Global Equity Fund - Federal Court of Appeal uses s. 9 jurisprudence in a GAAR case to establish the object and spirit of the Act's business loss provisions

The corporate taxpayer implemented a loss generation plan similar to those in 1207192 Ontario and Triad Gestco.   It had a subsidiary declare a stock dividend of preferred shares in order to deplete the value of its common shares of the subsidiary, and sold those shares to a family trust in order to generate a loss - which it reported on income account because it had a securities trading business.  These transactions were found to abuse ss. 3, 4, 9 and 111, which reflect a policy that "business losses must be grounded in some form of economic or business reality" - so that the loss was denied under the general anti-avoidance rule.

A difficulty for the Crown was that the central provision for the computation of business income or loss (s. 9) is antiquated and essentially devoid of substantive content.  How on earth could the Crown establish its "object, spirit or purpose" under the required "textual, contextual and purposive" approach?

No problem!  Mainville, J.A. found that Canderel had established that s. 9's goal "is to obtain an accurate picture of the taxpayer’s profit [or loss] for the year," so that it was contrary to this object to recognize a "paper loss" under s. 9.

Neal Armstrong.  Summaries of The Queen v. Global Equity Fund Ltd., 2012 FCA 272 under s. 245(4) and s. 152(9).