The appellant corporation was continued into the British Virgin Islands, thereby ceasing to be a Canadian-controlled private corporation (CCPC) but remaining a resident of Canada.
Shortly thereafter, it sold shares and realized a capital gain.
The Minister reassessed the appellant under the General Anti-Avoidance Rule (GAAR), arguing that the continuance was an abusive avoidance transaction designed to avoid the refundable tax on CCPC investment income under section 123.3 and to claim the general rate reduction under section 123.4.
The Tax Court of Canada allowed the appeal, finding that while the transactions were avoidance transactions that resulted in a tax benefit, they were not abusive.
The Court held that the Act contains distinct taxing regimes for CCPCs and non-CCPCs, and Parliament intended to allow corporations to move between these regimes.
The appellant's choice to be taxed as a non-CCPC, with its associated benefits and detriments, did not frustrate the object, spirit, and purpose of the relevant provisions.
