CRA indicates that Foix established that s. 84(2) should be construed broadly
When asked to comment on the Federal Court of Appeal decision in Foix, which found that s. 84(2) applied to a particular hybrid sale transaction, CRA stated:
According to the broad interpretation of subsection 84(2) adopted by the Court, “transactions leading to an alleged distribution or appropriation of funds or property are to be considered as a whole in a way that is temporally flexible”. With respect to the expression “in any manner whatever’ in subsection 84(2), the Court noted that “[t]hese far-reaching words are anchored in history as they have always been part of this provision, and they faithfully reflect its anti-avoidance purpose”. Finally, the Court emphasized that when a facilitator is involved, “the distribution or appropriation of the target corporation’s funds or property can be carried out in a variety of different ways and take place through various steps that are organized so as to occur at different times”. It then added that “in the presence of an orchestrated attempt to extract surpluses without tax or at a reduced rate, the intention of Parliament requires a reading of subsection 84(2) that balances the words that are used, as an overly literal reading would defeat its anti-avoidance mission”.
[Foix] also resolved the uncertainties arising from certain decisions that taxpayers frequently invoked against the application of subsection 84(2), namely, McNichol … Descarries … and Robillard … [and] warn[ed] against the formalistic and restrictive application of subsection 84(2) put forward in those decisions.
CRA also indicated that “Foix did not express an opinion on the Tax Court of Canada's analysis in Geransky” and implied that Geransky has been overtaken by the subsequent decisions of the Federal Court of Appeal in MacDonald and Foix, which “clearly ruled that subsection 84(2) should be given a broad interpretation.”
Neal Armstrong. Summary of 10 October 2024 APFF Roundtable, Q.3 under s. 84(2).