Words and Phrases - "lending"

The taxpayer ("241467"), which previously had engaged exclusively in a leasing business, was found to be engaged in a financing business that included the lending of money in light of the fact that of 24 identified transactions (including non-interest-bearing loans to the shareholder or relatives, which Bonner J regarded (at para. 7, as "falling outside the scope of business"), approximately 16 were interest-bearing loans made over a four-year period including various loans to finance trucking businesses. (After noting (at para. 8) the "distinction ... to be drawn between an indebtedness which arises as a result of the deferral of payment of the whole or part of a sale price and an indebtedness which arises as a result of the loan of money," he found that the deferred balance of the purchase price of sales were not loans, with reference to another two of the 24 transactions.)

Bonner J stated (at para. 18):

241467 entered into lease and loan transactions repeatedly with a view to earning income in the form of lease payments or interest. The financing business was its ordinary business and the lending of money was part of that activity. ...Moreover the presumption arising from incorporation must be taken into account...[even for] corporations formed under some statutes...not list[ing] their corporate objects.

A loan made by the taxpayer to a corporation ("161") to enable 161 to purchase a restaurant company ("606") was made in the ordinary course of that business notwithstanding that the taxpayer also subscribed for 86% of the shares of 161 ("The acquisition by a lender of control over the borrower is a sensible arrangement particularly where the lender is advancing virtually all of the borrower's capital ..." (para. 22).) However, a subsequent loan made by the taxpayer to 606 in order to enable 606 to pay rent, taxes and other accumulated debts was not in the ordinary course of its lending business since, at the time the money was advanced, there was little hope of repayment, and less hope of ever receiving interest.