The taxpayer made non-interest bearing advances to a wholly-owned incorporated radio station. On 8 August 2008, the corporation made a proposal under the Bankruptcy and Insolvency Act, which was accepted by the creditors, and then approved by the Quebec Superior Court on 9 October 2008. The taxpayer subsequently sold his shares at a gain to a purchaser which was interested in the CRTC radio licences.
The taxpayer's complete loss under the proposal on his advances (although conceded to be a capital loss) was not a business investment loss because his disposition of the advances was not a disposition to which s. 50(1) applied, which required that the advances be owing to him at the end of his taxation year (31 December 2008). After noting that most authorities suggested that under a proposal, the debtor was released of its obligations when the proposal had been accepted by the creditors and approved by the Court, Paris noted that here the taxpayer had renounced his entitlement to receive a distribution with the unsecured creditors (in order to secure approval) and that the corporation had written off the debt in its financial statements for its 31 October 2008 fiscal year:
As the taxpayer's loan no longer existed at 31 December 2008, the provisions of section 50 of the Act could not apply and the appellant had no right to an ABIL (para. 41)