The taxpayer entered into a flow-through share agreement with a corporation ("991") which he and his colleagues had incorporated for the purpose of investing in flow-through shares of an oil and gas company ("Sierra"). After the Minister reassessed the taxpayer to deny the deduction of amounts which 991 had renounced to the taxpayer and which Sierra, in turn, had renounced to 991, the taxpayer argued that the Minister could not reassess the taxpayer because 991 had not been reassessed (the taxpayer had provided a waiver under s. 152(4)(a)(ii) but 991 had not).
Angers J. rejected the taxpayer's argument that the phrase "except for the purposes of that renunciation" in ss. 66(12.61), (12,63) and (12.65) meant that flow-through expenses revert to the corporation once they are challenged by the Minister. He stated (at para. 85):
I would agree with the respondent's position that this phrase pertains to situations involving questions of whether the flow-through corporation has the status of principal business corporation or whether the taxpayer is truly a flow-through shareholder. If what the appellant suggests were actually the case, there would be no need for subsection 66(12.73) of the Act, which says that where a corporation renounces expenses in excess of the amounts it is entitled to renounce, that corporation must inform the Minister so that appropriate adjustments in the expense balances can be made.