Deduction denied due to No Records

The Tax Court of Canada denied deductions in the case of G Hill Fai Investments Ltd. v The Queen 2011-3317(IT). At issue was a reassessment disallowing the corporate taxpayer’s deduction of a capital loss in the amount of $382,219.31 for the 2006 taxation year related to a claim for bad debts relating to loan transactions occurring in 1994. CRA disputed the existence of the loans, and argued that if they did exist, they were not disposed of as bad debts. The taxpayer said that the transactions were reported in its 1994 financial statements and denied the requirement to produce supporting documentation since the loans were made beyond the six year recordkeeping requirement of paragraph 230(4)(b). The Tax Court denied the deductions on the basis of lack of proof