Symco 2015 Inc. v. Agence du revenu du Québec, 2024 QCCQ 8022

The taxpayer (“Symco 2015”), which had been engaged in a business of manufacturing decorative stonework claddings, sold essentially all its assets in December 2012 pursuant to a bankruptcy proposal that had been accepted by its creditors, and terminated all its non-shareholder employees. After an acquisition of its control (AoC) in March 2014, it immediately changed its name from Pierres Gémo Inc. to Symco 2015 Inc., commenced to carry on (from around June 2015) a business of carrying out restaurant renovations, which became profitable, and in September 2015, the bankruptcy proposal process was completed. Between the sale and the AOC, its activities had been minimal, e.g., two business trips to Haiti, along with a professed desire of one of its shareholders to resume the business.

Before confirming ARQ assessments that denied its use of pre-AOC non-capital losses pursuant to TA s. 736.0.1 (similar to ITA s. 111(5)(a)), Boutin JCQ stated (at paras. 81, 83, TaxInterpretations translation):

The economic activity which gave rise to such losses was not the same as the economic activity of Symco 2015. In the opinion of the Court, this is, keeping in mind the words "substantially all” and “similar”, used by the Legislature in TA Article 736.0.1, in itself a significant obstacle for the plaintiff. …

[Furthermore] there was a long period of inactivity, the evidence clearly illustrating that the Pierres Gémo Inc. company was at a standstill for quite some time.

The taxpayer, which had been engaged in a business of manufacturing decorative stonework claddings, sold essentially all its assets in December 2012 pursuant to a bankruptcy proposals that had been accepted by its creditors, and terminated all its non-shareholder employees. After an acquisition of its control (AoC) in March 2014, it commenced to carry on (from around June 2015) a business of carrying out restaurant renovations, which became profitable. Between the asset sale and the AoC, its activities had been minimal, e.g., two business trips to Haiti, along with a professed desire of one of its shareholders to resume the business.

Before confirming ARQ assessments that denied its use of pre-AOC non-capital losses under the Quebec equivalent of s. 111(5)(a)), Boutin JCQ stated (at paras. 81, 83, TaxInterpretations translation):

The economic activity which gave rise to such losses was not the same as the economic activity of [the post-AoC company]. In the opinion of the Court, this is, keeping in mind the words "substantially all” and “similar”, used by the Legislature in [the equivalent of s. 111(5)(a)(ii)(B)], in itself a significant obstacle for the plaintiff. …

[Furthermore] there was a long period of inactivity, the evidence clearly illustrating that the [pre-AoC] company was at a standstill for quite some time.