Words and Phrases - "en vue de"

On two days in October 1996, the parent company (“Marjad”) of the taxpayer (“3295036”) transferred shares of two public companies, whose fair market value (“FMV”) substantially exceeded their adjusted cost base (“ACB”), to 3295036. Marjad did not have a Quebec presence whereas 3295036 was a Quebec filer. Marjad and 3295036 filed a joint s. 85(1) rollover election for federal and Ontario purposes, but did not make the equivalent Quebec election. The effect was that for purposes of the Taxation Act (Quebec) (“TA”), 3295036 acquired the shares at a cost equal to their FMV, while at the same time the transfer did not generate a tax liability to Marjad.

3295036 sold a portion of the shares in 1998, and the larger portion of them in 2000 and, in each case, reported a gain for federal purposes and a capital loss for Quebec purposes. The ARQ assessed 3295036’s returns for 2007 and 2008 to deny its use in those taxation years of a portion of the capital losses that it had previously reported. TA, s. 529.1 denied the use by 3295036 of its stepped-up cost for the shares if the disposition to it by Marjad of those shares occurred as “part of a series of transactions or events that began before 19 December 1996 and ended after 18 December 1996,” i.e., as part of a series of transactions that terminated with the subsequent sales.

After finding that the subsequent sales were not part of the same “common law” series as the purchasers of the shares had not been identified at the time of the 1996 transfer (paras. 51), Fournier JCQ found (at para. 78) that the share transfers to 3295036 in 1996 were a “series of transactions” and that the subsequent sales of the shares by 3295036 were transactions (the “Transactions”) occurring “in contemplation” of that series and, thus, were assimilated to the series by the TA equivalent of s. 248(10), stating (at para. 90, TaxInterpretations translation):

[T]he Transactions were, all as in Copthorne, the type of transaction necessary in order to render the tax benefit resulting from the Series of Transactions a reality. In other words, the Transactions were the necessary acts for permitting 3295036 to take advantage of its artificially increased ACB at the end of the Series of Transactions commencing in 1996.

He also rejected (at para. 107) 3295036’s submission that the backward-looking interpretation of “in contemplation” adopted in inter alia Copthorne should be rejected because the French version had used the narrower phrase “en vue de” rather than “au vue de” and because a narrower scope should be given to a specific anti-avoidance provision than to GAAR.