Porter CEO battling CRA over tax bill from 'significant losses' from 'high-risk' pandemic trading
OTTAWA — Porter Airlines' CEO is fighting the CRA over a six-figure tax bill linked to an unsuccessful incursion into 'high risk' trading in the early months of the COVID-19 pandemic that cost him over $5.7 million.
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When the COVID-19 pandemic hit Canada in March 2020, Porter's top executive Michael Deluce saw opportunity. As economies suddenly shuttered and investors scrambled to grapple with the global pandemics, markets experienced some of the largest one-day swings in nearly four decades.
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According to a document filed to the Tax Court of Canada, Deluce noticed market volatility and decided to liquidate an investment portfolio containing low-risk investments that would generate capital, but only in the long-term.
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Instead, Deluce put the funds into a self-managed investing account and swung for the stars.
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According to an appeal he filed in court, the airline executive thought he could make significant amounts of money by investing in high-risk exchange-traded funds (ETF).
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He tried to short the S&P 500 index because he had a 'very pessimistic view' of the market's reaction to the pandemic and thought he could 'profit off a potential fall of the stock market'.
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On March 20 — the same day Porter suspended all flights for what would become 18 months — Deluce invested in an ETF focused on the price of futures contracts on crude oil, the document shows. His bet was that oil prices would rise within days after plummeting in early March amid a sharp dip in demand in the U.S. (they did not).
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'(Deluce) traded high-risk investment products with the intention of capitalizing on the volatility of the market caused by the Covid-19 pandemic, and to realize significant short-term profits,' reads his appeal.
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But Deluce's gamble did not pay off. His appeal states that he incurred 'significant losses' in his attempt to bet against the S&P 500, and losses in the four days he bet on oil prices rising starting March 20, 2020, but some gains from purchasing and selling units of a third ETF on March 26, 2020.
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After eight months of trading, he had accrued nearly $5.8 million in investment losses as well as interest fees on the loans he took out to fund his trades, according to his filing.
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Deluce is the son of Robert Deluce, who founded Porter Airlines in 2006 after a lengthy battle with the City of Toronto about development at Billy Bishop Toronto City Airport where the airline is headquartered. Michael Deluce was named CEO of Porter Airlines in 2019 and Robert Deluce assumed the role of executive chairman.
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