[1] This is an appeal and a cross-appeal from the decision of Archambault J.T.C.C. rendered on April 19, 2001 and reported at 2001 DTC 861; [2001] 4 C.T.C. 2399. The issue on the appeal is whether the learned judge erred in law in his interpretation of the words "the corporation" found in subparagraph 54(i)(ii) of the Income Tax Act. The provision read at the relevant time:

54(i) "superficial loss".-"superficial loss" of a taxpayer means his loss from the disposition of a property in any case where

(i) the same or identical property (in this paragraph referred to as "substituted property") was acquired, during the period beginning 30 days before the disposition and ending 30 days after the disposition, by the taxpayer, his spouse or a corporation controlled, whether directly or indirectly in any manner whatever, by him, and

(ii) at the end of the period referred to in subparagraph (i) the taxpayer, his spouse or the corporation, as the case may be, owned, in any manner whatever, the substituted property,

[...]

Emphasis added

54i) « perte apparente » - « perte apparente » subie par un contribuable signifie une perte résultant de la disposition d'un bien, dans tous les cas où

(i) le même bien ou un bien identique (appelé dans le présent alinéa le « bien de remplacement » ) a été acquis, pendant la période commençant 30 jours avant la disposition pour se terminer 30 jours après, par le contribuable, son conjoint ou une corporation contrôlée par lui, directement ou indirectement et de quelque façon que ce soit, et

(ii) à la fin de la période visée au sous-alinéa (i), le contribuable, son conjoint ou la corporation, selon le cas, était propriétaire, à quelque titre que ce soit du bien de remplacement,

[...]

Notre souligné

[2] The judge interpreted these words to mean the same corporation as the corporation referred to in subparagraph 54(i)(i), namely the corporation controlled, whether directly or indirectly in any manner whatever, by the taxpayer who disposed of the property. Since the corporation was no longer controlled by the taxpayer towards and before the end of the 30-day period mentioned in subparagraph 54(i)(i), the judge concluded that the conditions for the realization of a superficial loss were not met.

[3] We agree with the interpretation given by the Tax Court judge to the words "the corporation" for the reasons that he gave. Just like the words "the taxpayer" and "his spouse" in subparagraph 54(i)(ii) cannot refer to any other taxpayer or any other spouse than the taxpayer or the spouse referred to in subparagraph 54(i)(i), we have no doubt, bearing in mind the purpose of the provision and applying the principles of either a literal or a purposive interpretation, that "the corporation" also refers to the corporation as described, identified and qualified in subparagraph 54(i)(i). We should add that the French version of the provision, "le contribuable", "son conjoint" ou "la corporation", leads to the same unequivocal result. This is sufficient to dispose of the appeal without the need to address the other grounds of dismissal raised by the respondent or given by the Tax Court judge.

[4] The cross-appeal by the respondent attacks the judge's finding that the appellant had undertaken to make to senior executives of Color-Ad Packaging Inc. payments previously agreed under an Equity Appreciation Bonus Plan. Allegedly, the payments were made as part of the transaction by which the appellant, on a tax-deferred roll-over basis, acquired the shares of Gravure Graphics of Minnesota Inc. from J.K. May Investments Ltd. and Maynaki Holdings Ltd. The Tax Court judge found that it was the intent of the parties to the transaction that the appellant would make the payments and, consequently, that these payments were part of the appellant's cost of acquiring these shares.

[5] There was ample evidence to support this finding of the Tax Court judge coming from the appellant itself, the testimony of Mr. May who also controlled Maynaki Holdings Ltd. and from the fact that both J.K. May Investments Ltd. and Maynaki Holdings Ltd. were under an obligation prior to the roll-over transaction to make the impugned payments on the sale of the corporations' shares.

[6] For these reasons, both the appeal and the cross-appeal will be dismissed without costs.

"Gilles Létourneau"

J.A.

FEDERAL COURT OF CANADA

APPEAL DIVISION

Date: 20021202

Docket: A-298-01

BETWEEN:

GRAPHIC PACKAGING CANADA CORPORATION

Appellant

and

HER MAJESTY THE QUEEN

Respondent

REASONS FOR JUDGMENT

OF THE COURT

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-298-01

STYLE OF CAUSE:

GRAPHIC PACKAGING CANADA CORPORATION

Appellant

and

HER MAJESTY THE QUEEN

Respondent

PLACE OF HEARING: Montreal, Quebec

DATE OF HEARING: December 2, 2002

REASONS FOR JUDGMENT OF THE COURT : LÉTOURNEAU J.A.

CONCURRED IN BY: DÉCARY J.A.

NADON J.A.

DATED: December 2, 2002

APPEARANCES:

Mr. Wilfrid Lefebvre FOR THE APPELLANT

Mr. Gérald Chartier FOR THE RESPONDENT

SOLICITORS OF RECORD:

Ogilvy Renault FOR THE APPELLANT

Montreal, Quebec

Morris Rosenberg FOR THE RESPONDENT

Deputy Attorney General of Canada

Winnipeg, Manitoba

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Graphic Packaging Canada Corp. v. Canada, 2002 FCA 483

Citations2002 FCA 483

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2002 FCA 483