In Moose Factory Restaurant Properties Ltd. v R, 2019 TCC 156, the taxpayer claimed an ABIL in respect of a debt of a third party that the taxpayer had guaranteed. The third party went bankrupt leaving the taxpayer exposed under the guarantee, but the taxpayer hadn’t made any payments to the lender pursuant to the guarantee by the end of the taxation year in which it claimed the ABIL. Owen TCJ held that a debt hadn’t arisen by the year end (the taxpayer hadn’t acquired a right to contribution on account of a payment under the guarantee) and, even if there had been a debt, the taxpayer had no cost in it because it hadn’t (yet) laid anything out in respect of the debt.
Shaira Nanji and Kristina Djogovic-Morgan, “ABIL Denied: Design of Financing Structure Faulted” 9:4 Canadian Tax Focus (November 2019)
