CIBC v. The King, 2023 FCA 91.

Introduction

On May 4, 2023, the Federal Court of Appeal ("FCA") released its judgement¹ dismissing an appeal by Canadian Imperial Bank of Commerce ("CIBC") from a Tax Court of Canada ("TCC") decision² regarding the interaction of subsections 39(2)³ and 40(3.6) of the Income Tax Act (Canada)⁴ (the "ITA")⁵ in the context of a loss realized by CIBC in September, 2007 on the redemption of U.S. dollar-denominated shares it held in CIBC Delaware Holdings Inc. ("DHI"). The loss was solely attributable to the fluctuation in the value of the U.S. dollar ("US$") relative to the Canadian dollar ("C$") over the period in which CIBC held the shares of DHI.

While CIBC FCA concerned a historic version of subsection 39(2), the case raises an issue of potential significance to Canadian capital markets. As the Supreme Court of Canada has observed: "Canadian capital markets are of relatively modest size, and it is common for corporations requiring significant amounts of