The appellant and other Canadians sought to acquire potential losses from a U.S. partnership for use as an income tax deduction in Canada.
They became assignees of the interests of the original American partners and immediately disposed of the partnership's apartment complex back to the original partners, realizing accounting losses.
They also acquired a one percent interest in a Canadian oil and gas property.
The Minister disallowed the claim for partnership losses under s. 96 of the Income Tax Act.
The Supreme Court of Canada dismissed the appeal, holding that the fundamental criteria of a valid partnership—carrying on business in common with a view to profit—were not met.
The Court found no intention to profit from the apartment complex and concluded the oil and gas investment did not establish an ancillary profit-making purpose.
Furthermore, the Court held that an assignee of a partnership interest must satisfy the essential ingredients of a partnership under Canadian law to be considered a partner for tax purposes.
