A Canadian subsidiary ("Greenleaf") of Ford U.S. paid down to $9,750,000 (including accrued interest) a debt of $24,369,439 (plus accrued interest) owing by it to Ford U.S. through the application of share subscription proceeds of $14,843,596 received by it from Ford U.S.A. and the application of a small amount of cash on hand of $100,706. Eighteen days later, a predecessor of the taxpayer ("392"), which was at arm's length with Ford U.S., purchased all the shares of Greenleaf from Ford U.S. for consideration of $1, and purchased the debt at only a slight discount to the amount owing, so that the debt-parking rules in ss. 80.01(6) to (8) did not apply. The Minister applied s. 245(2) on the basis that Greenleaf had sustained a debt forgiveness in the amount of the debt-paydown.
After indicating that he was not convinced that the debt-paydown transactions had occurred only at the behest of Ford U.S., Bédard J went on to indicate that, in any event, they were part of the same series of transactions as the debt purchase as Ford U.S. had effected them in order to realize a capital loss on its shares of Greenleaf, so that the debt-paydown transactions were related transactions effected in contemplation of the subsequent sale transaction.
Bédard J proceeded to find abuse.