Summary

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Summary

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 - Interest - Deductions - Application of GAAR - Transactions admitted to be avoidance transactions pursuant to subsection 245(3) of the ITA - Whether transactions constitute an abuse or a misuse as contemplated by subsection 245(4) - Whether the decision is inconsistent with Singleton v. Canada and Ludmer v. Canada - Whether the decision raises critical issues not previously considered by this Court in Canada Trustco Mortgage Co. v. Canada and Mathew v. Canada - Whether the adoption of an “overall purpose” test, for purposes of applying the GAAR in section 245 of the Act, improperly results in a recharacterization of legally effective transactions and creates uncertainty regarding proper interpretation of the interest deductibility rules - Whether guidance is needed regarding the interaction between the interest deductibility provisions of the Act and the GAAR to safeguard the principles of consistency, predictability and fairness - Whether the lower courts erred in reading the words “series of” into subsection 245(4) of the Act where those words do not otherwise appear in that subsection - Whether the Federal Court of Appeal misdirected itself as to its inability to reverse the Tax Court of Canada’s decision.

In a number of transactions, a husband and wife attempted to borrow money in order to purchase a principal residence and deduct the interest expense paid under the mortgage. The Minister reassessed on the basis of the GAAR. Bowman C.J. dismissed the appeals from reassessment. The Federal Court of Appeal dismissed the appeals.

Lower Court Rulings