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Deans Knight Income Corporation, 2021 FCA 160, aff'd 2023 SCC 16-- summary under Subsection 245(4) Summary Under Tax Topics- Income Tax Act- Section 245- Subsection 245(4) avoidance of a de jure acquisition of a Lossco through acquiring “actual control” was abusive The non-capital losses of $90M, and other tax attributes of the taxpayer, were effectively sold to arm’s length investors pursuant to transactions under which: The existing shareholders of the taxpayer exchanged their shares for shares of a “Newco” (“New Forbes”) under a Plan of Arrangement A private company “facilitator” (Matco) entered into an “Investment Agreement” with the taxpayer and New Forbes pursuant to which Matco (principally in consideration for $3M in cash) acquired a debenture of the taxpayer that was convertible into shares representing 79% of its equity shares but only 35% of its voting shares. ...

In also noting that the application of s. 160 to the dividends appeared to accord with the purposes of s. 160, he stated (at para. 76) that the dividends had been paid by way of set-off against the shareholder debt and (at para. 77) that “the assets of the Corporation that would have been available to pay its tax debts were reduced” as a result of the dividends, which were “transfers of property for no consideration” (para. 79). ...

Nor is it reasonable to exclude from consideration all errors flowing from a mistake about the quantum of available contribution room or all errors caused by bad advice received from a third party. ...