Subsection 245(1) - Definitions
Tax Benefit
Cases
Copthorne Holdings Ltd. v. Canada, 2012 DTC 5006 [at 6536], 2011 SCC 63, [2011] 3 S.C.R. 721
The taxpayer's shareholders circumvented the rule in s. 87(3), which required that the paid-up capital ("PUC") of a subsidiary corporation...
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| Tax Topics - General Concepts - Stare Decisis | high threshold for reversing not met | 193 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | policy of s. 87(3) is to avoid preservation of PUC on parent and sub amalgamation | 372 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) | 342 | |
| Tax Topics - Statutory Interpretation - Expressio Unius est Exclusio Alterius | 109 |
Canada Trustco Mortgage Co., v. The Queen, 2005 DTC 5523, [2005] 2 S.C.R. 601, 2005 SCC 54
McLachlin C.J. and Major J. stated (at para. 20):
If a deduction against taxable income is claimed, the existence of a tax benefit is clear, since...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | policy of CCA provisions relied on cost irrespective of risk mitigation | 207 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) | 83 | |
| Tax Topics - Statutory Interpretation - Certainty | 127 | |
| Tax Topics - Statutory Interpretation - Ordinary Meaning | primacy to ordinary meaning if unequivocal | 90 |
Canadian Pacific Ltd. v. The Queen, 2000 DTC 2428, [2001] 1 CTC 2190 (TCC)
In finding that there was a tax benefit to the taxpayer in borrowing in Australian dollars at a higher rate than would be applicable to a...
See Also
Gervais v. The Queen, 2016 CCI 180
The taxpayer’s wife (Mrs. Gendron) purchased 1.04M preferred shares from the taxpayer (Mr. Gervais) at a cost of $1.04M (with Mr. Gervais not...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | basis averaging scheme to transfer half of a capital gain to the taxpayer’s wife was an abuse of the attribution rules | 429 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) | comparison with outright sale and gift | 193 |
MacDonald v. The Queen, 2012 TCC 123, rev'd 2013 DTC 5091 [at 5982], 2013 FCA 110
The emigration of the Canadian taxpayer to the United States would have caused the shares of his wholly- owned New Brunswick corporation ("PC") to...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | no abuse in surplus stripping if integration | 368 |
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) | 354 |
Administrative Policy
93 C.M.TC - Q. 11
Where a non-resident of Canada enters into a series of transactions designed primarily to secure an exemption or reduction from Canadian tax under...
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| Tax Topics - Treaties - Article 12 | 63 |
Transaction
Cases
R. v. Goldstein (1988), 42 C.C.C. (3d) 548 (Ont CA)
With respect to the interpretation of s. 548(1) of the Criminal Code, Houlden J.A. stated (p. 557) "the words 'the same transaction', in my...
See Also
MNR v. Granite Bay Timber Co. Ltd., 58 DTC 1066 (Ex Ct), briefly aff'd 59 DTC 1262 (SCC)
In finding that a resolution of the shareholders to wind-up a company was a "transaction" for purposes of s. 8(3) of the 1948 Act, Thurlow J....
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | the shareholders had a common purpose in determining to wind-up the company | 217 |
Subsection 245(2) - General anti-avoidance provision
Cases
Herbert H. Winter and David Herbert Outerbridge Winter v. Her Majesty The Queen, 90 DTC 6681, [1991] 1 CTC 113 (FCA)
Marceau J.A. accepted the following submission of Mr. Cumyn (p. 6683):
"There is a natural order to the provisions of the Income Tax Act with...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | s. 56(2) applied to taxpayer rather than 15(1) to son-in-law as de minimis shareholder | 74 |
| Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) | 171 |
See Also
594710 British Columbia Ltd. v. The Queen, 2016 TCC 288
Income account treatment of the profits realized by a condo-project limited partnership (HLP) was avoided through the corporate partners (the...
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| Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) | indirect transfer of property to taxpayer did not entail departure from FMV | 462 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | GAAR did not apply to the sale to a lossco of partner corps with pending condo sale profit allocations | 660 |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | LP profits can be allocated to purchasing partner at year end | 278 |
Quinco Financial Inc v. The Queen, 2016 TCC 190
On similar facts, Bocock J followed J.K. Read in rejecting a taxpayer argument that as a taxpayer could not apply GAAR to itself without CRA...
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| Tax Topics - Income Tax Act - Section 161 - Subsection 161(1) | interest on GAAR assessment accrues from the day after the balance-due date | 221 |
CIT Financial Ltd. v. The Queen, 2003 DTC 1138, 2003 TCC 544
Bowman A.C.J. noted that GAAR should not be applied if other sections of the Act are effective to eliminate the beneficial tax results sought by...
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| Tax Topics - General Concepts - Fair Market Value - Other | 88 | |
| Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(a) | 88 |
C.I.R. (New Zealand) v. Challenge Corporation Ltd., [1986] BTC 442 (PC)
The taxpayer acquired all the shares of a corporation ("Perth") with $5.8 million of tax losses from an arm's length vendor for a purchase price...
Administrative Policy
29 November 2016 CTF Roundtable Q. 7, 2016-0672091C6 - GAAR Assessment Process
In discussing the role of the GAAR Committee, CRA indicated that where the transactions under audit by the Tax Services Office are similar to...
Articles
D. Sandler, J. Li, "The Relationship between Domestic Anti-Avoidance Legislation and Tax Treaties", 1997 Canadian Tax Journal, Vol. 45, No. 5, p. 891.
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| Tax Topics - Treaties | 0 | |
| Tax Topics - Treaties - Article 3 | 0 |
Subsection 245(3) - Avoidance transaction
Cases
Canada v. Spruce Credit Union, 2014 DTC 5079 [at 7044], 2014 FCA 143
The taxpayer and 53 other BC credit unions maintained their required deposit insurance with two corporations ("CUDIC" and "STAB"). Due to a...
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| Tax Topics - Income Tax Act - Section 137.1 - Subsection 137.1(4) - Paragraph 137.1(4)(c) | allocations in proportion to shareholdings rather than premiums | 304 |
1207192 Ontario Limited v. Canada, 2012 DTC 5157 [at 7396], 2012 FCA 259, aff'g 2011 DTC 1301 [at 1686], 2011 TCC 383
In the course of applying s. 245 to deny the recognition by the taxpayer of a capital loss, the Court considered and rejected the argument of the...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | capital loss from value shift did not reflect economic loss; purpose objectively determined | 451 |
Canada Safeway v. Alberta, 2012 DTC 5133 [at 7271], 2012 ABCA 232
The taxpayer implemented a series of transactions that gave rise to interest deductions in Alberta, with the interest income being received free...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | replacing equity with borrowed money to reduce provincial income not abusive | 229 |
Canada v. Mackay, 2008 DTC 6238, 2008 FCA 105
In order for the taxpayers to acquire an interest in a shopping centre, a bank which held mortgages on the centre that were in foreclosure...
Canada v. Canadian Pacific Ltd., 2002 DTC 6742, 2002 FCA 98
The taxpayer borrowed 216 million in Australian dollars under debentures bearing interest at 16.125% per annum and that had been issued at a 2%...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | transaction not to be recharacterized to make it an avoidance transaction | 266 |
OSFC Holdings Ltd. v. Canada, 2001 DTC 5471, 2001 FCA 260
After becoming insolvent, a company ("Standard") in the mortgages business established a partnership, transferred a mortgage portfolio to the...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | policy against corporate loss trading | 229 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) | 32 | |
| Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc. | 70 | |
| Tax Topics - Statutory Interpretation - Interpretation/Definition Provisions | deeming v. definition provisions | 46 |
See Also
Gervais v. The Queen, 2016 CCI 180
The taxpayer’s wife (Mrs. Gendron) purchased 1.04M preferred shares from the taxpayer (Mr. Gervais) at a cost of $1.04M (with Mr. Gervais not...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | basis averaging scheme to transfer half of a capital gain to the taxpayer’s wife was an abuse of the attribution rules | 429 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(1) - Tax Benefit | benefit compared to straight sale and gift | 166 |
Veracity Capital Corporation v. M.N.R., 2015 DTC 5136 [at 6421], 2015 BCSC 2278
The following transactions occurred under a KPMG-advised “Quebec Year-end shuffle” or “Q-Yes” plan in order to avoid 90% of the B.C....
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | abuse of inter-provincial income allocation formula “designed to prevent both the over-taxation and the under-taxation of income" | 468 |
Birchcliff Energy Ltd. v. The Queen, 2015 TCC 232
A newly-launched public corporation ("Birchcliff") accessed the losses of a lossco ("Veracel"), in order to shelter the profits from producing oil...
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| Tax Topics - General Concepts - Sham | transitory share issuance under plan of arrangement was not a sham | 177 |
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(5) - Paragraph 111(5)(a) | grant of proxy did not detract from investors acting individually in own interest | 237 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | abusive reverse takeover by Lossco through diverted private placement | 261 |
Pièces automobiles Lecavalier Inc. v. The Queen, 2014 DTC 1126 [at 3319], 2013 TCC 310
A Canadian subsidiary ("Greenleaf") of Ford U.S. paid down to $9,750,000 (including accrued interest) a debt of $24,369,439 (plus accrued...
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| Tax Topics - General Concepts - Evidence | Canadian tax accountant's testimony on US tax consequences accorded little weight | 152 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | avoidance of debt forgiveness rules was abusive | 277 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) | debt-paydown transactions effected in contemplation of sale transaction were part of same series as the sales transactions | 248 |
Swirsky v. The Queen, 2013 TCC 73, 2013 DTC 1078 [at 431], aff'd 2014 FCA 36
For creditor-proofing reasons, the taxpayer sold shares in a family real estate development company ("Torgan") to his wife, and used the sales...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 33 | |
| Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(11) | 247 |
McClarty Family Trust v. The Queen, 2012 DTC 1123 [at 3122], 2012 TCC 80
A family holding company ("MPSI") paid a stock dividend of preferred shares, having nominal paid-up capital and a redemption amount of $48,000, on...
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| Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) | 340 |
McMullen v. The Queen, 2007 DTC 286, 2007 TCC 16
The taxpayer and an unrelated individual ("DeBruyn") accomplished a split-up of the business of a corporation ("DEL") of which they were equal...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 198 | |
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | mutual benefit and same advisors insufficient to establish non-arm's length in structured sale transaction | 258 |
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) | 229 | |
| Tax Topics - Income Tax Act - Section 84.1 - Subsection 84.1(1) | arm's length: negotiation based on self-interest | 257 |
MIL (Investments) S A v. The Queen, 2006 DTC 3307, 2006 TCC 460, aff'd 2007 FCA 236
In March 1993 an individual ("Boulle") transferred his shares of a Canadian public junior exploration company ("DFR") to the taxpayer, which was a...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) | 230 | |
| Tax Topics - Statutory Interpretation - Retroactivity/Retrospectivity | 91 | |
| Tax Topics - Treaties | 148 |
Desmarais v. The Queen, 2006 DTC 2376, 2006 TCC 44
The taxpayer, who held 14.28% of the common shares of a Canadian private corporation ("Consercom") transferred a 9.76% block to a wholly-owned...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | surplus stripping | 235 |
Overs v. The Queen, 2006 DTC 2192, 2006 TCC 26
The taxpayer owed approximately $2.3 million to a wholly-owned corporation. The loan, which had been used by him for personal purposes, would be...
Univar Canada Ltd. v. The Queen, 2005 DTC 1478, 2005 TCC 723
The taxpayer incorporated a Barbados subsidiary ("BarbadosCo") using borrowed money to subscribe for the shares of BarbadosCo, and BarbadosCo used...
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| Tax Topics - Income Tax Act - Section 95 - Subsection 95(6) - Paragraph 95(6)(b) | 102 |
Brouillette v. The Queen, 2005 DTC 1004, 2005 TCC 203
The taxpayer facilitated a leveraged buy-out of him and his co-shareholder of a company ("Brouillette Automobiles") by incorporating a corporation...
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | same advisors insufficient/adverse re price | 199 |
Geransky v. The Queen, docket 98-2383(IT)G (TCC)
The taxpayer, who owned a portion of the shares of the holding ("GH") which, in turn, owned an operating company ("GBC") utilized the enhanced...
Husky Oil Ltd. v. The Queen, 99 DTC 308 (TCC)
A Bermuda corporation, which was in financial difficulty and in which the taxpayer had an indirect 35% interest, transferred a drilling vessel,...
Commissioner of Taxation of the Commonwealth of Australia v. Spotless Services Ltd., 71 ALJR 81, 34 ATR 183, 141 ALR 92
Under arrangements that were characterized as a deposit of funds by the taxpayer in the Cook Islands, the taxpayer received an interest rate on...
RMM Canadian Enterprises Inc. v. The Queen, 97 DTC 302, [1998] 1 C.T.C. 2300 (TCC)
A non-resident corporation ("EC") approached a business associate who, along with two other individuals, formed a Canadian corporation ("RMM") to...
Mark Resources Inc. v. The Queen, 93 DTC 1004 (TCC)
Before going on to find that the former s. 245(1) did not prohibit the deduction of interest by the taxpayer, Bowman J. stated, in obiter dicta...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | loss utilization was not income-producing purpose/ gross income test | 173 |
Barclays Mercantile Industrial Finance Ltd. v. Melluish, [1990] BTC 209 (Ch. D.)
The taxpayer ("BMI") acquired a film from the producer ("WBI"), leased it to another corporation at a return that yielded 2.16% per annum on its...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | 130 | |
| Tax Topics - Income Tax Act - Section 83 - Subsection 83(2.1) | main purpose was to make a profit, not take deduction | 254 |
| Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(17) | 73 |
Mallalieu v. Drummond, [1983] BTC 380, [1983] 2 All E.R. 1095 (HL)
The court rejected the view that in ascertaining the purpose of an expenditure, the state of mind of the spender is the only relevant factor.
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(h) | 62 |
Newton v. Commissioner of Taxation of the Commonwealth of Australia, [1958] A.C. 450 (PC)
In interpreting the provisions of s. 260 of the Commonwealth Income Tax and Social Services Contribution Assessment Act, 1936-1951 (Australia),...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 260 - Subsection 260(1) - Securities Lending Arrangement | "arrangement" | 122 |
Administrative Policy
23 May 2013 IFA Round Table Q. 4
Given that in all three cases, a new Canadian corporation (CanHoldco) is "inserted" to establish cross-border PUC so as to enable surplus of...
2003 Ruling 2003-03924
The corporate general partner of a Canadian limited partnership operating a business in Canada borrows on an unsecured basis under a loan with a...
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| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | 100 |
1996 A.P.F.F. Round Table No. 7M12910 (Item 3.2)
In a situation where Canco subscribes for shares of its Barbados subsidiary, and the Barbados subsidiary loans the same funds to a U.S. subsidiary...