Case information

Taxation – General Anti-Avoidance Rule – Whether Canada Revenue Agency may use general anti-avoidance rule to give retroactive effect to prospective amendments to Income Tax Act – Whether there is a jurisprudential divide regarding the relevance of subsequent amendments in the interpretation and application of the general anti-avoidance rule, specifically in determining the pre-amendment policy of statutory provisions – Whether series of transactions amounts to abusive tax avoidance?

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.

In a series of transactions, Oxford Properties Group Inc. transferred real estate properties through a tiered structure of limited partnerships. It paid no tax on the transfers and the properties retained their tax attributes, including their adjusted cost bases and undepreciated capital costs. As the properties progressed through the partnerships, through amalgamations and holdings of partnership interests, Oxford Properties Group Inc. was able to elect to use paras. 88(1)(c) and (d) and s. 98(3) to bump the adjusted cost bases of its partnership interests. It then sold those interests to tax-exempt entities and calculated capital gains based on the increased adjusted cost bases of the partnership interests. The Minister of National Revenue concluded that Oxford Properties Group Inc. thereby avoided tax that would have been payable on latent recapture and capital gains had the properties been sold to the tax-exempt entities. The Minister determined that this abused the Income Tax Act. Applying the general anti-avoidance rule in s. 245 of the Income Tax Act, the Minister reassessed Oxford Properties Group Inc.’s 2006 taxation year and assessed a taxable gain of $148,221,522. Oxford Properties Group Inc. appealed. The Tax Court allowed the appeal. The Federal Court of Appeal allowed an appeal in part. It set aside the decision of the Tax Court and referred the reassessment back to the Minister for reconsideration on the basis that the Minister erred by not treating non-depreciable property and depreciable property differently for purposes of calculating the capital gain and the capital gain was $116,591,744.