Précis: Mr. MacDonald was a very senior and experienced financial professional. He had a substantial holding of shares of Bank of Nova Scotia (“BNS”) which he had held for long period of time. He formed the opinion that the BNS shares were likely to decline steeply in value in part because of their large international exposure. Hoping to benefit from that decline he entered into a Forward Contract with TD Securities Inc. which included a collateral pledge of 165,000 BNS shares. Mr. McDonald did not have the option to settle the Forward Contract with the delivery of shares. Mr. MacDonald made cash settlement payments under the Forward Contract of roughly $10 million between 2004 and 2006. He treated the payments as business losses. CRA reassessed Mr. MacDonald in 2009 treating the payments as capital in nature. The position of CRA was that the arrangement was a form of “hedge” designed to protect the value of his BNS holdings.
MacDonald v. R. – TCC: Losses on Forward Contracts currently deductible – arrangement not a hedgeREAD MORE »