On December 13, 1991 some Canadian promoters acquired a 98% interest in a U.S. partnership ("Klink") that has been carrying on a business of leasing a computer which was now fully depreciated for U.S. tax purposes and had a nominal value; and on November 20, 1991 the taxpayers purchased a 93.6% interest in Klink from the promoters. Minutes thereafter, Klink conveyed the computer to another partnership ("ILP") for an agreed price of $50,000 as a contribution of capital to ILP, thereby giving rise to a terminal loss.
Bowie T.C.J. found that neither the promoters nor the taxpayers had any intention of carrying on business in common with the remaining U.S. partners and, instead, "simply intended to create a large tax loss for themselves at a relatively modest cost". Accordingly, the Klink partnership came to an end on December 13, 1991 or, at the latest, on December 20, 1991 and, therefore, there were no partnership losses to be allocated to the taxpayers.