Easton v. Minister of National Revenue, (1992) 53 F.T.R. 167 (TD)

• Judge: Dubé, J.
• Court: Federal Court (Canada)
• Case Date: January 29, 1992
• Jurisdiction: Canada (Federal)
• Citations: (1992), 53 F.T.R. 167 (TD)

Easton v. MNR (1992), 53 F.T.R. 167 (TD)

MLB headnote and full text

M. Donald Easton (plaintiff) v. Her Majesty The Queen and The Minister of National Revenue (defendants)

(T-2314-87)

Indexed As: Easton v. Minister of National Revenue

Federal Court of Canada

Trial Division

Dubé, J.

February 6, 1992.

Summary:

A lawyer, who was the sole shareholder of a company involved in the development of real estate, personally guaranteed the liabil­ities of the company. The company defaulted. The lawyer paid $300,000 in settlement of his obligations under the per­sonal guarantee. The Minister of National Revenue disallowed the noncapital loss claimed by the lawyer with respect to the amount paid under the personal guarantee. The lawyer appealed.

The Federal Court of Canada, Trial Divi­sion dismissed the appeal.

Income Tax - Topic 1784

Capital gains and losses - Capital losses - What constitutes a capital loss - A lawyer, who was the sole shareholder of a com­pany involved in real estate development, paid $300,000 as settlement of a personal guarantee which he executed to secure the liabilities of the company - The Minister of National Revenue disallowed the law­yer's claim for a noncapital loss with respect to the $300,000 - The lawyer appealed - The Federal Court of Canada, Trial Division, held the loss was a capital loss and dismissed the appeal - The guar­antee was considered to be a deferred loan, made by the lawyer to the company, to acquire an asset from which he intended to derive a stream of income.

Cases Noticed:

Panda Realty Ltd. v. Minister of Na­tional Revenue (1986), 86 D.T.C. 1266 (T.C.C.), refd to. [para. 18, footnote 1].

Minister of National Revenue v. Freud, [1969] 1 S.C.R. 75; 68 D.T.C. 5279, refd to. [para. 18, footnote 1].

Cull v. Minister of National Revenue, [1987] 2 C.T.C. 63; 14 F.T.R. 232; 87 D.T.C. 5322 (F.C.T.D.), refd to. [para. 18, footnote 1].

O'Mandryk v. Minister of National Rev­enue, [1989] 1 C.T.C. 162; 24 F.T.R. 137 (F.C.T.D.), refd to. [para. 18, foot­note 1].

Vine Estate v. Minister of National Rev­enue (1989), 89 D.T.C. 5528; 29 F.T.R. 59 (F.C.T.D.), refd to. [para. 18, footnote 1].

Associated Investors of Canada Ltd. v. Minister of National Revenue, [1967] C.T.C. 138; 67 D.T.C. 5096 (Ex. Ct.), refd to. [para. 18, footnote 1].

Commonwealth Construction Co. Ltd. v. Minister of National Revenue (1984), 84 D.T.C. 6420; 56 N.R. 309 (F.C.A.), refd to. [para. 18, footnote 1].

Minister of National Revenue v. Steer, [1967] S.C.R. 34; 66 D.T.C. 5481, refd to. [para. 18, footnote 2].

Stewart & Morrison Ltd. v. Minister of National Revenue, [1974] S.C.R. 477; 72 D.T.C. 6049, refd to. [para. 18, footnote 2].

McLaws v. Minister of National Revenue, [1974] S.C.R. 887; 27 D.L.R.(3d) 137; 72 D.T.C. 6149, refd to. [para. 18, foot­note 2].

R. v. H. Griffiths Co. Ltd., [1977] 1 F.C. 476; 76 D.T.C. 6261 (F.C.T.D.), refd to. [para. 18, footnote 2].

Merban Capital Corp. Ltd. v. Minister of Na­tional Revenue (1989), 100 N.R. 383; 89 D.T.C. 5404 (F.C.A.), refd to. [para. 18, footnote 2].

Kalthoff v. Minister of National Revenue (1990), 36 F.T.R 255; 90 D.T.C. 6378 (F.C.T.D.), refd to. [para. 18, footnote 2].

K.J. Beamish Construction Co. Ltd. v. Minister of National Revenue (1990), 90 D.T.C. 1584 (T.C.C.), refd to. [para. 18, footnote 2].

Alberta Gas Ethylene Co. Ltd. v. Minister of National Revenue (1990), 90 D.T.C. 6419; 112 N.R. 399 (F.C.A.), refd to. [para. 18, footnote 2].

Lachapelle v. Minister of National Rev­enue (1990), 90 D.T.C. 1876 (T.C.C.), refd to. [para. 18, footnote 2].

Tor-Guelph Holdings and 309901 Ontario Ltd. v. Minister of National Revenue (1991), 91 D.T.C. 355 (T.C.C.), refd to. [para. 18, footnote 2].

Hill v. Minister of National Revenue (1991), 91 D.T.C. 1094 (T.C.C.), refd to. [para. 18, footnote 2].

Salomon v. A. Salomon and Co. Ltd., [1897] A.C. 22, refd to. [para. 26].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, generally [para. 19].

Counsel:

David A. Freeman, for the plaintiff;

William Mah, for the defendants.

Solicitors of Record:

Freeman & Company, Vancouver, British Columbia, for the plaintiff;

John C. Tait, Q.C., Deputy Attorney Gen­eral of Canada, Ottawa, Ontario, for the defendants.

This appeal was heard in Vancouver, British Columbia, on January 29, 1992, before Dubé, J., of the Federal Court of Canada, Trial Division, who delivered the following decision on February 6, 1992.