The appellant purchased a 50% interest in computer software for $2.8 million, paying $700,000 by cheque and $2.1 million by promissory note.
He claimed capital cost allowance of $1.4 million in each of his 1997 and 1998 taxation years.
The Minister reassessed to disallow the deductions on the basis that the investment was an unregistered tax shelter.
The Tax Court of Canada dismissed the appeal, finding that the valuation report provided to the appellant contained statements and representations regarding the tax status of the software, satisfying the definition of a tax shelter under subsection 237.1(1) of the Income Tax Act.
As the tax shelter was unregistered, subsection 237.1(6) prohibited the deduction of the capital cost allowance.
