A partnership of which the taxpayer was a member ("Roseland II") and another partnership ("Roseland I") owning a similar and adjacent condominium development, sold all their assets to a newly-formed partnership ("RPM") with the purchase price being paid for by way of set-off against the subscription price for the partnership interests in RPM with such partnership interest in RPM having been distributed to the partners of Roseland I and II.
After finding that these transactions were undertaken primarily to realize a tax benefit (the realization of terminal losses), Paris J. went on to find that the transactions did not result in an abuse or misuse and rejected a submission of the Crown (at para. 122) that "there is a general or overall policy in the Act prohibiting losses on any transfer between related parties, or parties described by counsel as forming an economic unit". Paris J. stated (at para. 120):
"In my view, the particularity with which Parliament has specified the relationship that must exist between the transferor and transferee for the purpose of each stop-loss rule referred to by the Respondent is more indicative that these rules are exceptions to a general policy of allowing losses on all dispositions."
He went on to state (at para. 123):
"I would also point out that Parliament has chosen to define the circumstances in which the terminal loss would be denied on transfers of depreciable property between partnerships in subsection 85(5.1) (now subsection 13(21.2)) and in doing so would appear to have chosen to allow taxpayers who are not within the circumstances set out in that provision to claim their terminal losses."