Corollary

In Vankerk v R, 2006 FCA 96 (which I wrote about here), the Court held that a taxpayer could not deduct a loss incurred in connection with an “investment” in a business that turned out to be a fraud. A taxpayer cannot deduct a loss where there is no source of income. The corollary appears to be that a taxpayer who realizes a gain where there is no source should not be required to include the gain in income for tax purposes. In Johnson v R, 2011 TCC 540, the taxpayer was one of the lucky few to receive more than she “invested” in a Ponzi scheme. The Tax Court held that the taxpayer’s gain should not be included in the her income for tax purposes because there was no source of income.