Cloverdale Paint Inc. v. The Queen, 2007 DTC 243, 2006 TCC 628 -- summary under Paragraph 20(1)(l)

The wholly-owned U.S. subsidiary of the taxpayer accumulated a large balance owing to the taxpayer as a result of its purchase of paint inventory over the years. In the taxation year in question, the subsidiary was in financial difficulty. MacArthur J. found that the taxpayer had shown that the "liquidation" method (under which an allowance for doubtful accounts was deducted equal to the difference between the amount owing and the net realizable value of the subsidiary's assets) was a reasonable method for computing the allowance, and that the burden then shifted to the Crown, who failed to provide any evidence as to why the liquidation approach was not acceptable. The debt owing also was doubtful in light of the financial position of the subsidiary.