Boeckh - Court of Quebec finds that an investment company focused on capital gains was a trader or dealer for s. 39(5)(a) purposes

Boeckh was a closely-held investment company whose portfolio (of over $100 million for many of the years at issue) was focused on Canadian public companies in the resource and high tech sectors. In finding that an election that Boeckh had made under the Quebec equivalent of s. 39(4) was ineffective by virtue of the exclusion for a trader or dealer in securities, so that its stock market gains were on income account, Riverin JCQ found that:

• A qualified investment professional (an experienced CFA) devoted himself full-time to managing Boeckh’s portfolio;

• The portfolio had what he considered to be a high turnover (of around 30%, with the percentage of securities held for over two years, ranging from 31% to 45%, and those held for over five years ranging from 14% to 24%).

• Boeckh’s objective was to generate gains rather than dividends, and focused on companies with a high potential for appreciation.

In other words, Boeckh managed its portfolio like a typical mutual fund. Note that the s. 39(5) election is not available to mutual funds regarding their non-Canadian portfolios.

Neal Armstrong. Summary of Investissement Boeckh Inc. v. ARQ, Nos. 500-80-033896-169, 500-80-035759-175 under s. 39(5)(a).