The parties brought a joint motion under section 58 of the Tax Court of Canada Rules (General Procedure) to determine whether paragraph 40(3.6)(a) of the Income Tax Act applied to deem the appellant's loss from the disposition of shares in a foreign subsidiary to be nil.
The appellant argued that the loss was a foreign exchange loss under subsection 39(2) and therefore excluded from subsection 40(3.6).
The Tax Court held that, based on the Federal Court of Appeal's decision in R. v. Bank of Montreal, the loss must first be determined under subsection 40(1), which is subject to the overriding rule in subsection 40(3.6).
Therefore, the loss was deemed to be nil, and the question was answered in the affirmative.
