A partnership owned by the taxpayers admitted a third party ("Woodward") as a member of the partnership with a view to selling an apartment building of the partnership and allocating 80% of the resulting gain for tax purposes to Woodward, with Woodward also receiving 80% of the net proceeds of sale of the property (which were substantially reduced due to the leveraging of the property) and then ceasing to be a partner.
The allocation of 80% of the income to Woodward was found to be unreasonable given that "Woodwards' contribution was both ephemeral and for all practical purposes risk free". The reasonable treatment of the arrangement under s. 103 would be to treat Woodward's share of the income as the amount of income it actually received.
However, Bowman C.J. went on to find that if he had concluded that s. 103(1) did not apply, on balance s. 245 would be applied to reach the same conclusion, but with the possibility that perhaps all of the profit, rather than most of the profit, should have been allocated to the taxpayers.