Section 253

The taxpayer, who ceased to be a resident of Canada when he resigned as CFO of a NASDAQ-listed corporation (Canadian Solar Inc., or “CSI”), thereafter exercised his employee stock options to acquire CSI shares and, after such shares had declined in value, sold them on the NASDAQ through a stock broker based in the U.S. Such sale gave rise to a capital loss.

In rejecting a submission (at para. 10) that the taxpayer’s loss was deemed by s. 253(b) to be from a business carried on in Canada as “when an individual lists shares of a publicly listed corporation for sale on a particular stock exchange, the individual makes the share available to anyone who is willing to purchase the share, without any territorial restriction,” Dawson JA stated (at paras. 12-13):

Assuming that listing publicly traded shares for sale on a stock exchange constitutes a solicitation or offer within the meaning of subsection 253(b), the solicitation or offer must take place in Canada. Offering shares listed on an American exchange through an American broker does not constitute the solicitation of orders or the offering of anything for sale in Canada by the offeror.

The contrary conclusion would be inconsistent with the purpose of section 253, which has been held to be “to subject non-resident persons to Canadian tax provided they carry out a minimum amount of commercial activity within Canada’s borders” (Maya Forestales S.A. v. Canada, 2005 TCC 66, 2005 D.T.C. 514, at paragraph 34; aff’d 2006 FCA 35, 354 N.R. 272).

Under the law of Colorado, which was the proper law of the contracts between the American plaintiff and a Canadian finance company, the Canadian finance company could not be considered the agent of the plaintiff with regard to creditor's group insurance policies which the Canadian company was issuing instead on its own account. Nor did the issuance by the plaintiff, at the insistence of the federal Superintendent of Insurance, of brochures to the Canadian clients of the Canadian finance company constitute evidence of solicitation in Canada of insurance business by the plaintiff.

S.253(b) did not apply to a lender who "remained in Switzerland and was solicited there by a [Canadian] broker offering him participation in money lending activities. Neither can it be said that loans can be offered for sale".

The finding of the trial judge that the only activity of the taxpayer carried on in Canada was attempting by advertising to induce Canadians to cross the border into Washington State to view the plaintiff's building lots, in the hope that some might become interested in buying property there, by itself established that the taxpayer was not deemed by s. 253(b) to be carrying on business in Canada. The finding of the trial judge that "no offer was obtained and no attempt was made to obtain any in Canada and ... that nothing was offered for sale in Canada either through an agent or otherwise" further supported this conclusion.

The trial judge also stated (76 DTC 6178, at 6180) that "soliciting orders means that orders must be sought and attempts made to obtain them within the jurisdiction and the word 'offer' ... must be given its ordinary meaning in contract law, that is, a binding offer which, if accepted, would create a contract ...".