Deans Knight Income Corp. v. Canada

I. Overview

II. Facts

III. Judicial History

A. Tax Court of Canada, 2019 TCC 76, [2019] 4 C.T.C. 2001

B. Federal Court of Appeal, 2021 FCA 160, 460 D.L.R. (4th) 731

IV. Issues

V. Analysis

A. Background to the General Anti-Avoidance Rule

B. The Relationship Between the GAAR, the Duke of Westminster Principle and Uncertainty

C. Applying the GAAR

(1) Tax Benefit

(3) Abusive Tax Avoidance

(a) The Object, Spirit and Purpose Reflects the Rationale of the Provision

(b) The Provision’s Text, Context and Purpose Are Used to Determine Its Rationale

(c) The Abuse Analysis Focuses on Whether the Result of the Transactions Frustrates the Provision’s Object, Spirit and Purpose

(d) Summary

VI. Application

A. Which Provisions Are at Issue?

B. What Is the Object, Spirit and Purpose of Section 111(5)?

(1) The Text of the Provision

(a) Section 111(5) Should Be Considered Against the Foundational Principles of the Act

(b) Section 111(5) Delineates the Boundaries of the Benefit-Conferring Provision, Section 111(1)(a)

(c) Parliament’s Selection of Control Tests Differs Across the Act

(d) The Control Test in Section 111(5) Is Expanded and Restricted by Other “Deeming” Provisions

(3) The Purpose of the Provision

(4) Conclusion on Object, Spirit and Purpose

C. Was There an Abuse of Section 111(5)?

VII. Conclusion

I. Overview

II. Analysis

A. The GAAR Cannot Override Parliament’s Intent

B. The Text, Context and Purpose of Section 111(5)

(1) The Notion of De Jure Control

(3) Conclusion on the Object, Spirit and Purpose of Section 111(5)

C. Abuse Analysis

(1) Standard of Review

(2) Avoidance Transaction

(2) The Context of the Provision

(2) The Binary Nature of Control: De Jure and De Facto Control

(2) The Avoidance Transactions Do Not Amount to an Abuse of Section 111(5)’s Object, Spirit and Purpose

APPENDIX