A
W
Prociuk
(orally):—At
the
hearing
of
this
appeal
on
January
22
last,
the
matters
respecting
certain
pension
plan
contributions
for
the
taxation
years
1964
to
1967,
inclusive,
were
adjourned
to
the
next
sittings
at
Winnipeg,
scheduled
to
be
held
on
April
2,
1973,
unless
sooner
settled.
The
other
issue
of
disallowance
by
the
Minister
of
the
sum
of
$21,000
as
a
reserve
for
a
doubtful
debt
in
the
taxation
year
1965
was
proceeded
with
and
fully
argued.
It
was
conceded
by
counsel
for
the
respondent
that
the
appellant
was
a
money-lender
within
the
meaning
of
paragraph
11
(1
)(e),
which
reads
as
follows:
11.
(1)
.
.
.
the
following
amounts
may
be
deducted
in
computing
the
income
of
a
taxpayer
for
a
taxation
year:
(e)
a
reasonable
amount
as
a
reserve
for
(i)
doubtful
debts
that
have
been
included
in
computing
the
income
of
the
taxpayer
for
that
year
or
a
previous
year,
and
(ii)
doubtful
debts
arising
from
loans
made
in
the
ordinary
course
of
business
by
a
taxpayer
part
of
whose
ordinary
business
was
the
lending
of
money;
Accordingly,
the
sole
issue
to
determine
is
whether
or
not
the
loan
herein
was
“in
the
ordinary
course
of
business’’
of
the
appellant.
Briefly,
the
facts
are
as
follows:
The
appellant’s
principal
officer
and
president,
Sidney
L
Morantz,
of
Winnipeg,
Manitoba,
discussed
with
his
friend,
A
V
Cham,
also
of
Winnipeg,
Manitoba,
an
executive
in
the
financial
field,
the
possibility
of
purchasing
a
shopping
centre
at
St
Clair
Shores,
Michigan,
USA.
Having
agreed
that
this
would
be
a
beneficial
and
viable
project,
they
incorporated
a
company
in
Michigan,
USA,
known
as
St
Clair
Shores
Shopping
Centre
Inc,
both
being
the
principal
officers
thereof.
The
appellant,
through
the
instrumentality
of
its
president,
Sidney
L
Morantz,
aforesaid,
advanced
or
loaned
certain
sums
of
money
to
the
American
corporation,
totalling
some
$81,000,
more
or
less.
No
security,
collateral,
nor
any
documentation
relative
hereto
was
obtained
for
this
loan
by
the
appellant,
with
the
exception
of
three
demand
promissory
notes
signed
by
the
above
gentlemen
as
officers
of
the
St
Clair
corporation.
No
interest
was
charged
nor
stipulated..
Both
men
stated
that
the
reason
for
such
procedure
was
the
fact
that
they
controlled
St
Clair
and
the
money
would
be
repaid
as
soon
as
it
became
available
from
its
business
operation.
Unfortunately,
the
St
Clair
project
shortly
thereafter
showed
every
indication
of
financial
failure;
and,
in
1965,
the
appellant
set
up
a
reserve
for
doubtful
debts
of
$21,000,
which
was
disallowed.
The
fact
of
the
matter
is
that
subsequently
the
American
corporation
met
with
total
failure,
and
the
appellant
had
lost
beyond
recovery
approximately
$44,000.
This,
of
course,
is
most
unfortunate.
In
listening
to
the
testimony
of
Messrs
Morantz
and
Cham,
which
was
at
once
admirably
credible
and
forthright,
one
cannot
help
but
conclude
that
the
poor
state
of
documentation
of
the
financial
transactions,
or
the
total
lack
of
same,
is
to
be
found
among
good
friends
and
close
associates.
I
have
also
read
the
judgment
of
Mr
R
S
W
Fordham,
QC
in
Shaw
v
MNR,
39
Tax
ABC
326;
65
DTC
682,
which
in
certain
respects
is
not
dissimilar
to
the
instant
case
before
the
Board.
Having
given
the
matter
my
best
consideration,
I
must
conclude
that
this
transaction
was
more
in
the
nature
of
an
accommodation
to
an
associate
or
a
capital
investment
by
the
appellant.
Having
regard
to
its
other
loan
transactions
it
is
clear
that
this
was
not
a
loan
“in
the
ordinary
course
of
its
business”
as
a
money-lender.
The
appeal,
accordingly,
is
dismissed.
Appeal
dismissed.
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