The Minister reassessed the appellant under the General Anti-Avoidance Rule (GAAR) to disallow the deduction of non-capital losses from prior years.
The Minister argued that the appellant's restructuring circumvented the loss restriction rules in subsection 111(5) of the Income Tax Act by avoiding an acquisition of de jure control while transferring effective control.
The Tax Court of Canada allowed the appeal, finding that the object, spirit, and purpose of subsection 111(5) relies on the bright-line test of de jure control.
Since there was no acquisition of de jure control, the transactions did not abuse the provision, and the GAAR did not apply.
