The appellant corporation sought to deduct non-capital losses incurred by a predecessor corporation prior to an amalgamation.
The Minister of National Revenue disallowed the deduction on the basis that control of the predecessor had changed hands, relying on a shareholder agreement that restricted the transfer and issuance of shares.
The Supreme Court of Canada held that while 'control' under the Income Tax Act means de jure control, a unanimous shareholder agreement is a constating document that must be considered in assessing de jure control.
However, the specific agreement in this case did not deprive the majority shareholder of effective control.
Therefore, there was no change in control, and the appellant was entitled to deduct the losses.
