http://decision.tcc-cci.gc.ca/site/tcc-cci/decisions/en/item/66429/index.do 
Affordable Sign Service Ltd. v. The Queen[1] (January 15, 2014) involved funds lent by the appellant to a Mr. Koch (who was subsequently found guilty of securities fraud in relation to other matters):
[2] The appellant submits that it is entitled to a deduction in the amount of $50,000 in respect of the loss of a $100,000 investment in a Canadian-controlled private corporation, Seahorse International Ventures Inc. (“Seahorse”). The respondent submits that the investment does not qualify as an ABIL on several grounds, which are discussed below.
[3] The only witnesses at the hearing were Demetre Pomonis (“Mr. Pomonis”) and his son, Anthony Pomonis (“Anthony”).
Background
[4] The appellant is in the business of installing and maintaining signs. Mr. Pomonis managed the business at the relevant time and is now retired. He is the corporation’s sole shareholder.
[5] Mr. Pomonis testified that Anthony approached him about an investment opportunity that he was aware of. Since the appellant had excess funds, Mr. Pomonis said that he decided to have the appellant make the investment.
[6] Mr. Pomonis testified that he knew very little about the investment, that it was done on the basis of a handshake without documentation, and that he was relying entirely on Anthony.
[7] Mr. Pomonis testified that the investment was made on February 29, 2008 and that the funds were to be returned with 25 percent interest in four months.
[8] Mr. Pomonis further testified that the funds were not repaid on time and that he asked Anthony to get the money back. However, the money was lost, he said.
In the result the court concluded that the funds had not be advanced for the purpose of earning income nor was there evidence that the debt was uncollectible:
[38] First, the relevant evidence consists almost entirely of the testimony of Mr. Pomonis and Anthony. This evidence is self-interested and should be viewed with caution. It is not fatal to rely entirely on self-interested testimony, but the testimony needs to be detailed and cogent to be considered reliable. The testimony was lacking in this respect.
[39] Second, the appellant did not call an unrelated witness, such as another investor, the promoter Mr. Davis, or the accountant who prepared the income tax return. In addition, there was no written documentation to support the terms of the indebtedness and there was no documentation to support the appellant’s position that Seahorse was not able to repay the debt.
….
[41] Further, I found some of the testimony to be implausible. It would have required much more detail for me to be satisfied that the testimony was reliable. I would mention a few instances where this was a problem.
[42] First, Mr. Pomonis claims to have very little knowledge of the investment and the attempts to recover the money. I find this odd, especially since the investment appears to be quite large for a company the apparent size of the appellant. I note from the income tax return that the ABIL reduced the appellant’s income to zero and that a small loss was reported. I would have thought that in these circumstances Mr. Pomonis would be more interested in the details of the investment and the attempts to recover the money.
[43] Anthony testified that in evaluating the investment, he was relying on information that other investors were earning large returns with Mr. Koch. This statement seems odd because Mr. Koch was at the time in trouble with other investors which led to the Commission’s investigation. It seems implausible that Mr. Davis was not aware of these problems. Further, if Mr. Davis was collaborating on a fraud with Mr. Koch, it seems odd that Anthony would remain on friendly terms with Mr. Davis after the debt was purportedly in default.
[44] Moreover, there were very few details about the attempts to recover the money. It appears from the testimony that Anthony quickly concluded that the investment was fraudulent and it is not clear that he took any significant action after that to recover the money. I would have thought that at the very least Anthony would have worked with other investors to try to recover the money and that Anthony would know what the police were doing regarding this matter.
[45] I also find it troubling that Anthony was in contact with Mr. Koch, directly or indirectly, in order to obtain a supporting letter for this appeal. If Mr. Koch was the bad guy, why did not Anthony or Mr. Pomonis take further action to recover the debt?
[46] When the testimony is viewed as a whole, I find that it was not sufficiently detailed to be considered reliable.
[47] It is not clear from the evidence what the true circumstances of the arrangement are. It is possible that the appellant was the victim of a fraud by Mr. Koch. However, it is also possible that the transaction did not involve a loss at all and that it was set up to enable the appellant to claim a deduction on its tax return. The bottom line is that the appellant has not established a prima facie case that the indebtedness was laid out for the purpose of earning income or that a loss was incurred either through a disposition or a bad debt.
The appeal was accordingly dismissed.
[1] 2014 TCC 18.