Dominic Bédard-Lapointe

The Appellant, an insolvent mining company with significant tax losses, underwent a series of transactions to spin out its mining assets and acquire a real estate business from two corporate groups.

To avoid an acquisition of control that would restrict the use of its losses under subsection 111(4) of the Income Tax Act, the corporate groups structured their share consideration to include non-voting shares, ensuring they held less than 50% of the voting shares despite owning over 90% of the equity.

The Minister reassessed the Appellant to deny the deduction of net capital losses under the general anti-avoidance rule (GAAR).

The Tax Court of Canada dismissed the appeal, finding that the corporate groups acted in concert as a group of persons, the use of non-voting shares was an avoidance transaction that resulted in a tax benefit, and the transactions abused the object, spirit, and purpose of subsection 111(4) by fundamentally transforming the corporation to allow new shareholders to benefit from its historical losses.

The appeals concerned the tax consequences of dividends paid by Husky Energy Inc. to two non-resident corporations under securities lending arrangements.

The Minister assessed Husky for failing to withhold Part XIII tax at the 15% rate under the Canada-Barbados Income Tax Convention, and assessed the successor corporations of the Barbados entities for the shortfall.

The Tax Court held that the Luxembourg entities were not the beneficial owners of the dividends under the Canada-Luxembourg Income Tax Convention because they were contractually obligated to pay the dividend amounts to the Barbados entities.

Consequently, Husky was liable for Part XIII tax at the 25% rate.

However, because the Minister only assessed the Barbados successor corporations and not the Luxembourg entities, the appeals of the Barbados successor corporations were allowed and their assessments vacated.

Husky's appeal was dismissed.

The appellant corporation appealed a reassessment that added a $31,500,000 capital gain to its income for the 2005 taxation year under the General Anti-Avoidance Rule (GAAR).

The appellant had engaged in a series of transactions, including the circular payment of capital dividends and cross-redemption of shares, to avoid the application of subsection 55(2) of the Income Tax Act and reduce the capital gain realized on the sale of its indirect interest in a pharmaceutical company.

The Tax Court of Canada found that while the transactions complied with the literal wording of the capital dividend account provisions, they frustrated the object, spirit, and purpose of subsection 55(2), which is intended to prevent the conversion of taxable capital gains into tax-free intercorporate dividends.

The appeal was dismissed.

The Appellants were successful in their appeals of assessments under subsection 160(2) of the Income Tax Act.

They sought a lump sum award of costs of $808,651.68 and disbursements of $170,376.79.

The Tax Court of Canada awarded a lump sum of $453,257 in costs and allowed the claimed disbursements subject to taxation.

The Appellants appealed assessments under section 160 of the Income Tax Act for the tax liability of their former subsidiaries.

The Appellants had sold the shares of their subsidiaries to an arm's length purchaser under a share put agreement.

The purchaser used the cash and receivables in the subsidiaries to pay the purchase price.

The Minister assessed the Appellants under section 160 on the basis that the subsidiaries had indirectly transferred property to the Appellants.

The Tax Court of Canada allowed the appeals and vacated the assessments.

The Court found that while there was an indirect transfer of property, the Appellants and the subsidiaries were dealing at arm's length at the time of the transfer, and the Appellants had given fair market value consideration for the property.

The Court also found that the general anti-avoidance rule did not apply because the transactions were not undertaken primarily to obtain a tax benefit and did not result in abusive tax avoidance.