Budget 2013: Further Restrictions On Loss Trading

Economic acquisitions of control

The Income Tax Act (Canada) (the "Tax Act") contains rules (the "loss trading rules") limiting the ability of a corporation to utilize losses and other tax pools that have arisen or were acquired prior to the acquisition of control of the corporation by an unrelated person. Control of a corporation for this purpose is generally considered to be the ownership of shares having the majority of votes in the election of the board of directors. Some taxpayers have sought to avoid the application of these rules by not acquiring voting control of a corporation which has losses or other tax pools, but instead acquiring shares which entitle the taxpayer to receive substantially all the economic value of the corporation.