Symco 2015 – Court of Quebec doubts that a restaurant renovation business was a similar business to a business of manufacturing decorative stone cladding

The taxpayer, which had been engaged in a business of manufacturing decorative stonework claddings, sold essentially all its assets in December 2012 pursuant to a bankruptcy proposal that had been accepted by its creditors, and terminated all its non-shareholder employees. After an acquisition of its control (AoC) in March 2014, it commenced to carry on (from around June 2015) a business of carrying out restaurant renovations, which became profitable. Between the asset sale and the AoC, its activities had been minimal, e.g., two business trips to Haiti, along with a professed desire of one of its shareholders to resume the business. Before confirming ARQ assessments that denied its use of pre-AOC non-capital losses under the Quebec equivalent of s. 111(5)(a)), Boutin JCQ stated:

The economic activity which gave rise to such losses was not the same as the economic activity of [the post-AoC company]. In the opinion of the Court, this is, keeping in mind the words "substantially all” and “similar”, used by the Legislature in [the equivalent of s. 111(5)(a)(ii)(B)], in itself a significant obstacle for the plaintiff. …

[Furthermore] there was a long period of inactivity, the evidence clearly illustrating that the [pre-AoC] company was at a standstill for quite some time.

Neal Armstrong. Summary of Symco 2015 Inc. v. Agence du revenu du Québec, 2024 QCCQ 8022 under s. 111(5)(a)(ii)(B).