191.1

112(2.1), 112(2.2) or 112(2.4), or section 187.2 or 187.3 or subsection 258(3) or 258(5)

Part VI.1

The expression “non-tax purpose” has a broader scope than the expression “business purpose”.  For example, transactions that may reasonably be considered to have been undertaken or arranged primarily for family or investment purposes would be immune from the GAAR under s. 245(3).  Section 245(3) does not purport to protect only transactions that have a real business purpose.

With respect, we cannot agree with this interpretation of s. 245(4). Parliament could not have intended this two-step approach, which on its face raises the impossible question of how one can abuse the Act as a whole without misusing any of its provisions.  We agree with the Tax Court judge, in the present case, at para. 90, that “[i]n effect, the analysis of the misuse of the provisions and the analysis of the abuse having regard to the provisions of the Act read as a whole are inseparable.”   As discussed more fully below, the interpretation of specific provisions of the Act cannot be separated from contextual considerations arising from other provisions.  The various provisions of the Income Tax Act must be interpreted in their contextual framework, so that the Act functions as a coherent whole, with respect to the particular statutory scheme engaged by the transactions.    40                              There is but one principle of interpretation: to determine the intent of the legislator having regard to the text, its context, and other indicators of legislative purpose.  The policy analysis proposed as a second step by the Federal Court of Appeal in OSFC is properly incorporated into a unified, textual, contextual, and purposive approach to interpreting the specific provisions that give rise to the tax benefit.

We recently raised this issue with the CRA and based on the discussion, we believe that: the CRA has not changed its policies in this area they will continue to not assess penalties for failures to complete box 048 of the T4A

It seems to me that in considering the purpose of a subset of the entire series of transactions, Justice Paris had in mind the correct test. As this Court said in MacKay v. Canada, 2008 FCA 105 (CanLII) at paragraph 25: The existence of a bona fide non-tax purpose for a series of transactions does not exclude the possibility that the primary purpose of one or more transactions within the series is to obtain a tax benefit.

(iii) if the particular time is after March 31, 1977, an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act except subsections 51(3) and 66.3(2) and (4), sections 84.1 and 84.2, subsections 85(2.1), 85.1(2.1) and (8), 86(2.1), 87(3) and (9), paragraph 128.1(1)(c.3), subsections 128.1(2) and (3), section 135.2, subsections 138(11.7), 139.1(6) and (7), 148(7), 192(4.1) and 194(4.1) and sections 212.1 and 212.3,

[21]  The Tax Court found that the object, spirit and purpose of section 84.1 was correctly identified in Descarries v. Canada, 2014 TCC 75 (CanLII), [2014] D.T.C. 1081: an anti-avoidance rule “to prevent taxpayers from performing transactions whose goal is to strip a corporation of its surpluses tax-free through the use of a tax-exempt margin or a capital gain exemption.” (reasons, paragraph 67).

84(3), (4) or (4.1)

84(3) or 84(4)

66.3(2)

51(3)

(iii) if the particular time is after March 31, 1977, an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act except subsections 51(3) and 66.3(2) and (4), sections 84.1 and 84.2, subsections 85(2.1), 85.1(2.1) and (8), 86(2.1), 87(3) and (9), paragraph 128.1(1)(c.3), subsections 128.1(2) and (3), section 135.2, subsections 138(11.7), 139.1(6) and (7), 148(7), 192(4.1) and 194(4.1) and sections 212.1 and 212.3,

All of the above works to distinguish the facts of the present matter from Capancini and Morasse where, in each case, the Court found that the shares received by the taxpayer had never been owned by the distributing parent company and did not, therefore, come within the meaning of “dividend in kind”. Here, the documentary evidence does nothing to refute the Minister’s assumption that Tyco International did own the Tyco Electronics and Covidien shares it ultimately distributed, thus putting the Appellant’s case on the same factual footing as Hamley and bringing it within Justice Hershfield’s analysis set out above at paragraph 7 of these Reasons. In these circumstances, there is no justification for the Court to interfere with the Minister’s reassessment.

While it is not clear exactly how the facts were presented in Capancini, I believe that the Tyco transactions are distinguishable from the circumstances in Morasse.

amount

(c) in any other case, the amount of any stock dividend is the amount by which the paid-up capital of the corporation that paid the dividend is increased by reason of the payment of the dividend; (montant)

But do the America Movil securities represent underlying profits of Telmex? What does the $12,432 reflect? Was there a corresponding decline in the value of the Telmex shares which offset the "value" received by Ms. Morasse in the form of the America Movil shares? In an annual report that Telmex filed with US Securities and Exchange Commission on August 23, 2001,[4] the trading history of Telmex ADS for the months of February and March 2001 showed a decline from a high of $54 to approximately $34 a share. Recall that the spin-off took place in February 2001. Ms. Morasse held 400 Telmex ADRs and therefore suffered a drop in the value at that time of approximately US$8,000. Presuming an exchange rate of approximately one and one-half to one, this amounts to roughly $12,000 or just shy of the value the Respondent has attributed as income of Ms. Morasse on receipt of the America Movil shares.