In order to realize an allowable business investment loss on its investment in a corporation ("DMI") held jointly by it and a third party ("Rexfor"), the taxpayer and Rexfor formed a new corporation ("DMI 1993") owned jointly by them, arranged for DMI to transfer all its assets and liabilities to DMI 1993 save for two sawmills worth $2.5 million and $2.5 million of debt owing to a third party, and then sold the shares of DMI to an unrelated third party for nominal consideration.
In finding that realization of the loss did not result in a misuse or abuse, Noël, J.A. stated (at p. 5475) that:
"There is nothing in the Act that bars a taxpayer from realizing a loss on the sale of shares to arm's length third parties, even if a significant portion of the assets to which the loss on the shares may be attributed remains within the group of corporations."