Frank W. Quo Vadis

The appellant, K&D Logging Ltd., appealed reassessments of its 2005 and 2006 taxation years denying deductions claimed under subsection 20(21) of the Income Tax Act.

The appellant had advanced funds to a non-resident corporation in 1996 and annually reported interest income based on prescribed rates, despite the loan agreement not specifying an interest rate.

When the loan was repaid in 2006, the appellant claimed deductions for the unpaid interest it had previously reported.

The Tax Court of Canada dismissed the appeal, finding that because the loan was interest-free, the amounts reported were properly characterized as imputed income under subsection 17(1) of the Act, and therefore subsection 20(21) did not apply to permit a deduction.

The appellants appealed reassessments regarding the valuation of a shareholder benefit for their personal use of a boat owned by their company.

The Tax Court of Canada found that the boat was acquired and used primarily for bona fide business marketing purposes, and that the appellants' personal use was minimal (around 5%).

The Court concluded that the $18,000 the appellants paid to the company each year was a reasonable fair market value for their personal use.

The appeals were allowed with costs.