of
$450,000.
He
contends
he
acquired
the
shares
and
shareholder
advances
strictly
as
an
investment,
that
he
is
not
in
the
business
of
buying
and
selling
shares
or
other
securities
and
other
than
his
sale
and
subsequent
reacquisition
of
shares
of
the
company
has
not
bought
or
sold
shares,
and
that
he
did
not
receive
any
salary
from
the
company
in
1971
or
1972
due
to
its
perilous
financial
position
as
he
was
concerned
that
a
failure
to
turn
its
financial
affairs
around
and
commence
to
earn
profits
might
result
in
the
decision
of
the
company’s
bankers
to
call
their
loan
which
would
have
put
it
into
bankruptcy.
He
had
devoted
his
entire
adult
life
to
his
family
company
and
wished
to
save
it,
and
when
partial
payments
of
the
advances
to
the
company
by
Charter
Industries
Limited
which
had
been
transferred
to
him
were
made
in
1971
and
1972
these
constituted
capital
receipts
by
him
relating
to
his
acquisition
of
a
long
term
investment.
He
testified
that
after
his
sale
of
the
company,
while
he
continued
as
production
manager
on
a
salary
basis,
the
new
owners
who
did
not
understand
the
business
mismanaged
it
causing
severe
financial
difficulties.
They
had
wholesale
divisions
which
sold
school
supplies
and
took
orders
for
school
bags
manufactured
by
the
company,
without
scheduling
the
production
of
them,
for
much
larger
quantities
than
could
be
sold.
In
1970
the
company
had
about
$600,000
worth
of
school
bags
in
warehouses
and
there
was
no
possible
way
that
this
many
could
be
sold,
resulting
in
a
loss
of
$423,231
for
that
year
alone
as
appears
from
the
financial
statement
for
the
year
ending
December
31,
1970.
The
deficit
as
of
January
1,1970
had
been
$238,527
and
it
was
on
this
basis
that
the
net
worth
as
of
December
31,
1969
had
been
calculated,
showing
paid
in
capital
of
$16,000,
shareholders’
loans
of
$625,000
for
a
total
of
$641,000
from
which
a
deficit
of
$238,527
was
deducted
showing
the
net
worth
of
$402,473.
When
he
repurchased
the
company
in
April
1970
he
was
to
have
paid
to
the
vendor
one
half
of
the
net
worth
as
of
December
31,
1970
which
was
of
course
reduced
to
nil
as
a
result
of
the
1970
loss.
Mr
Eidinger
began
to
get
phone
calls
from
suppliers
who
were
not
being
paid
which
accounts
amounted
to
some
$250,000
in
addition
to
which
the
bank
was
owed
$575,000
plus
an
overdraft.
His
wife
had
also
loaned
Charter
Credit
$60,000
to
invest
in
another
business
which
that
company
was
investing
in
in
London.
This
loan
had
been
transferred
to
a
company
known
as
H
J
M
Enterprises
Corporation
Ltd
controlled
by
defendant.
His
personal
credit
was
still
good
at
the
bank
however
which
agreed
to
accept
his
personal
guarantee
of
bank
loans
for
$200,000
when
the
loans
had
been
reduced
to
this
amount
by
payment
to
the
bank
of
40%
of
the
accounts
receivable
from
any
proceeds
from
sales
of
merchandise
from
the
date
of
his
repurchasing
the
company.
While
Mr
Eidinger,
apparently
a
very
honest
witness
and
good
businessman,
but
admittedly
not
an
accountant
nor
too
familiar
with
tax
implications
was
somewhat
vague
as
to
the
terms
of
the
agreement,
these
appear
from
the
agreement
itself
which
was
filed
as
an
exhibit.
His
employment
contract
which
was
to
remain
in
force
until
December
31,1970
calling
for
payment
of
$30,000
per
annum
salary
terminated
as
of
that
date,
but
Charter
undertook
to
pay
him
$10,000
per
annum
until
September
30,
1973,
pro
rated
monthly.
Defendant
undertook
until
January
1,
1971
not
to
draw
any
sums
by
way
of
compensation
or
bonus
or
any
money
whatsoever
from
the
company
other
than
the
amount
due
on
this
employment
contract.
The
company
could
not
declare
any
dividends
until
this
date
nor
sell
any
of
its
assets
and
equipment
save
in
the
ordinary
course
of
its
business.
It
was
provided
that
if
the
purchaser
failed
to
make
the
payment
of
the
sum
due,
ie
one
half
of
the
net
worth
as
of
December
31,1970,
for
which
the
$60,000
due
to
him
was
collateral
this
could
be
compensated
against
him.
Mr
Eidinger
testified
that
when
he
had
moved
the
company’s
business
from
Quebec
City
in
1967
or
1968
some
20
families
of
long
term
employees
moved
with
it.
About
40
to
50
employees
were
involved
and
they
all
agreed
with
him
that
they
would
have
to
contribute
to
get
the
business
back
on
its
feet,
some
of
them
working
100
hours
a
week
without
overtime
pay.
He
himself
personally
paid
off
overdue
accounts
in
the
amount
of
$56,241.58
as
appears
from
a
list
filed
as
an
exhibit,
these
being
for
the
most
part
suppliers
with
whom
he
had
done
business
for
many
years
and
to
whom
he
felt
obligated.
He
started
turning
the
business
around
in
1971
and
1972
but
did
not
draw
any
salary
as
this
would
have
been
an
expense
item
and
it
was
essential
to
cut
down
on
expenses
and
show
a
profit
in
order
to
convince
the
bank
not
to
call
the
loan.
He
did
not
pay
these
accounts
with
subrogation
and
does
not
appear
in
the
financial
statements
of
the
company
as
a
creditor
for
these
amounts
so
in
effect
he
gave
the
supplies
for
which
these
accounts
had
been
rendered
to
the
company.
By
December
31,
1971
statement
he
had
converted
what
had
been
a
loss
of
$423,231
in
1970
to
a
profit
of
$70,935
in
1971.
The
profit
on
operations
however
was
only
$3,263.
It
is
of
interest
to
note
that
in
other
income
for
1971
there
is
an
item
of
$41,112
for
cancellation
of
charges
incurred
in
a
prior
year,
which
according
to
the
auditor’s
note
includes
an
amount
of
$33,323
which
was
accrued
for
executive
salaries
in
the
year
ending
December
31,
1970
and
subsequently
cancelled
by
agreement
of
waiver.
The
balance
sheet
shows
that
loans
from
shareholders
were
reduced
from
$625,000
at
the
end
of
1970
to
$585,744
at
the
end
of
1971.
This
was
as
a
result
of
the
repayment
of
defendant
of
$39,256
which
is
the
subject
of
the
1971
assessment.
Mr
Eidinger
testified
that
prior
to
1970
he
had
been
drawing
$300
a
week
as
salary
and
his
wife
and
brother
and
brother’s
wife
were
also
on
salary
with
the
company
which
was
well
known
throughout
Canada
as
a
manufacturer
of
school
bags.
Although
he
was
president
from
1968
to
1970
this
was
in
name
only
and
he
was
really
production
manager.
Charter
hired
a
vice-
president
at
$18,000
a
year
who
knew
nothing
about
the
business
and
could
not
even
speak
French
although
it
was
a
Quebec
company.
School
bags
are
sold
on
wholesale
basis
nearly
a
year
ahead
and
he
had
arranged
to
meet
a
buyer
from
K-Mart
in
Toronto
with
whom
he
had
dealt
for
years
but
was
forced
to
cancel
the
appointment
because
Charter
wanted
him
to
attend
a
directors’
meeting
that
day.
As
a
result
the
company
lost
a
$500,000
contract.
Locks
for
the
bags
were
ordered
in
Europe
in
far
greater
quantities
than
he
would
ever
need.
He
gave
this
evidence
as
examples
of
mismanagement.
He
has
never
had
to
make
good
the
$200,000
guarantee
of
the
bank
loan
and
in
fact
the
company
finally
paid
it
off
in
full
last
year.
The
business
has
continued
to
prosper
since
1972.
There
was
some
confusion
in
the
evidence
as
to
an
item
of
$56,653
which
appears
under
liabilities
in
the
1970
statement
as
a
loan
payable
to
H
J
M
Enterprises
Corp
Ltd.
It
appears
from
his
examination
for
discovery
that
Charter
Credit
had
reimbursed
his
wife
the
amount
due
on
her
loan
to
them.
She,
through
the
company
known
as
H
J
M
Enterprises
had
then
loaned
the
amount
shown
on
the
1970
balance
sheet
to
Fanco
Products
Ltd.
This
was
used
by
the
company
to
repay
the
more
pressing
accounts
payable
which
he
had
indicated
he
had
paid
personally
in
approximately
this
amount.
In
any
event
the
company
repaid
this
amount
to
her
as
it
does
not
appear
on
the
December
31,
1971
balance
sheet,
and
whatever
confusion
there
is
about
this
is
not
an
issue.
On
April
21,
1972
he
took
over
the
full
guarantee
of
the
company’s
indebtedness
to
the
bank
pursuant
to
his
agreement
with
Charter,
not
limiting
his
guarantee
to
$200,000.
The
loan
had
however
been
reduced
to
$292,700
by
December
31,
1971.
The
company
never
paid
any
interest
on
the
loans
from
Charter
to
it,
nor
has
any
interest
on
these
loans
been
paid
by
the
company
to
defendant
Eidinger
after
they
were
transferred
to
him.
The
amounts
he
received
in
repayment
in
1971
and
1972
were
not
payments
at
any
fixed
intervals
but
represented
sums
which
he
took
from
the
company
from
time
to
time.
He
had
previously
been
supposed
to
receive
over
$30,000
a
year
from
the
company
as
salary,
so
took
drawings
from
the
company
for
living
expenses
in
approximately
this
amount,
by
way
of
repayment
of
the
loans
transferred
to
him
rather
than
in
a
manner
which
would
appear
as
an
expense
item
affecting
company’s
profit
and
loss
statement.
Despite
the
fact
that
$175,000
of
the
loan
for
which
the
company
had
pledged
its
equipment
was
subject
to
interest
at
the
rate
of
14%
per
annum,
this
was
never
paid.
Reference
was
made
to
extensive
jurisprudence
dealing
with
somewhat
similar
situations
although
in
many
of
the
cases
the
issue
was
profit
realized
from
the
acquisition
and
later
sale
of
shares
of
a
company
on
the
verge
of
bankruptcy
which
shares
had
little
or
no
value
at
the
time
of
acquisition,
rather
than
on
profit
realized
from
repayment
of
loans
made
to
such
a
company
which
had
been
assigned
to
the
taxpayer
for
little
or
no
consideration,
but
the
principle
is
the
same.
The
question
to
be
considered
is
whether
the
acquisition
of
such
shares
or
assignment
of
such
loans
was
part
of
a
profit
making
scheme
embarked
on
by
the
taxpayer
seeking
through
his
personal
efforts
to
reverse
the
company’s
financial
position
and
re-establish
it
as
a
profit
making
enterprise,
or
whether,
as
contended
in
the
present
case,
the
assignment
of
the
loans
represented
a
capital
investment
so
that
the
repayment
of
same
would
not
be
taxable
as
income.
It
has
been
well
established
that
each
such
case
must
depend
on
its
own
facts.
I
am
satisfied
that
the
assignment
of
the
loans
to
Mr
Eidinger
for
no
consideration
whatsoever,
as
it
turned
out,
was
merely
incidental
to
his
reacquisition
of
the
company
through
the
purchase
of
its
shares
and
that
he
had
no
thought
whatsoever
at
the
time
of
any
tax
advantages
which
might
eventually
accrue
to
him
by
the
repayment
of
these
loans
by
the
company
when
it
recovered
its
financial
position
sufficiently
to
enable
it
to
do
so.
The
sole
objective
which
he
had
in
mind
was
to
restore
the
company
to
prosperity
for
the
benefit
of
himself,
members
of
his
family,
and
long
term
employees,
which
he
felt,
rightly
as
it
turned
out,
could
be
accomplished
if
he
regained
control
of
the
company.
To
this
extent
this
situation
may
be
distinguishable
from
some
of
the
jurisprudence
to
which
I
was
referred.
For
example
in
the
case
of
Her
Majesty
the
Queen
v
John
Woods,
[1977]
CTC
597;
57
DTC
5411,
which
was
decided
against
the
taxpayer,
Grant,
D
J
stated
at
page
601
[5414]:
I
am
convinced
that
he
took
over
the
shareholder’s
loan
in
the
Midtown
acquisition
with
the
conviction
that
he
could
make
a
success
of
such
business
and
that
it
would
provide
profits
from
which
such
shareholder’s
loan
could
be
paid
to
him.
He
was
further
of
the
opinion
that
such
payments
to
himself
could
be
made
free
from
income
tax.
(emphasis
mine).
The
same
distinction
could
be
made
in
the
case
of
Stephen
S
Steeves
v
Her
Majesty
The
Queen
confirmed
in
appeal,
[1976]
CTC
470;
[1977]
CTC
325;
76
DTC
6269;
77
DTC
5230,
in
which
Dube,
J
stated
at
page
475
[6273]
dealing
with
the
purchase
of
book
debts:
There
is
no
evidence
that
plaintiffs
ever
purchased
book
debts
before.
They
obviously
did
so
on
this
occasion
because
it
seemed
to
them
to
offer
rewarding
possibilities.
If
the
Paving
venture
turned
sour
they
would
lose
$70,000
more,
but
if
everything
went
well,
they
could
reap
over
$600,000,
perhaps
tax
free.
It
was
a
calculated
risk
based
on
self-confidence.
However
this
judgment
emphasized
the
connection
between
this
and
the
successful
carrying
on
of
the
road
building
operation
of
the
company
which
had
been
taken
over
by
the
taxpayer
together
with
an
assignment
of
book
debts
of
the
company
owed
to
the
vendors,
stating
at
page
475
[6273]:
Yet,
the
plaintiffs
must
have
viewed
the
odds
as
being
bearable
and
to
a
very
high
degree
within
their
control.
After
all,
the
success
of
the
operation
lay
within
the
reach
of
their
own
capability.
While
acquiring
book
debts
is
not
within
the
normal
course
of
their
business,
building
roads
is
their
business,
and
the
success
of
the
former
rested
entirely
on
the
results
of
the
latter.
If
the
plaintiffs
had
purchased
the
book
debts
of,
say,
a
fashion
store,
in
one
isolated
transaction,
where
they
had
no
knowledge
of
the
clothing
business
and
no
means
within
their
command
to
enhance
the
book
debt
value,
then
the
transaction
might
very
well
be
considered
to
be
entirely
outside
their
“business”.
But,
obviously,
such
is
not
the
case
here.
Reference
was
made
to
the
Supreme
Court
case
of
MNR
v
J
N
Sissons,
[1969]
CTC
184;
69
DTC
5152
(infra).
While
I
do
not
believe
that
it
is
conclusive
that
on
the
fact
of
the
present
case
defendant
acquired
the
loan
without
paying
any
cash
consideration
therefore
or
that
this
would
by
itself
prevent
the
repayment
of
same
from
being
considered
as
payments
on
account
of
capital,
Thurlow,
J,
as
he
then
was,
in
the
case
of
James
Voorhees
Drumheller
v
MNR,
[1959]
Ex
CR
281;
[1959]
CTC
275;
59
DTC
1177
(before
the
Supreme
Court
decision
in
the
Sissons
case)
also
stressed
the
significance
of
the
personal
effort
of
the
taxpayer
leading
to
the
appreciation
of
his
capital
investment,
stating
at
page
288
[282,
1181]:
The
sum
received
by
the
appellant
in
no
sense
represents
a
return
or
appreciation
of
capital
invested
in
the
joint
project,
for
he
had
put
no
money
or
property
into
it.
Nor
did
he
or
his
associate
have
a
franchise,
when
they
embarked
on
their
joint
scheme.
What
they
put
into
the
project
was
almost
entirely
personal
effort.
Indeed,
the
appellant’s
contribution
was
nothing
but
his
personal
efforts,
and
his
rights
in
the
assets
(which
consisted
principally
of
the
franchise)
gained
in
carrying
out
the
venture
represented
his
return
for
what
those
efforts,
carried
out
as
they
were
in
conjunction
with
further
efforts
by
Mr
Brook,
had
produced.
In
the
case
of
MNR
v
James
N
Sissons,
Pigeon,
J
in
rendering
the
judgment
of
the
Supreme
Court
stated
at
page
187
[5154]:
(b)
The
loss
to
the
original
owners
is
equally
immaterial
and
inconclusive.
If
a
man
in
difficult
financial
circumstances
sells
a
prized
possession,
say
an
old
painting,
to
an
art
dealer
for
a
fraction
of
what
it
is
worth,
the
dealer’s
profit
on
the
resale
is
clearly
income
although
the
former
owner
has
suffered
a
capital
loss
when
disposing
of
it.
(d)
As
to
the
fact
that
the
gain
arose
at
least
in
part
from
respondent’s
efforts,
this
clearly
tends
to
show
not
that
it
is
a
capital
gain
but
profit
from
a
“business”.
One
of
the
characteristics
of
income
from
such
a
source
is
that
it
is
essentially
the
result
of
the
businessman’s
efforts.
An
Australian
case
to
which
the
Court
was
referred
bears
considerable
resemblance
to
the
facts
of
the
present
case
and
is
of
assistance
to
defendant.
The
case
to
which
I
make
reference
is
that
of
Wills
v
Federal
Commissioner
of
Taxation
,
77
ATC
4101,
in
which
a
debt
totalling
some
$485,585
owed
by
a
loss
company
was
assigned
to
the
taxpayer
and
other
members
of
the
Wills
family
in
connection
with
the
purchase
of
the
total
issued
share
capital
of
the
company.
The
purchasers
took
the
view
that
the
company’s
losses
were
attributable
to
poor
management
and
that
if
it
was
taken
over
and
adequate
finance
arranged
it
might
be
possible
for
it
to
make
a
profit.
This
eventually
took
place
and
the
book
debts
were
paid
off
to
the
purchaser
who
sought
to
treat
the
repayment
as
payment
on
account
of
capital.
The
decision
stated
at
pp
4113-4114:
It
appears
to
me
that
at
the
date
of
the
purchase
Mr
Wills
had
made
no
plan
in
relation
to
repayment
of
the
debt.
He
realized
that
it
was
a
means
of
drawing
off
the
company’s
profits,
and
he
believed
that
if
this
were
done
at
some
future
date
then
the
profit
would
not
be
assessable
income.
It
may
be
that,
it
he
had
directed
his
mind
to
the
matter,
he
would
have
considered
that,
if
profits
were
made,
and
a
distribution
was
contemplated,
then
repayment
of
the
debt
in
whole
or
part
would
be
preferable
to
the
declaration
of
dividends.
But
there
is
no
evidence
that
he
ever
directed
his
mind
to
this
matter,
either
before,
at,
or
after
the
purchase.
When
he
did
decide
upon
repayment,
it
was
in
special
circumstances,
not
reasonably
foreseeable
at
the
time
of
the
purchase.
This
position
is
to
be
contrasted
with
a
hypothetical
case
where
the
purchaser
of
a
debt,
under
like
conditions
to
the
present
purchasers,
received
repayment
of
the
debt
from
the
profits
of
the
debtor
company
in
circumstances
where
payment
of
a
dividend
might
have
been
reasonably
expected.
In
determining
the
relevance
of
the
payment
of
the
debt
to
the
intention
of
the
purchaser
of
it
at
the
date
of
assignment,
regard
should
be
had,
in
my
view,
to
the
lapse
of
time
between
assignment
and
repayment,
and
to
circumstances
indicative
of
the
reasons
for
the
repayment
at
the
time
when
it
occurs—in
short
to
all
circumstances
which
throw
light
on
the
question
whether
the
repayment
is
the
carrying
out
of
some
prior
plan
to
draw
profits
from
the
debtor
company.
Although
defendant
has
an
acceptable
explanation
as
to
why
he
took
nominal
sums
which
he
required
for
living
expenses
out
of
the
company
as
repayment
of
loans
rather
than
as
salary—namely
that
the
company’s
affairs
were
so
precarious
when
he
again
took
over
that
the
bank
might
well
call
its
loans,
putting
the
company
into
bankruptcy
unless
it
could
begin
to
show
a
profit,
and
I
am
satisfied
that
the
tax
considerations
did
not
enter
into
his
mind,
nevertheless
I
am
forced
to
the
conclusion
that
although,
at
the
time
of
the
acquisition,
assignment
of
the
loans
to
him
was
of
little
interest
to
him
and
not
a
primary
consideration
for
his
reacquisition
of
the
business,
the
acquisition
of
these
loans
by
such
assignment
cannot
be
considered
as
a
Capital
investment
by
him
(even
if
he
had
paid
some
nominal
sum
for
them)
but
must
be
considered
as
part
and
parcel
of
the
acquisition
of
the
business.
Therefore
even
though
it
was
an
isolated
transaction
and
he
is
certainly
not
in
the
business
of
acquiring
loans
or
book
debts,
the
acquisition
of
them
cannot
he
considered
as
a
capital
investment
by
him.
Although
the
reasoning
in
the
Australian
case
of
Wills
is
persuasive,
the
weight
of
Canadian
jurisprudence
and
in
particular
the
Supreme
Court
case
of
Sissons
(although
the
facts
in
it
were
somewhat
dissimilar
in
that
the
taxpayer
had
deliberately
purchased
two
loss
companies
and
transferred
a
profitable
business
to
one
of
them
which
was
able
to
write
off
its
losses
against
these
profits
and
thus
repay
a
loan
to
the
other
company
enabling
it
to
redeem
debentures
held
by
the
taxpayer—in
short
a
well
thought
out
scheme)
lead
me
to
conclude
that
the
enhancement
in
value
of
the
loans
to
the
company
which
he
acquired
from
nil
to
a
sufficient
value
to
enable
repayment
of
them
to
him
to
be
commenced
was
not
a
capital
profit
resulting
from
circumstances
which
he
did
not
control
but
that
it
was
a
result
of
defendant’s
personal
efforts
and
hence
part
of
an
adventure
in
the
nature
of
trade.
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