http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/109223/index.do 
Barnwell v. The Queen (April 21, 2015 – 2015 TCC 98, Owen J.).
Précis: The taxpayer was a lawyer and a CGA. He extended loans aggregating $73,000 to a business acquaintance, Mr. Austin. The loans were made by means of a number of cheques, all payable to Mr. Austin and commencing in 2007. In 2011 Mr. Barnwell claimed an ABIL in the amount of $39,150 (later reduced at trial to $36,500). CRA denied the deduction on the basis that the loans were made to Mr. Austin, not a CCPC. Mr. Barnwell claimed that Mr. Austin acted as the alter ego of the Whitesand Group of Companies Inc., a CCPC, which was the true debtor. The Tax Court rejected the argument that Mr. Austin was a mere agent for Whitesand. As a result the appeal was dismissed, but without costs.
Decision: The position of Mr. Barnwell, in a nutshell, was as follows:
[35] The Appellant commenced his argument with the following proposition:
So there are, in the normal course there are four driving underlying principles to claiming the debt as an ABIL. The debt obviously has to be incurred by the Appellant. The debt was acquired for gaining or producing income; the business has to be an active business; it has to be a CCPC, Canadian-controlled private corporation. And the debt has to be realized in the year of the claim.
[36] The Appellant submitted that the evidence supported the conclusion that Whitesand Group of Companies Inc. was a Canadian-controlled private corporation that carried on an active business in Canada. With respect to the assumption of fact in paragraph 9 n. of the Reply, the Appellant stated:
In the amount of 78,300 to Whitesand. The loan was made to Whitesand. My evidence as I have given it, Your Honour, and I would submit to you that what is important here in terms of evidence is assessing whether the witness has been credible. I have no grounds, no reason to make a false presentation to this court. The monies were paid to Mr. Austin. Mr. Austin was seen as Whitesand, and he’s correct. The point was he was possible [sic] and he directed me to make the cheques to him, because he is responsible. Plain and simple. The bank account shows activity. It is not on the level of activity that one would expect, given the loans, but the monies were based on the representations made to me to [sic] Mr. Austin cheques were written in favour of Whitesand.
[Footnotes omitted]
The Tax Court did not accept the “alter ego” argument put forward by Mr. Barnwell:
[58] Mr. Austin was a director and officer of Whitesand Group of Companies Inc. However, an Ontario corporation is a legal entity that has a legal personality separate and apart from its directors, officers and shareholders. There is no suggestion on the face of the cheques or the promissory notes that Mr. Austin was acting in his capacity as a director or officer of Whitesand Group of Companies Inc. when he received the cheques or signed the promissory notes, and in his testimony Mr. Austin did not suggest that he was acting in any such capacity. There was no agency agreement and Mr. Austin did not suggest in his testimony that he received the cheques as an agent on behalf of Whitesand Group of Companies Inc. In fact, as already noted, Mr. Austin stated that he accepted that he was personally responsible for the debt.
[59] Under the circumstances, this Court cannot simply ignore the legal form and substance of the transactions that did in fact take place in favour of the Appellant’s subjective appreciation of events. The documentation and the testimony of Mr. Austin clearly indicate that the loans in respect of which the Appellant is claiming an ABIL were made by the Appellant to Mr. Austin personally. Accordingly, the loans did not create “a debt owing to the taxpayer by a Canadian-controlled private corporation” as required by the description of a business investment loss in paragraph 39(1)(c) of the ITA.
[60] For the foregoing reasons, the appeal is dismissed without costs.
[Footnote omitted]