An individual transferred the assets of his business to the taxpayer in consideration for the assumption of his business liabilities, the issuance of shares to him and family members, and the giving by the taxpayer of a demand interest-bearing promissory note. Interest on the note was not deductible by the taxpayer pursuant to s. 5(1)(b) of the Income War Tax Act, which provided for the deduction of "such reasonable rate of interest on borrowed capital used in the business to earn the income as the Minister in his discretion may allow". Kellock J. stated (p. 712):
"[I]n order to enable the statute to apply, 'there must be a real loan and a real borrowing'. Here there is nothing more than unpaid purchase money secured by a promissory note which, in my opinion, is insufficient."