The appellant, a successful businessman, used surplus funds to make loans to third parties, including purchasing unsecured debentures from a payday loan financier and issuing promissory notes to a merchant banking company.
When the borrowers became insolvent, the appellant sought to deduct his losses as business losses.
The Minister reassessed the losses as being on account of capital.
The Tax Court of Canada dismissed the appeal, finding that the appellant was an investor rather than being in the business of lending money, as he lacked the positive indicia of a business such as active promotion, complex loan arrangements, and adequate record-keeping.
Legal fees incurred to recover the funds were also held to be non-deductible capital outlays.
