GSW Appliances Ltd. v. M.N.R.
T-1934-85
McKeown J.
1/10/93
13 pp.
Appeal from TCC decision taxpayer not entitled to deduct inventory allowance in amount of $652,754 in 1977 giving rise to non-capital loss for 1976 taxation year-Foundation Agreement entered into by GSW with Canadian General Electric Company Limited (CGE)-GSW entering into Asset Transfer Agreement with Camco as of December 28, 1976 to convey and transfer to Camco assets and properties used by it and subsidiaries in carrying on business of manufacture, sale and servicing of major appliances-Plaintiff one of three named subsidiaries of GSW-By virtue of Indenture made as of January 1, 1977 between plaintiff and GSW, all assets, property and business of plaintiff, including inventories transferred to GSW-Plaintiff claiming inventory allowance under Income Tax Act, s. 20(1)(gg)-Whether taxpayer held finished inventory for sale in 1977-Inventory must be dealt with in trading context-Taxpayer having already committed inventory to be sold pursuant to agreements made in 1976-December 28 and September 27 agreements amounting to equitable transfers-Completion of transfer of inventory in 1977 not constituting carrying on business-One of essential elements of s. 20(1)(gg) not met as plaintiff not holding tangible property (inventory herein) for sale on January 1-Plaintiff not entitled to deduction with respect to inventory allowance on finished goods portion of inventory-Appeal dismissed-Income Tax Act, S.C. 1970-71-72, c. 63, s. 20(1)(gg) (as enacted by S.C. 1977-78, c. 1, s. 14(1)).