A loan that the taxpayer made to a partnership consisting of two Canadian-controlled private corporations qualified for recognition as a business investment loss in the year that the debt became bad. Given that the partnership itself did not have the capacity to be indebted, the debt of the partnership was owed by the partners, i.e., by Canadian-controlled private corporations. Lamarre J stated (at para. 22):
The legal view of a partnership, which is adopted by the provincial legislation, clearly states that the partnership itself does not have the capacity to be indebted. The debt of the partnership is owed by the partners....
Furthermore, the corporate partner that was controlled by the taxpayer qualified as a small business corporation even after the appointment of a receiver-manager for the partnership on the basis of a finding that the receiver-manager was acting not only as agent for the secured creditors but also as agent for the debtor partners for the purposes of managing the partnership business.