Case information

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Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Taxation - Income Tax - Assessment - Tax Avoidance - Series of Transactions - Whether GAAR applicable to deny tax benefit - Whether there are conflicting trends in the case law arising from a misinterpretation of the Court’s statements in Canada Trustco Mortgage Co. v. Canada, [2005] 2 S.C.R. 601 with respect to the concept of “series of transactions” as defined in subsection 248(10) of the Income Tax Act - Interaction of the GAAR with other statutory schemes - Whether the courts below erred in finding that the Share Sale, or the series of transactions including the Share Sale, resulted in a misuse and abuse within the meaning of ss. 245(4) - Whether the courts below erred in finding that the Share Sale was an “avoidance transaction” within the meaning of ss. 245(3) - Whether the lower courts erred in finding that the series of transactions including the Share Sale resulted in a “tax benefit” within the meaning of ss. 245(1)?

The assessment arose out of a 1996 redemption of preferred shares in the capital of the appellant, Copthorne Holdings Ltd., that were held by a related non-resident corporation. Because the appellant believed that the paid-up capital (“PUC”), as defined in subsection 89(1), of the redeemed shares was equal to the proceeds that it paid to the non-resident corporation, the appellant did not withhold any amount of income tax in respect of the redemption proceeds. The Minister of National Revenue applied the General Anti-Avoidance Rule (the “GAAR”), s. 245 of the Income Tax Act, to transactions that facilitated the preservation of paid-up capital (“PUC”) in respect to certain shares. The Minister determined that the deemed dividend that arose on the 1995 Redemption was $58,325,223 and that 15% of that amount should have been withheld by Copthorne III pursuant to subsection 215(1). Accordingly, the Minister assessed Copthorne III Part XIII tax in the amount of $8,748,783.40 pursuant to subsection 215(6). In addition, the Minister assessed a penalty of 10% of that amount pursuant to subsection 227(8).