Four unrelated individuals each holding 25% of the common shares of a small business corporation, transfer their shares to a corporation (“Newco”) with which they are not affiliated, thereby sustaining a capital loss. CRA indicated that, assuming that each of individual did not have de facto control over Newco, the loss sustained by each would not be a "superficial loss," and would not be denied by s. 40(2)(g)(i). However, in noting that the transaction very well might not be an arm’s length transaction, so that a business investment loss was not realized, CRA stated:
[T]he situation where one party to a transaction is merely accommodating the other party in an attempt to obtain a certain tax result may be a situation where the parties are not dealing at arm's length because they do not have separate economic interests which reflect ordinary commercial dealings between parties acting in their own separate interests. … [I]t is quite possible that each of the Individuals and Newco were not dealing at arm's length.