Deans Knight Income Corporation Granted Leave to Appeal to Supreme Court of Canada

VANCOUVER, British Columbia, March 10, 2022 (GLOBE NEWSWIRE) -- Deans Knight Income Corporation (the "Company") announces that the Company has been granted leave by the Supreme Court of Canada (the "SCC") to appeal the August 4, 2021 income tax decision of the Federal Court of Appeal (the "FCA Decision"). The FCA Decision overturned the earlier decision of the Tax Court of Canada and confirmed the Canada Revenue Agency's (the "CRA") reassessments of the Company's tax attributes in its 2009 to 2012 taxation years. The SCC will now hear arguments from the Company and the Crown regarding the notices of reassessment ("NORAs") issued by the Canada Revenue Agency ("CRA") in respect of the Company's taxation years 2009 to 2012, inclusive. At stake is whether the deduction of the Company's tax attributes in its 2009 to 2012 taxation years can be properly denied by the CRA on the basis of the general anti-avoidance rule in the Income Tax Act (Canada).

As previously disclosed, the Company received the NORAs in July 2014 in which the CRA denied the use of certain tax attributes by the Company. The NORAs indicated that the Company's tax liability for the 2009 to 2012 taxation years was approximately $22.7 million, including arrears interest and penalties. In order to limit additional interest and penalties from accruing, the Company prepaid the CRA. Should the Company ultimately be successful in defending its tax filing position, the amount prepaid to the CRA will be refunded to the Company with interest. However, if the Company is unsuccessful, the amount prepaid to the CRA will be forfeited.

Now that the SCC has granted the Company leave to appeal the FCA Decision, the Company anticipates that final resolution could take an additional 8 ? 12 months.  

"When the portfolio liquidation commenced in 2014, shareholders were required to retain over $2 per share in the Company, primarily consisting of funds on deposit with the CRA," said Dillon Cameron, CEO. "While this decision is a preliminary step in the appeal to the Supreme Court of Canada, the Company is encouraged by the fact that the Supreme Court of Canada grants few leave applications in general, especially in income tax cases." Cameron continued, "Since the Initial Public Offering in 2009, management has maintained the view that the Company's tax filing position was appropriate. The original objective of the Company was to maximize total return for shareholders by investing primarily in corporate debt securities. For the first 5 years we executed this strategy and for the last 7 years we have defended the Company's tax filing position. We look forward to further updating our shareholders as information becomes available."