Deans Knight Income Corporation v. His Majesty the King

(Federal) (Civil) (By Leave)


Taxation — Corporate restart transaction — Deductible losses — Non-capital losses — General anti-avoidance rule — Whether the Federal Court of Appeal erred in relying on the GAAR to conclude that “actual control” was Parliament’s intended test under ss. 37(6.1), 111(5) and 127(9.1) of the ITA — Whether the Federal Court of Appeal erred in concluding, contrary to the trial judge’s findings, that the avoidance transactions resulted in an abuse of ss. 37(6.1), 111(5) and 127(9.1) of the ITA — Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), ss. 37(6.1), 111(5) and 127(9.1).


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Prior to the transactions at issue, the appellant, Deans Knight Income Corporation, was a Canadian public corporation that had approximately $90 million of unused non-capital losses and other deductions. It sought to realize the value of these tax attributes and entered into an agreement with a corporation that had expertise in arranging such transactions. From 2009 to 2012, the appellant deducted a majority of its tax attributes to reduce its tax liability. Following the issuance of reassessments to deny the deductions, the appellant successfully appealed to the Tax Court, but the decision was overturned by the Federal Court of Appeal.

Lower Court Rulings

April 19, 2019
Tax Court of Canada

Appeals from the reassessments for 2009 2012 taxation years allowed
August 4, 2021
Federal Court of Appeal

2021 FCA 160, A-170-19
Appeal allowed; judgment of Tax Court set aside and appeals to the Tax Court are dismissed