Agence du revenu du Québec v. Samson, 2023 QCCA 332

The respondent (Samson) and a corporation (Bourgade) implemented a plan set out in a tax-planning memo of a tax advisor that contemplated that they would transfer their shares of a corporation (CRP) in December 2013 after having satisfied the conditions for realizing a business investment loss under s. 50(1)(b)(iii). This result was premised on their having had a November 30, 2013 taxation year – which had occurred for Bourgade, but not for Samson who, as an individual, had a calendar taxation year.

The Quebec Superior Court agreed to rectify the share sale agreement to change its date from December 11, 2013 to the date on which it had actually been signed (April 4, 2014). After quoting from the tax planning memo, and before dismissing the ARQ’s appeal, the Court stated (at paras. 19-21, TaxInterpretations translation):

The judge further concluded that "the Agreement does not reflect the true intention of the parties", in that "its date excluded from the outset any possibility of making the election under ITA subsection 50(1)". … Since the ITA s. 50(1)(b)(iii) election could not be made before December 31, 2013, the December 11, 2013 date of the Agreement does not reflect the parties' intention.

Given this clearly expressed intention, it must be concluded that the respondent's request for rectification simply seeks to correct the date of the Agreement to give effect to that intention. This is consistent with the pronouncements of the Supreme Court in Jean Coutu. This is not a case where the taxpayer is seeking a tax benefit that he did not anticipate at the time of his tax planning.

… The answer might have been different if the rectification had given the taxpayer an additional tax benefit that he had not anticipated at the time of his tax planning. However, that is not the case here.

An individual (Samson) and corporation (Bourgade) implemented a tax-planning memo that contemplated that they would transfer their shares of a corporation in December 2013 after having satisfied the conditions for realizing a business investment loss under s. 50(1)(b)(iii). This result was premised on their having had a November 30, 2013 taxation year – which had occurred for Bourgade, but not for Samson (who had a calendar taxation year).

The Quebec Superior Court agreed to rectify the share sale agreement to change its date from December 11, 2013 to the date on which it had actually been signed (April 4, 2014).

Before dismissing the ARQ’s appeal, the Court repeated that realizing the loss under s. 50(1)(b)(iii) was a specified result in the tax memo, and stated (at paras. 19-20, TaxInterpretations translation):

Since the ITA s. 50(1)(b)(iii) election could not be made before December 31, 2013, the December 11, 2013 date of the Agreement does not reflect the parties' intention.

Given this clearly expressed intention, it must be concluded that the respondent's request for rectification simply seeks to correct the date of the Agreement to give effect to that intention. This is consistent with … Jean Coutu. This is not a case where the taxpayer is seeking a tax benefit that he did not anticipate at the time of his tax planning.