Sophie Virji

The Minister assessed the appellant trust under subsection 160(1) of the Income Tax Act in respect of dividends it received from a non-arm's length corporation that had an outstanding tax liability.

The trust appealed, arguing that the fair market value of the dividends should be reduced by the amount of income tax payable by the trust and its beneficiaries upon receipt of the dividends.

The Tax Court of Canada dismissed the appeal, following the Federal Court of Appeal's decision in Gilbert, which held that the fair market value of a transferred dividend must be assessed in the hands of the transferor, without regard to the tax consequences for the transferee.

The applicant brought an interlocutory motion to compel the respondent to answer six undertaking requests made during discovery examinations.

The underlying appeal concerned general anti-avoidance rule (GAAR) reassessments denying the applicant's use of tax attributes.

The applicant sought documents exchanged between the CRA and the Department of Finance to test the respondent's pleaded assumptions regarding the policy underlying the relevant provisions.

The Tax Court of Canada granted the motion, finding that the requests were focused, relevant to the GAAR analysis, and not a fishing expedition.