Magicuts Inc. v. The Queen, 98 DTC 2085, [1999] 1 CTC 2842 (TCC) -- summary under Capital Loss v. Loss

The Taxpayer's U.S. subsidiary developed over time a large balance owing to the taxpayer in respect of products and equipment sold by the taxpayer to the subsidiary for a profit and as a result of the taxpayer paying for various other expenses of the subsidiary. The Minister's disallowance of a deduction by the taxpayer of the amounts owing to it by the subsidiary was confirmed on the basis of a finding that Rip TCJ. that, by cancelling portions of the debt owing to the taxpayer, it contributed such portions to the subsidiary's capital and that such contribution represented a change of use of the money from a trade debt to capital.