For creditor-proofing reasons, the taxpayer sold shares in a family real estate development company ("Torgan") to his wife, and used the sales proceeds to satisfy shareholder loans owing by him to Torgan. Torgan,in turn, used the proceeds to purchase a GIC, which it pledged (as security for a guarantee) to a trust company which had lent the shares' purchase price to the taxpayer's wife. He sought to have his wife's related losses (mostly due to interest on the loan) attributed to him pursuant to s. 74.1(1).
After finding that the loan interest was not deductible, Paris J. went on to address the Minister's argument that if, in fact, losses had arisen on the wife's share investment, the attribution of such losses should be denied under s. 245. Paris J. accepted the taxpayer's evidence that the transactions were carried out in order to pay off the shareholder loans to him and for creditor proofing, and that tax reduction was not one of the main reasons for the transactions. The taxpayer also enjoyed tax benefits in that he avoided the inclusion of the shareholder loans in income under s. 15(2), and avoided capital gains by virtue of the spousal rollover under s. 73(1), but these benefits were likewise not the primary purpose of the transactions.