Court upholds Quebecor capital gains tax strategy, dismisses government appeal

The Federal Court of Appeal dismissed an appeal brought by the federal government against Quebecor Inc., confirming that a series of corporate transactions by the company to avoid paying a large tax bill were not abusive under the law. The appeal court’s decision, issued Nov. 21, upheld a 2023 ruling by the Tax Court of Canada in Quebecor’s favour. The case revolved around transactions by Quebecor and a numbered corporation under its indirect control, 3662527 Canada Inc. (366), in the early 2000s. Quebecor held shares in Canadian pulp and paper company Abitibi Consolidated Inc., which had a low tax cost but a high value, exposing Quebecor to a potential capital gain of $191.8 million if those shares were sold. Meanwhile, 366 held shares in Videotron with an unrealized capital loss of $200.5 million. Quebecor took steps designed to leverage the unrealized loss in 366’s Videotron shares to increase the tax cost of Quebecor’s Abitibi shares, shielding the gains it would have had to pay taxes on. Quebecor effectively sold its Abitibi shares to 366 and reacquired them at market value shortly after, then 366 was wound-up, triggering the loss on its Videotron shares. Following the transactions, the Minister of National Revenue argued that the scheme contravened the Income Tax Act and its general anti-avoidance rule (GAAR). The minister reduced the cost of Quebecor’s Abitibi shares from $191.8 million to $1, denying the losses and subsequent tax benefit. While Quebecor admitted that the transactions were for tax benefit, it successfully argued to the Tax Court — and now the Federal Court of Appeal — that they were not abusive. The crown alleged that the overall result of the transactions breached the rules around wind-ups and capital gains/losses by allowing “two levels of losses for the same economic interest.” This argument was rejected by the appeals court, which found that “the premise of ‘a single loss’ or ‘matching’ is not supported in the act.” The court emphasized the legal separation between a corporation and its shareholders. If the law does not explicitly prevent it, both the corporation and the shareholder are legally entitled to calculate their respective losses when they dispose of their separate assets. Therefore, even if one business owns the other, the tax system measures the gain or loss of each business separately, meaning an economic loss can be measured and claimed at both the corporate level and the shareholder level. The court further concluded that the net result of the series of transactions was a transfer or consolidation of losses between “related persons,” all affiliated with Quebecor. It observed that loss consolidation transactions between such parties, even when performed for tax reasons, generally do not result in misuse or abuse of the act. Because the Crown failed to prove that the transactions “frustrated” the “object, spirit, or purpose” of provisions in the Income Tax Act, the court ruled that the GAAR does not apply and dismissed the government’s appeal with costs. phalentm@thewirereport.ca

Court upholds Quebecor capital gains tax strategy, dismisses government appeal

Court |
By Phalen Tynes-MacDonald
|November 26, 2025

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Court upholds Quebecor capital gains tax strategy, dismisses government appeal

Court | By Phalen Tynes-MacDonald |November 26, 2025

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By Phalen Tynes-MacDonald
|November 26, 2025