Where Profitco avails itself of the benefit of tax losses of Lossco, a publicly traded corporation that is insolvent and has ceased to carry on its business, by transferring assets to Lossco in consideration for shares that represent only 45% of the votes but substantially all the value of Lossco, CRA would consider the application of GAAR. CRA stated:
We are of the view that transactions that are designed to allow a person to acquire a very substantial economic interest in a corporation (for example, perhaps by having both de facto control and a substantial equity interest in the corporation) and to benefit from the corporation's tax losses, without being subjected to the “same or similar” business restrictions in subsection 111(5), could reasonably be considered to result in an abuse having regard to the general policy of the Act against the trading of non-capital losses by unrelated corporations.
