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Appeals dismissed; GAAR applied to deny capital losses created to circumvent dividend stop-loss rules.
The appellant carried out a corporate reorganization involving the immigration of a US subsidiary to Canada and its subsequent wind-up, realizing a capital loss.
The Minister applied the general anti-avoidance rule (GAAR) to deny the capital loss carryover for the 2018 taxation year and to reduce the capital loss balance for the 2007 taxation year, arguing the transactions circumvented the dividend stop-loss rules in subsections 93(2) and (2.01) of the Income Tax Act.
The Tax Court of Canada dismissed the appeals, finding that the avoidance transactions were abusive as they frustrated the object, spirit, and purpose of the dividend stop-loss rules, which aim to prevent the artificial creation of losses through tax-free dividends.
