Grubner v. The Queen (February 23, 2018 – 2018 TCC 39, Boyle J.).
Précis: The Grubner brothers claimed allowable business investment losses (ABILs) in 2012 in respect of $606,000 they had paid directly to CRA in connection with unremitted GST/HST and sources deductions of Bavara Auto Haus Inc. (“Bavara”), a corporation of which they were both directors. Justice Boyle held that there was no evidence that the Grubners acquired a debt or other obligation of Bavara for the purpose of earning income. As a result the two appeals were dismissed with costs.
Decision: The Grubners did not advance the money in question to Bavara but paid it directly to CRA. They did not produce any documentation of the alleged loan and they did not call the other 50% shareholder, Mr. Dawson, to give evidence. The Court was simply not satisfied that they had demonstrated the underlying facts to give rise to ABILs:
 Given the significant limitations to the evidence I received, all of which came from the two Appellants who have an interest in the outcome, little of which was corroborated with documents, some of which appeared inconsistent with the documents or with other testimony, I am unable to conclude on a balance of probabilities that the debt or other obligation owed by Bavara to Claudio and Ruben Grubner was acquired by them for the purpose of earning income.
 It had no interest payable on it and I am unable to conclude on a balance of probabilities that it was realistic or reasonable to expect a greater return on a sale of Bavara’s shares or business at the time they paid CRA these amounts. That is fatal to the possible success of these appeals given that subparagraph 40(2)(g)(ii) of the ITA deems their loss to be nil on a disposition of a debt or other right unless it was acquired for an income earning purpose. This alone is sufficient to dismiss these appeals. If the loss was nil, there can be no ABIL.
 In order for the Appellants to successfully claim an ABIL, it would be necessary to have established that their rights against Bavara were a debt obligation and not some other right, such as one of statutory entitlement to recovery under the federal GST or income tax legislation or perhaps a right of subrogation. I am unable to conclude that under applicable law, which I am prepared to assume would be British Columbia, this would be characterized as a debt obligation. Paragraph 39(1)(c) of the ITA requires expressly that an ABIL can only be recognized with respect to a debt obligation. Further, for there to have been an ABIL, the debt obligation must have been disposed of in order to recognize that loss. The Appellants are relying upon a deemed disposition under the bad debt rule in section 50 of the ITA which also expressly only applies to debts and not to other rights or obligations. These are also fatal to the possible success of these appeals.
 In conclusion, the Appellants have not provided the Court with sufficient credible, consistent or corroborated evidence to establish on a balance of probabilities the facts needed to support their ABIL claims. In addition, the Appellants have not established that their claims against Bavara were debts which is required by the deemed disposition rule for bad debts and by the definition of an ABIL.
Thus the appeals were dismissed with costs.