Words and Phrases - "for the purpose of"

The taxpayer, which was a corporation resident in West Germany, borrowed deutschemarks ("DM") from a German bank to help finance the acquisition in 1983 of three properties in Montreal. The bank consented to a sale in 1986 of the properties to an arm's length purchaser ("MCLR") provided that the taxpayer repaid the loans out of the proceeds of a sale of the properties to its shareholders ("Vogel" and "Fischer"). Vogel and Fischer financed the purchase by borrowing DM personally from the bank secured by hypothecs on the properties, then sold the properties to MCLR subject to the hypothecs.

In finding the that taxpayer had not made or incurred an outlay or expense for purposes of s. 40(1)(a)(i) by virtue of the appreciation of the DM between 1983 and 1986, Rip TCJ. found that no foreign exchange loss had arisen on the repayment of the DM loan with DMs, and that the foreign exchange loss arose as a result of DM being exchanged for dollars in 1983 and dollars being reconverted into DM in 1986. This exchange transaction was not effected "for the purpose of" disposing of the properties, i.e., "for the immediate or initial purpose" of so doing. S.40(1)(a)(i) "does not contemplate expenses or outlays which may have merely facilitated the making of the disposition or which were entered into on the occasion of the disposition." (p. 1046).