Mac’s Convenience Stores - Quebec Court of Appeal finds that as the parties did not think about the thin cap consequences of a dividend, they could not subsequently rectify to solve a thin cap problem

Mac’s Convenience Stores Inc. didn’t realize at the time that paying a substantial dividend to its Canadian parent would cause the thin cap rules to apply to interest on a loan from a related non-resident corporation. Schrager JA took essentially the same approach as in Groupe Jean Coutu in finding that rectification was not available to convert the dividend into a stated capital distribution.

Although rectification was appropriate to correct an "error to achieve the tax consequences originally and specifically intended and agreed upon," here the parties had not cast their minds to the thin cap rules, so that correcting a thin cap problem was not necessary to give effect to their intentions at the time.

Neal Armstrong. Summary of Mac’s Convenience Stores Inc. v. A.G. of Canada, 2015 QCCA 837 under General Concepts – Rectification.