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The Concept of De Facto Control in Canadian Tax Law: Taber Solids and Beyond

The legal concept of control is both highly significant to the operation of Canadian tax law and, perhaps surprisingly, still somewhat unsettled in terms of its interpretation. This is particularly true of the scope given by the courts to control in fact (de facto control) where two different and sometimes competing tests have appeared in the case law. The starting point presented in this paper for considering these rival tests for control in fact begins the 2002 Federal Court of Appeal decision in Silicon Graphics and its ‘board control’ test for control in fact before turning to the opposing ‘operational control’ test to have emerged in the subsequent case law. While the Taber Solids decision of the Tax Court of Canada in late 2009 might have resolved the tension between the dueling approaches – and to some extent the case has laid some of the groundwork for an eventual reconciliation, this paper argues that Taber Solids stands for a continuing misreading of Silicon Graphics. Instead, based on an examination of legislative text, context, and purpose, this paper argues that the meaning attributed to the concept of de facto control should be returned to its earlier and narrower interpretation.