In Roszko v R, 2014 TCC 59, the Court held that amounts received by a participant under notes issued as part of a Ponzi scheme were not income for the purposes of the Income Tax Act (Canada). The Court distinguished R v Johnson, 2012 FCA 253 (which I discussed here), on the basis that, while the investment contract in Johnson simply promised a return, Mr Roszko’s contract specified how amounts would be invested. The funds were not invested in that manner, of course, because the “investment” was a fraud, and so the Court held that there could be no source of income (per Hammill v R, 2005 FCA 252). The Court also held that the amounts received, to the extent they did not exceed the amounts originally invested, were simply a return of capital.
