The taxpayers were fraudulently induced to purchase worthless securities with their RRSP funds. Webb JA found that s. 146(9) did not apply to include the difference between the purchase price and the (nil) fair market value in the taxpayers' income. The trial judge had erred in concluding that securities had in fact been acquired. Under the Alberta Business Corporations Act, the corporations in question could not hold shares in themselves, so that a purported acquisition by one of the RRSPs of shares which the vendor corporation purportedly owned of itself was not valid. Furthermore, in the case of purported purchases by other of the RRSPs of shares of a corporation from a third party, the evidence supported a finding that such "vendor" did not own such shares.
The taxpayers had also argued that s. 146(9) should only apply in situations where the acquisition of property by an RRSP or RRIF is part of a scheme devised to allow an annuitant to extract funds from an RRSP or RRIF without paying tax on such amounts. The majority found it was unnecessary to consider this argument in light of its conclusions above.
In a concurring opinion, Sharlow JA agreed with the taxpayer's alternative argument. The purpose of s. 146(9) is not to punish investment decisions merely because they prove to be unwise - that is, merely because the fair market value of an acquired property is less than the taxpayer thinks it is. For example, a taxpayer who spends $800,000 of RRSP funds on securities that she believes are worth $800,000 but are in fact only worth $600,000 clearly should not be hit with a $200,000 income inclusion (para. 61). There was no basis in the present case for concluding that the taxpayers should be treated any differently.
(Another taxpayer attempted to purchase the worthless shares with RRIF funds, and the judges reached similar conclusions regarding the application of the similarly worded s. 146.3(4).)