Holding companies may be able to carry forward losses following an acquisition of control

Where a parent corporation (or an intermediate managementco/holdco) is holding its investments in subsidiaries as part of a business, this suggests that its non-capital losses (e.g., from interest and financing expenses) can be carried forward following an acquisition of control for deduction from income from the same source such as dividend income from subsidiaries.

As a break fee should be viewed as being received pursuant to a pre-acquisition agreement for the acquisition of shares on capital account, an application of the analogous jurisprudence on the disposition of option contracts suggests that the break fee generally will be received on capital account. Given the "perfect circularity" of the s. 14 and 39 rules, it is unclear whether the break fee receipt would give rise to a capital gain or eligible capital amount.

Neal Armstrong. Summaries of Ian Gamble, "Income from a Business or Property: General Principles and Current Issues", 2014 Conference Report, Canadian Tax Foundation, 5:1-32 under s. 111(5)(a), s. 95(2)(a)(ii)(B) and s. 9 – capital gain v. profit – contract.