Each taxpayer bought units in a limited partnership, which was to acquire a large yacht to be used for catered vacation charters. However, the capital raised was grossly insufficient for accomplishing the marketed objectives, and Rossiter ACJ characterized the arrangements as a "Ponzi-like scheme [which] was set to collapse eventually" (para. 344).
After finding that "the Limited Partnerships did not carry on a genuine business which constituted a source" (para. 389), Rossiter ACJ went on to find that most of the claimed expenses giving rise to partnership losses were fictitious, and that "expenses that were not fictitious or phony were incurred as window dressing for the purpose of perpetuating a fraudulent scheme" (para. 392), so that they did not satisfy s. 18(1)(a) even if they had been incurred in the course of a business.