,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

            ,9=m,n ,circul>
    
,subject3 ,g5]al ,anti-,avoid.e ,rule
  ,sec;n #bde (! ,9come ,tax ,act
,numb]3 #hh-b
,date3 ,octob] #ba1 #aihh

#a4 ,! purpose ( ? circul> is 6provide
  guid.e ) respect 6! applic,n (! g5]al
  anti-avoid.e rule1 sec;n #bde (!
  ,9come ,tax ,act 7! ,act74 ,? rule
  applies ) respect 6transac;ns 5t]$
  96af ,royal ,ass5t is giv5 6,bill
  ;,c-#aci except =3
  7a7 transac;ns t >e "p (a s]ies (
    transac;ns1 -m5c+ 2f ! "d ( ,royal
    ,ass5t & -plet$ 2f #aihi 7&= ?
    purpose a s]ies ( transac;ns does n
    9clude any relat$ transac;ns or
    ev5ts -plet$ 9 3templ,n (! s]ies71
    or
                                      #a
                 #hh-b               a#a
  7b7 any "o or m transac;ns1 "o ( : 0
    5t]$ 962f ,april #ac1 #aihh1 t 7
    5t]$ 960a taxpay] 9 ! c\rse ( an
    >range;t & 9 respect ( : ! taxpay]
    rcvd f ! ,de"p;t ( ,n,nal ,rev5ue1
    2f ,april #ac1 #aihh a 3firm,n or
    op9ion 9 writ+ ) respect 6! tax
    3sequ;es "!(4
#b4 ,rev5ue ,canada1 ,tax,n w issue
  adv.e rul+s ) respect 6! applic,n (!
  g5]al anti-avoid.e rule 6propos$
  transac;ns & w publi% summ>ies (!
  facts & rul+s 9 ^? cases t w provide
  fur!r guid.e ": ! rul+s !mvs >e n
  publi%$4

  ,9 ord] 65sure t ! rule is appli$ 9 a
  3si/5t mann]1 propos$ assess;ts 9volv+
  ! rule w 2 review$ 0,rev5ue ,canada1
  ,tax,n ,h1d ,(fice4
#c4 ,subsec;n #bde7#b7 /ates t ": a
  transac;n is an avoid.e transac;n1 !
  tax 3sequ;es 6a p]son % 2 det]m9$ z is
  r1sona# 9 ! circum/.es 9 ord]       #b
                 #hh-b               b#a
  6d5y a tax b5efit t wd result f t
  transac;n or f a s]ies ( transac;ns t
  9cludes t transac;n4

  ,an avoid.e transac;n is def9$ 9
  subsec;n #bde7#c7 z a s+le transac;n
  or "o t is a "p (a s]ies ( transac;ns
  ": ! s+le transac;n or ! s]ies results
  directly or 9directly 9 a tax b5efit1
  un.s !
--------------------------------------#b
  transac;n is c>ri$ \ prim>ily = bona
  fide purposes o!r ?an 6obta9 ! tax
  b5efit4

  8,tax b5efit0 is def9$ 6m1n a reduc;n1
  avoid.e or def]ral ( tax or o!r am.t
  paya# or an 9cr1se 9 a refund ( tax or
  o!r am.t "u ! ,act4

  ,subsec;n #bde7#d7 provides t ! rule 9
  subsec;n 7#b7 does n apply 6a
  transac;n ": x may r1sonably 2 3sid]$
  t ! transac;n wd n result           #c
                 #hh-b               a#b
  directly or 9directly 9 a misuse (!
  provi.ns (! ,act or an abuse hav+
  reg>d 6! provi.ns (! ,act r1d z a
  :ole4

           ,avoid.e transac;n
    
#d4 ,an avoid.e transac;n is a s+le
  transac;n c>ri$ \ prim>ily 6obta9 a
  tax b5efit4 ,": a transac;n1 : is
  prim>ily tax-motivat$1 =ms "p (a s]ies
  ( transac;ns t is c>ri$ \ prim>ily =
  non-tax purposes1 ! s+le transac;n w
  n"e!.s 2 an avoid.e transac;n4 ,! fact
  t ! s]ies ( transac;ns has bona fide
  non-tax purposes does n preclude a
  tax-motivat$ transac;n t =ms "p (!
  s]ies f 2+ an avoid.e transac;n4

  ,an avoid.e transac;n does n 9clude a
  transac;n t 8may r1sonably 2 3sid]$ 6h
  be5 "utak5 or >rang$ prim>ily = bona
  fide purposes o!r ?an 6obta9 ! tax
  b5efit04 ,! purposes (a transac;n   #d
                 #hh-b               b#b
  >e det]m9$ n only f ! taxpay]'s /ate;t
  ( 9t5;n b al f all ! circum/.es (!
  transac;n or transac;ns4 ,if x c 2
  9f]r$ f all ! circum/.es t ! prim>y or
  pr9cipal purpose 9 "utak+ ! transac;n
  is o!r ?an 6obta9 a tax b5efit1 !n !
  transac;n is n an avoid.e transac;n4

  ,a transac;n w n 2 an avoid.e
  transac;n if ! taxpay] e/abli%es t x
  is "utak5 prim>ily =a bona fide
  busi;s1 9ve/;t or family purpose4 ,9
  mak+ ? det]m9,n x is important 64t+ui%
  ^? transac;ns : may h a busi;s1 9ve/;t
  or family e6ect f ^? : h a busi;s1
  9ve/;t or family purpose4 ,"! >e _m
  transac;ns t h a busi;s1 9ve/;t or
  family e6ect1 : may n"e!.s 2 avoid.e
  transac;ns 2c ! prim>y purpose (!
  transac;n is 6obta9 a tax b5efit4
  7,see1 = example1 p>agraph #bb ": !
  "pn]%ip has a busi;s e6ect b ! prim>y
  purpose (! "pn]%ip is 6obta9 a tax
  b5efit47                            #e
            ,misuse or abuse         c#b
    
#e4 ,subsec;n #bde7#d7 /ates t ! rule
  does n apply 6an avoid.e transac;n if
  x may r1sonably 2 3sid]$ t ! transac;n
  wd n result 9 a misuse (! provi.ns (!
  ,act or an abuse hav+ reg>d 6!
  provi.ns (! ,act r1d z a :ole4
--------------------------------------#c
  ,transac;ns t rely on specific
  provi.ns1 :e!r 9c5tive provi.ns or
  o!rwise1 = _! tax 3sequ;es1 or on
  g5]al rules (! ,act c 2 negat$ if ^!
  3sequ;es >e s 9consi/5t )! g5]al s*eme
  (! ,act t !y _c h be5 )9 ! 3templ,n (
  ,p>lia;t4 ,on ! o!r h&1 a transac;n t
  is 3si/5t )! object & _s ( provi.ns (!
  ,act is n 6be a6ect$4 ,rev5ue ,canada
  w foll[ ? pr9ciple 9 9t]pret+ sec;n
  #bde (! ,act4

               ,examples
    
#f4 ,! examples t foll[ illu/rate !
  approa* t ,rev5ue ,canada w take    #f
                 #hh-b               a#c
  9 c]ta9 situ,ns4 ,! transac;n or
  transac;ns describ$ >e assum$ 6-ply )!
  relevant provi.ns (! ,act & n 6be
  subject 6any o!r anti-avoid.e rule4
  ,!y >e al assum$ =! purposes ( ?
  circul> 6h be5 "utak5 prim>ily 6obta9
  a tax b5efit & !y >e1 = t r1son1
  avoid.e transac;ns4 ,"!=e1 ! issue 6be
  det]m9$ is :e!r !y wd 2 reg>d$ z a
  misuse (a provi.n (! ,act or an abuse
  hav+ reg>d 6! ,act z a :ole4 ,!
  examples >e g5]al 9 nature1 &1 = ?
  r1son1 c>e %d 2 ex]cis$ 9 ext5d+ !
  9t]pretative -;ts 6specific situ,ns4
#g4 ,divisive ,reorganiz,ns
  7,butt]flies7
,facts
  ,at ! -m;e;t (a s]ies ( transac;ns t w
  2 c>ri$ \ 6divide ! assets (a "picul>
  corpor,n pursuant 6p>agraph
  #ee7#c77b71 #ej@3p (! %>es (! "picul>
  corpor,n >e [n$ 0;,a & #ej@3p >e [n$
  0;,b1 an 9dividual ) :om ;,a d1ls at
  >m's l5g?4 ,! corpor,n c>ries on    #g
                 #hh-b               b#c
  two busi;ses4 ,! %>es (! "picul>
  corpor,n [n$ 0;,b >e transf]r$ 6,bco1
  ;,b's :olly-[n$ corpor,n4 ,bco
  9corporates a subsidi>y1 ,subco1 !
  "picul> corpor,n transf]s all !
  prop]ty ( "o busi;s 6,subco1 &!
  "picul> corpor,n &! ,subco elect "u
  subsec;n #he7#a7 9 respect (!
  prop]ties transf]r$ 6def] ! recogni;n
  (! ga9 t wd o!rwise 2 r1liz$ on !
  transf]4 ,subco assumes liabilities (!
  "picul> corpor,n & issues 6! "picul>
  corpor,n retracta# pref]r$ %>es hav+ a
  pd-up capital equal 6! elect$ am.t &a
  redemp;n am.t equal 6! am.t 0: ! fair
  m>ket value (! prop]ty transf]r$
  exce$s ! non-%>e 3sid],n4 ,subco
  redeems ! pref]r$ %>es4 ,! "picul>
  corpor,n pur*ases ! -mon %>es [n$
  0,bco & ,subco w9ds up 96,bco4 ,at !
  3clu.n (! s]ies ( transac;ns ,bco has
  rcvd assets (! "picul> corpor,n 9
  ex*ange = xs %>es (! "picul> corpor,n4
                                      #h
                 #hh-b               c#c
,9t]pret,n
  ,if ea* transac;n 9 ! s]ies (
  transac;ns is 3si/5t )! object & _s (
  p>agraph #ee7#c77b71 !n subsec;n
  #bde7#b7 wd n apply4 ,on ! o!r h& if a
--------------------------------------#d
  transac;n 9 ! s]ies ( transac;ns
  results 9 a 4tribu;n ( prop]ty t fails
  6-ply )! object & _s ( p>agraph
  #ee7#c77b71 !n ! "picul> corpor,n &
  ,bco wd 2 tax$ 9 a3ord.e )! provi.ns (
  subsec;n #ee7#b74 ,? mi<t o3ur1 =
  example1 if a transf]ee does n rcv xs
  propor;nate %>e ( ea* type ( prop]ty
  (! "picul> corpor,n4 ,h["e1 subsec;n
  #bde7#b7 wd 2 appli$ 6a transac;n t is
  "p (a s]ies ( transac;ns t has be5
  /ructur$ 6avoid ! e6ects (! applic,n (
  subsec;n #ee7#b74
#h4 ,3solid,n ( ,pr(its & ,losses 9 a
  ,corporate ,gr\p
,facts
  ,a corpor,n transf]s prop]ty us$ 9 xs
  busi;s 6a relat$ corpor,n 6p]mit    #i
                 #hh-b               a#d
  ! deduc;n ( non-capital losses (!
  relat$ corpor,n4 ,all (! %>es (! two
  corpor,ns h be5 [n$ 0! same taxpay]
  dur+ ! p]iod 9 : ! losses 7 9curr$4
,9t]pret,n
  ,! abs;e 9 ! ,act ( re/ric;ns ag/
  transf]r+ prop]ty 2t relat$ corpor,ns1
  ! exi/;e ( specific provi.ns p]mitt+ !
  pay;t ( 9come &! transf] ( losses 2t
  relat$ corpor,ns & ref];es 9 !
  ,explanatory ,notes ,relat+ 6,9come
  ,tax ,re=m 9dicate t a transf] (! type
  9 "q is 3si/5t )! s*eme (! ,act &1
  "!=e1 subsec;n #bde7#b7 wd n 2 appli$4

  ,h["e1 if a transf] (a prop]ty or o!r
  transac;n is "utak5 6avoid a specific
  rule1 s* z a rule design$ 6preclude !
  deduc;n ( losses af ! acquisi;n (
  3trol (a corpor,n 0an >m's l5g? p]son1
  s* a transf] wd 2 a misuse (! provi.ns
  (! ,act & 2 subject 6sec;n #bde4

                                     #aj
                 #hh-b               b#d
#i4 ,facts
  ,a p]son has prop]ty ) an unr1liz$
  capital ga9 t x wi%es 6sell 6a ?ird
  "py4 ,a relat$ corpor,n has a net
  capital loss4 ,9/1d ( sell+ ! prop]ty
  directly 6! ?ird "py & r1liz+ a
  capital ga91 ! p]son transf]s !
  prop]ty 6! relat$ corpor,n & elects "u
  subsec;n #he7#a7 6def] ! recogni;n (!
  ga94 ,! relat$ corpor,n sells !
  prop]ty 6! ?ird "py & reduces !
  result+ taxa# capital ga9 0! am.t ( xs
  net capital loss4
,9t]pret,n
  ,subsec;n #fi7#aa7 does n p]mit a
  p]son 6transf] prop]ty 6an unrelat$
  corpor,n on a tax-def]r$ basis ": x is
  9t5d$ t ! unrelat$ corpor,n w sell !
  prop]ty & reduce ! am.t (! ga9 0am.ts
  ( losses or simil> deduc;ns : x may
--------------------------------------#e
  claim4 ,0implic,n1 ! subsec;n does
  p]mit a transf] 6a relat$ corpor,n on
  a tax-def]r$ basis4 ,9 ^!          #aa
                 #hh-b               a#e
  circum/.es s* a transf] wd 2 a3epta# z
  x is )9 ! object & _s (! ,act4
#aj4 ,e/ate ,freezes
,facts
  ,"u a typical e/ate freeze >range;t a
  p>5t transf]s 6a newly-=m$ corpor,n
  all (! %>es ( an op]at+ -pany & elects
  "u subsec;n #he7#a7 9 ord] 6def]
  recogni;n (! ga9 on ! transf]4 ,!
  3sid],n =! transf] is pref]r$ %>es
  retracta# at ! op;n (! p>5t = an am.t
  equal 6! fair m>ket value (! %>es (!
  op]at+ -pany transf]r$4 ,! pref];e
  %>es c>ry vot+ 3trol4 ,a tru/ = m9or
  *n (! p>5t subscribes = -mon %>es (!
  new -pany =a nom9al am.t4
,9t]pret,n
  ,! ,explanatory ,notes /ate t e/ate
  freezes wd n ord9>ily result 9 misuse
  or abuse giv5 ! s*eme (! ,act 9clud+ !
  rec5tly 5act$ ,subsec;n #gd.d7#d74
  ,sec;n #gd.d 0 5act$ 6d1l ) 9come
  splitt+ & cd h applic,n 6c]ta9 e/ate
  freeze >range;ts4                  #ab
                 #hh-b               b#e
  ,subsec;n #gd.d7#b7 may apply 6deem an
  am.t 6be rcvd z 9t]e/ 0an 9dividual :o
  loans or transf]s prop]ty 6! corpor,n
  & "o (! ma9 purposes (! loan or
  transf] may r1sonably 2 3sid]$ 6be
  6reduce ! 9come (! 9dividual & 6b5efit
  a designat$ p]son4 ,a designat$ p]son
  is ! 9dividuals' sp\se1 or a p]son "u
  #ah :o does n d1l )! 9dividual at >m's
  l5g? or :o is ! 9dividual's niece or
  nephew4

  ,subsec;n #gd.d7#b7 w n apply to
  8attribute0 9come 6! 9dividual "?\t a
  p]iod "?\t : ! corpor,n is a small
  busi;s corpor,n z def9$ 9 subsec;n
  #bdh7#a74 ,9 a4i;n1 z provid$ 9
  subsec;n #gd.d7#d71 ! rule w n apply
  ": ! only 9t]e/ : ! designat$ p]son
  has 9 ! corpor,n is a b5eficial 9t]e/
  9 ! %>es (! corpor,n : >e held "? a
  tru/ &! t]ms (! tru/ provide t ! p]son
  may n obta9 ! use ( any 9come or
                                     #ac
                 #hh-b               c#e
  capital (! tru/ :ile ! p]son is a
  designat$ p]son4

  ,subsec;n #bde7#b7 w n apply 6!
  transf] (! %>es 6! corpor,n ":
  subsec;n #gd.d7#b7 applies 6deem !
  p>5t 6rcv an am.t z 9t]e/4 ,simil>ly1
  subsec;n #bde7#b7 wd n apply ":1 =!
  r1sons /at$ abv1 subsec;n #gd.d7#b7
  does n apply 6deem ! p>5t 6rcv an am.t
  z 9t]e/4
--------------------------------------#f
  ,simil> 3sid],ns wd apply 6o!r types (
  e/ate freezes 9volv+ a transf] (
  prop]ty 0a p>5t 6a corpor,n4 ,=
  example1 9 an e/ate freeze c>ri$ \
  pursuant 6sec;n #hf (! ,act1 ! p>5t wd
  4pose (! %>es (! op]at+ -pany & rcv
  pref]r$ %>es (! -pany hav+ a redemp;n
  am.t equal 6! fair m>ket value (! %>es
  4pos$ (4 ,! 4posi;n ( %>es 0! p>5t wd
  3/itute a transf] ( prop]ty 6! op]at+
  -pany =! purposes ( subsec;n #gd.d7#b7
  (! ,act &! applic,n ( subsec;n     #ad
                 #hh-b               a#f
  #bde7#b7 6! transf] wd 2 det]m9$ 9 !
  mann] describ$ abv4
#aa4 ,9corpor,n (a ,proprietor%ip
,facts
  ,an 9dividual taxpay] transf]s 8 or h]
  busi;s 6a corpor,n prim>ily 6obta9 !
  b5efit (! small busi;s deduc;n4
,9t]pret,n
  ,"! is no?+ 9 sec;n #abe 7t provides
  =! small busi;s deduc;n7 or else": 9 !
  ,act t prohibits an 9dividual f
  9corporat+ 8 or h] busi;s4 ,!
  9corpor,n is 3si/5t )! ,act r1d z a
  :ole &1 "!=e1 subsec;n #bde7#b7 wd n
  apply 6! transf] (! busi;s 6!
  corpor,n4
#ab4 ,4posi;n ( prop]ty
,facts
  ,a taxpay] [ns prop]ty t1 if 4pos$ ( 9
  a /rai<t=w>d mann]1 wd result 9 ! imm
  r1liz,n ( 9come or a capital ga94 ,!
  taxpay] & ano!r taxpay] t wants 6buy !
  prop]ty 7! pur*as]7 =m a "pn]%ip &!
  taxpay] transf]s ! prop]ty 96!     #ae
                 #hh-b               b#f
  "pn]%ip & elects "u subsec;n #ig7#b7
  6def] ! recogni;n ( ga9 : o!rwise wd
  >ise4 ,! pur*as] 3tributes ca% 6!
  "pn]%ip 9 an am.t equal 6! fair m>ket
  value (! prop]ty4 ,! taxpay] )draws
  all ! ca% f ! "pn]%ip &1 2c ( s*
  )drawal1 ! taxpay]'s %>e (! 9come &
  loss (! "pn]%ip is reduc$4 ,! "pn]%ip
  3t9ues 6c>ry on busi;s4
,9t]pret,n
  ,! use (! "pn]%ip is an attempt
  6circumv5t ! provi.ns t provide t
  proce$s ( 4posi;n ( prop]ty >e 6be
  a3.t$ = at ! "t ( receipt & wd 2 3tr>y
  6! s*eme (! ,act r1d z a :ole4
  ,subsec;n #bde7#b7 wd acly apply4
#ac4 ,facts
  ,a corpor,n resid5t 9 ,canada [ns
  prop]ty1 ! proce$s ( 4posi;n ( : wd
  result 9 ! imm r1liz,n ( 9come1 a
  capital ga91 or bo?4 ,! taxpay] sells
  ? prop]ty 6an >m's l5g? taxa#

                                     #af
                 #hh-b                #g
  ,canadian corpor,n 9 3sid],n =
  redeema# %>es hav+ a redemp;n am.t
  equal 6! fair m>ket value (! prop]ty
  sold4 ,! taxpay] & pur*as] elect "u
  subsec;n #he7#a7 9 respect (! prop]ty
  6def] recogni;n (! pr(it t wd 2 r1liz$
  on a /rai<t=w>d sale (! prop]ty4 ,!
  %>es h pd-up capital equal 6! am.t
  elect$ s t on ! redemp;n (! %>es !
  taxpay] rcvs ! pr(it on ! sale z a
  taxa# divid5d deducti# "u subsec;n
  #aab7#a7 (! ,act4
,9t]pret,n
  ,if ! prop]ty transf]r$ is non-
  deprecia# capital prop]ty1 subsec;n
  #ee7#b7 applies &! taxpay] wd r1lize a
  capital ga9 equal 6! di6];e 2t !
  redemp;n am.t &! adju/$ co/ base (!
  redeema# pref]r$ %>es4 ,subsec;n
  #bde7#b7 wd1 "!=e1 n apply4 ,on ! o!r
  h&1 if ! prop]ty transf]r$ is
  deprecia# prop]ty or prop]ty ! proce$s
  ( 4posi;n ( : wd result 9 ! r1liz,n (
  9come1 subsec;n #bde7#b7 wd        #ag
                 #hh-b               a#g
  apply on ! basis t ! issue (! pref]r$
  %>es is "utak5 6avoid ! 3sequ;es (a
  /rai<t=w>d 4posi;n (! prop]ty4
#ad4 ,"p ,,iv tax on ,taxa# ,divid5ds
  ,rcvd
,facts
  ,ea* ( two private corpor,ns [ns less
  ?an #aj@3p (! -mon %>es (a pay]
  corpor,n t is 6pay a sub/antial taxa#
  divid5d4 ,! pay] corpor,n w n 2 5titl$
  6a divid5d refund on ! pay;t (!
  divid5d4 ,n"o (! corpor,ns is relat$
  6any (! o!rs4 ,! private corpor,ns =m
  a corpor,n1 ,newco1 transf] _! %>es (!
  pay] corpor,n 6,newco 9 ex*ange = -mon
  %>es ( ,newco & elect "u subsec;n
  #he7#a7 9 respect 6! transf]4 ,foll[+
  ! transf] (! pay] corpor,n's %>es
  6,newco1 ,newco w 2 3nect$ )! pay]
  corpor,n4 ,! pay] corpor,n pays !
  divid5d 6,newco1 free ( ,"p ,,iv tax4
  ,newco pays ! same am.t 6! private
  corpor,ns z a divid5d1 free ( ,"p ,,iv
  tax4 ,! prim>y purpose =!          #ah
                 #hh-b               b#g
  transf] (! %>es is 6avoid ! ,"p ,,iv
  tax : wd 2 paya# if ! divid5d 7 rcvd
  directly 0! private corpor,ns4
,9t]pret,n
  ,z ! transf] ( %>es 6! ,newco is "p (
  an >range;t "utak5 6avoid ! tax
  requir$ 0,"p ,,iv (! ,act 6be pd 9
  respect ( divid5ds rcvd on portfolio
  %>es1 ! transf] (! %>es wd 2 a misuse
  (a provi.n (! ,act or an abuse (! ,act
  z a :ole & subsec;n #bde7#b7 wd 2
  appli$4
--------------------------------------#h
#ae4 ,capital ga9s exemp;n
,facts
  ,! -mon %>es (a corpor,n wd 2
  8qualifi$ small busi;s corpor,n %>es0
  z def9$ 9 subsec;n #aaj.f7#a7 except t
  at ! "t 9 "q all or sub/anti,y all (!
  assets (! corpor,n >e n us$ 9 an
  active busi;s c>ri$ on prim>ily 9
  ,canada4 ,! %>ehold]s wi% 6sell _!
  %>es & 6h ! ga9s qualify =! special
  9cr1s$ capital ga9s exemp;n        #ai
                 #hh-b               a#h
  provid$ 0subsec;n #aaj.f7#b.a7 (!
  ,act4 ,6a*ieve ? result1 ! %>ehold]s
  9corporate a corpor,n & transf] 6?
  corpor,n %>es (! op]at+ corpor,n t h a
  fair m>ket value equal 6! fair m>ket
  value (! assets t >e n us$ 9 ! active
  busi;s (! op]at+ corpor,n4 ,! op]at+
  corpor,n pur*ases ^! -mon %>es f ! new
  corpor,n & pays ! pur*ase price (!
  %>es 0transf]r+ ! non-busi;s assets 6!
  new corpor,n4 ,! op]at+ corpor,n may h
  a tax liabil;y >is+ f ! 4posi;n (!
  non-busi;s assets4 ,! new corpor,n may
  2 subject 6subsec;n #ee7#b7 (! ,act if
  ! ga9 on ! pur*as$ %>es is attributa#
  6"s?+ o!r ?an 9come e>n$ or r1liz$ 0!
  op]at+ corpor,n4
,9t]pret,n
  ,! =m,n (! new corpor,n &! transf] (!
  %>es 6! new corpor,n is n an abuse (!
  ,act4 ,! transf] (! non-busi;s assets
  is gov]n$ 0subsec;n #ee7#b7 (! ,act4
  ,s9ce ! def9i;n (a qualifi$ small
  busi;s corpor,n %>e does n         #bj
                 #hh-b               b#h
  require t all or sub/anti,y all (!
  assets 2 us$ 9 c>ry+ on an active
  busi;s 9 ,canada =a "picul> p]iod ( "t
  prior 6! sale (! %>es1 ! 4tribu;n (!
  non-busi;s assets prior 6! sale is
  a3epta#4 ,"!=e1 9 ? case1 ! transac;ns
  "utak5 to 8purify0 ! corpor,n >e 9
  a3ord.e )! s*eme (! ,act4
#af4 ,s]vices r5d]$ 6a ,corpor,n
,facts
  ,a corpor,n [es an am.t = s]vices
  r5d]$ 0a p]son :o does n d1l at >m's
  l5g? )! corpor,n4 ,! am.t >ises f a
  bona fide transac;n & is deducti# 6!
  corpor,n4 ,h["e ! am.t is n pd 2f ! 5d
  (! second tax,n ye> foll[+ ! ye> 9 : !
  exp5se 0 9curr$ s z 6maximize !
  def]ral ( xs tax,n 9 ! h&s (! p]son4
,9t]pret,n
  ,sec;n #gh 7: d1ls ) unpd am.ts7 does
  n d5y ! deduc;n (a bona fide exp5se 6a
  taxpay] 9 ! ye> t x is 9curr$4 ,x
  does1 h["e1 provide t ei ! taxpay] or
  ! non->m's l5g? p]son w            #ba
                 #hh-b                #i
  9clude ! am.t 9 9come 9 ! ?ird tax,n
  ye> foll[+ ! ye> 9 : ! exp5se is
  9curr$4 ,! def]ral 9 s* circum/.es is
  3templat$ 0subsec;n #gh7#a7 (! ,act &
  subsec;n #bde7#b7 wd n apply4
#ag4 ,facts
  ,an 9dividual provides s]vices 6a
  corpor,n ) : he or %e does n d1l at
  >m's l5g?4 ,! -pany does n pay a sal>y
  6! 9dividual 2c pay;t (a sal>y wd
  9cr1se ! am.t (a loss t ! -pany w 9cur
  9 ! ye>4
,9t]pret,n
  ,"! is no provi.n 9 ! ,act requir+ a
  sal>y 6be pd 9 ^! or any circum/.es &!
  failure 6pay a sal>y is "!=e n 3tr>y
  6! s*eme (! ,act r1d z a :ole4
  ,subsec;n #bde7#b7 wd n apply 6deem a
  sal>y 6be pd 0! corpor,n or rcvd 0!
  9dividual4
#ah4 ,facts
  ,a ,canadian-3troll$ private corpor,n
  pays xs %>ehold]/manag] an am.t z
  sal>y t w reduce ! corpor,n's      #bb
                 #hh-b               a#i
  9come 6xs busi;s limit =! tax,n ye>4
  ,! am.t (! sal>y is1 h["e1 n 9 excess
  (a r1sona# am.t4
,9t]pret,n
  ,subsec;n #bde7#b7 wd n apply 6! pay;t
  z ! ,act recognizes ! deductibil;y (
  r1sona# busi;s exp5ses4
#ai4 ,deductibil;y ( ,9t]e/ ,exp5se
,facts
  ,a taxa# ,canadian corpor,n1 : is
  pr(ita#1 has a :olly-[n$ taxa#
  ,canadian corpor,n t is su/a9+ losses
  & ne$s a4i;nal capital 6c>ry on xs
  busi;s4 ,! subsidi>y cd borr[ ! monies
  f xs bank b ! subsidi>y cd n obta9 any
  tax sav+ 9 ! curr5t ye> 0deduct+ !
  9t]e/ exp5se4 ,"!=e1 ! p>5t corpor,n
  borr[s ! m"oy f xs bank & subscribes =
  a4i;nal -mon %>es (! subsidi>y &
  reduces xs net 9come 0deduct+ ! 9t]e/
  exp5se4 ,! subsidi>y uses ! m"oy 6ga9
  or produce 9come f xs busi;s4

                                     #bc
                 #hh-b               b#i
,9t]pret,n
  ,! borr[+ 0! p>5t corpor,n is =!
  purpose ( ga9+ or produc+ 9come z
  requir$ 0p>agraph #bj7#a77c7 (! ,act &
  subsec;n #bde7#b7 wd1 "!=e1 n apply4
#bj4 ,facts
  ,a taxa# ,canadian corpor,n has agre$
  6pur*ase all (! %>es ( an op]at+
  corpor,n1 : is al a taxa# ,canadian
  corpor,n4 ,! pur*as] 9corporates
-------------------------------------#aj
  a hold+ corpor,n : borr[s ! pur*ase
  price & pays ! v5dor =! %>es4 ,! hold+
  corpor,n &! op]at+ corpor,n amalgamate
  s t ! 9t]e/ paya# on ! monies borr[$
  6acquire ! %>es c 2 deduct$ 9 -put+ !
  9come f ! busi;s (! amalgamat$
  corpor,n4
,9t]pret,n
  ,! borr[+ 0! hold+ corpor,n &!
  amalgam,n >e n abusive & subsec;n
  #bde7#b7 wd n apply 6! borr[+ 0! hold+
  corpor,n4
                                     #bd
                 #hh-b              a#aj
#ba4 ,*ange ( ,fiscal ,p]iods
,facts
  ,an op]at+ corpor,n m]ges )a %ell
  corpor,n 9 an amalgam,n describ$ 9
  subsec;n #hg7#a7 (! ,act4 ,? m]g] is
  "utak5 solely =! purpose ( hav+ !
  rules 9 p>agraph #hg7#b77a7 deem !
  tax,n ye> (! op]at+ -pany 65d immly 2f
  ! amalgam,n1 : ye> 5d w produce a tax
  b5efit4
,9t]pret,n
  ,! def9i;n ( 8fiscal p]iod0 9 subsec;n
  #bdh7#a7 (! ,act /ates t no *ange 9 !
  usual & a3ept$ fiscal p]iod may 2 made
  )\t ! 3curr;e (! ,m9i/]4 ,! use (!
  rules ( subsec;n #hg7#b7 6circumv5t ?
  require;t wd 2 a misuse ( subsec;n
  #hg7#a7 & 3sequ5tly subsec;n #bde7#b7
  wd apply4
#bb4 ,transf] ( ,l& ,9v5tory
,facts
  ,! taxpay]1 a ,canadian resid5t :o
  holds l& 9v5tory t has appreciat$ 9
  value wants 6transf] ! 9v5tory     #be
                 #hh-b              b#aj
  on a rollov] basis 6a taxa# ,canadian
  corpor,n 7! pur*as]74 ,l& 9v5tory _c 2
  transf]r$ on a tax-def]r$ basis "u
  subsec;n #he7#a74 ,s9ce "! is no
  prohibi;n 9 subsec;n #ig7#b7 ag/
  transf]r+ l& 9v5tory on a tax-def]r$
  basis 6a ,canadian "pn]%ip1 ! taxpay]
  =ms a "pn]%ip )! pur*as]4 ,! taxpay]
  transf]s ! l& 6! "pn]%ip & elects "u
  subsec;n #ig7#b7 6def] ! ga9 on !
  transf]4 ,! pur*as] 3tributes a nom9al
  am.t ( ca% = xs "pn]%ip 9t]e/4 ,!
  v5dor transf]s ! "pn]%ip 9t]e/ 6!
  pur*as] 9 3sid],n = %>es hav+ a fair
  m>ket value equal 6! value (! "pn]%ip
  9t]e/ &! "pies elect "u subsec;n
  #he7#a7 9 respect (! transf]4 ,on !
  acquisi;n 0! pur*as] (! taxpay]'s
  "pn]%ip 9t]e/ ! "pn]%ip c1ses 6exi/ &
  subsec;n #ih7#e7 applies 6deem !
  pur*as] 6acquire ! l& at ! am.t (!
  taxpay]'s co/ am.t (! l&4

                                     #bf
                 #hh-b               #aa
,9t]pret,n
  ,! result ( ? s]ies ( transac;ns is t
  ! taxpay] has avoid$ ! recogni;n (!
  ga9 t ! ^ws ( sec;n #he imply %d 2
  recogniz$ 9 s* circum/.es4 ,al? !
  "pn]%ip may c>ry on busi;s & h a
  busi;s e6ect1 ! =m,n (! "pn]%ip &!
  transf] (! l& >e "utak5 6circumv5t !
  prohibi;n 9 sec;n #he4 ,subsec;n
  #bde7#b7 wd apply z ! transf] (! l& 6!
  "pn]%ip is 3tr>y 6! s*eme (! ,act r1d
  z a :ole tak+ 96a3.t ! sec;n #he
  prohibi;n4
#bc4 ,debtor's ,ga9 on ,settle;t (
  ,debts 7,sec;n #hj7
,facts
  ,a p]son :o has pur*as$ ! debt & %>es
  (a -pany 9 f9ancial di6iculty 7!
  taxpay]7 9t5ds 6reorganize ! capital
  (! taxpay] 63v]t debt 96%>es4 ,! debt
  (! taxpay] has a co/ 6! p]son t is
  less ?an xs pr9cipal am.t4 ,! fair
  m>ket value (! assets (! taxpay] is
  less ?an xs pr9cipal am.t )!       #bg
                 #hh-b              a#aa
  result t pay;t (! debt 0! issu.e (
  %>es w result 9 ! applic,n ( sec;n
  #hj4 ,6avoid ? result ! taxpay]
  transf]s all ( xs prop]ty 6a :olly-[n$
  subsidi>y 5sur+ t ! am.ts elect$ "u
  subsec;n #he7#a7 result 9 ! recogni;n
  ( 9come f : ! losses (! taxpay] may 2
  deduct$4 ,! p]son !n =gives ! debt4 ,!
  taxpay] amalgamates ) xs :olly-[n$
  subsidi>y )! result t all (! prop]ty
  (! subsidi>y 7: 0 =m]ly prop]ty (!
  taxpay]7 2comes prop]ty (! amalgamat$
  -pany4 ,sec;n #hj wd apply on !
  =give;s ( debt b only 6reduce ! adju/$
  co/ base (! %>es (! subsidi>y4 ,s9ce
  ^! %>es >e c.ell$ on ! amalgam,n1 !
  applic,n (! sec;n is ( no e6ect4
,9t]pret,n
  ,9 ? situ,n ! transf] (! assets (!
  taxpay] 6! :olly-[n$ subsidi>y t is
  "utak5 solely 6avoid ! results (a
  /rai<t=w>d =give;s (! debt wd 2
  subject 6subsec;n #bde7#b74
                                     #bh
                 #hh-b              b#aa
#bd4 ,res]ves = an ,am.t n due until a
  ,lat] ,ye>
,facts
  ,! [n] ( r1l prop]ty has agre$ 6sell !
  prop]ty 6an >m's l5g? pur*as]4 ,!
  pur*as] wants 6buy ! prop]ty = ca%1 b
  ! [n] does n want 6recognize ! sale
  proce$s 9 ! ye> ( sale4 ,! [n] sells !
  r1l prop]ty 6an 9t]m$i>y -pany def]r+
  receipt (! proce$s ( 4posi;n (!
  prop]ty = m ?an two ye>s af ! date (
  sale4 ,! 9t]m$i>y immly sells !
  prop]ty 6! ?ird "py = ca%4 ,! [n] rcvs
  9t]e/ f ! 9t]m$i>y 9 respect (! monies
  rcvd 0! 9t]m$i>y f ! ?ird "py4
-------------------------------------#ab
,9t]pret,n
  ,z ! 9t]posi;n (! 9t]m$i>y is made
  solely 65a# ! [n] (! prop]ty 6def]
  recogni;n (! ga9 ! sale (! r1l prop]ty
  6! 9t]m$i>y wd 2 subject 6subsec;n
  #bde7#b74

                                     #bi
                 #hh-b              a#ab
#be4 ,divid5d ,/ripp+ 7,subsec;n
  #bdg7#a77
  ,z a 3sequ;e (! 9troduc;n ( sec;n
  #bde1 subsec;n #bdg7#a7 is rep1l$4
  ,subsec;n #bdg7#a7 is direct$ at a
  transac;n or s]ies ( transac;ns "o (!
  purposes ( : is 6e6ect a significant
  reduc;n (1 or 4appe>.e (1 assets (a
  corpor,n 9 ord] 6avoid ! :ole or "p (!
  tax t wd h be5 paya# on ! 4tribu;n (
  prop]ty (a corpor,n4

  ,9 #aihf1 ,rev5ue ,canada1 ,tax,n
  3firm$ t subsec;n #bdg7#a7 cd apply 6a
  transac;n or s]ies ( transac;ns t 7
  "utak5 6circumv5t specific provi.ns t
  provid$ t a %>ehold] :o 4poses ( %>es
  6! issu+ corpor,n a3.t = an am.t rcvd
  on ! 4posi;n z a divid5d r ?an z
  proce$s ( 4posi;n4 ,! specific rules
  m5;n$ at t "t 7 sec;ns #hd.a & #bab.a
  & subsec;ns #ff.c7#b71 #he7#b.a71
  #aib7#d.a7 & #aid7#d.a74 ,! latt] two
  subsec;ns h s9ce be5 rep1l$ &      #cj
                 #hh-b              b#ab
  subsec;n #he.a7#b.a7 has be5 5act$
  6re/rict ! 9cr1se 9 pd-up capital on a
  %>e = %>e ex*ange4

  ,al1 ,"p ,,ii4#a imposes a tax on
  c]ta9 corpor,ns t pay an am.t 6a
  taxpay] z a sub/itute = normal
  divid5ds if !y pay s* am.t 9 a mann] t
  all[s ! recipi5t 6a3.t =! am.t rcvd z
  proce$s ( 4posi;n ( prop]ty4

  ,provi.ns1 s* z ^? m5;n$ abv1 9dicate
  ! circum/.es 9 : am.ts rcvd 0a
  %>ehold] (a corpor,n f ! corpor,n on a
  4posi;n ( %>es or o!r prop]ty >e 6be
  a3.t$ = z a divid5d4 ,if z a result (a
  s]ies ( transac;ns a %>ehold] r1lizes
  a capital ga9 on ! 4posi;n ( prop]ty
  &a transac;n 9 ! s]ies is an avoid.e
  transac;n1 subsec;n #bde7#b7 w 2
  appli$ 6! transac;n if x is det]m9$ t
  ! s]ies ( transac;ns 0 c>ri$ \ 6?w>t !
  purpose (! provi.n 9 "q4
                                     #ca
                 #hh-b              c#ab
#bf4 ,issue ( /ock divid5d
,facts
  ,a private corpor,n wi%es 6provide an
  annual divid5d pay;t 6xs 9dividual
  %>ehold]s z tax-free capital ga9s4 ,!
  corpor,n z "p ( an >range;t pays a
  /ock divid5d 6xs %>ehold]s ": ! /ock
  divid5d %>es rcvd h a l[ pd-up capital
  &a hi< fair m>ket value4 ,z "p (! same
  >range;t ! %>es >e pur*as$ 0a corpor,n
  relat$ 6! issu+ corpor,n or a ?ird "py
  brok] or d1l] ": ! pur*ase price (!
  %>es is fund$ 0! issu+ corpor,n4
-------------------------------------#ad
,9t]pret,n
  ,z ! pay;t & repur*ase (! /ock divid5d
  %>es is "p ( an >range;t 6avoid !
  %>ehold] tax requir$ 6be pd on
  divid5ds f ! corpor,n1 ! pay;t &
  repur*ase wd 2 a misuse (a provi.n (!
  ,act or an abuse (! ,act z a :ole &
  subsec;n #bde7#b7 wd apply4

                                     #cb
                 #hh-b              a#ad
  ,subsec;n #bde7#b7 may al apply 9 o!r
  situ,ns 9volv+ a reduc;n ( assets (a
  corpor,n4
#bg4 ,3v].n ( ,sal>y 96,capital ,ga9
,facts
  ,an employee (a private corpor,n wi%es
  6rcv a bonus1 sal>y or a por;n (!
  employ]'s pr(it z a capital ga9 9 ord]
  6claim ! capital ga9s exemp;n4 ,!
  employee subscribes = pref]r$ %>es (!
  employ]1 : >e redeema# at a premium t
  reflects a por;n (! employees annual
  sal>y or ! employ]'s book pr(it4
  ,prior 6_! redemp;n1 ! pref]r$ %>es >e
  pur*as$ 0a -pany relat$ 6! employ]
  corpor,n1 "!by all[+ ! employee 6rcv a
  4tribu;n ( surplus z a capital ga94
,9t]pret,n
  ,! acquisi;n (! pref]r$ %>es is "p (
  an >range;t design$ 6avoid ! tax t wd
  h be5 requir$ 6be pd on sal>y4 ,!
  acquisi;n "!=e results 9 an abuse (!
  ,act z a :ole & subsec;n #bde7#b7 wd
  apply4                             #cc
                 #hh-b              b#ad
#bh4 ,redemp;n ( ,pref]r$ ,%>es foll[+
  an ,amalgam,n
,facts
  ,a taxa# ,canadian corpor,n m]ges )
  ano!r taxa# ,canadian corpor,n t is a
  %ell -pany4 ,on ! m]g] ! %>ehold]s :o
  3troll$ ! pr$ecessor rcv -mon %>es (!
  m]g$ -pany &! m9or;y %>ehold]s (!
  pr$ecessor rcv redeema# pref]r$ %>es t
  >e immly redeem$4 ,! sole r1son t !
  m9or;y %>ehold]s rcv %>es 9/1d ( ca%
  is 6cause ! m]g] 6-ply )! require;ts (
  p>agraph #hg7#a77c7 (! ,act4
,9t]pret,n
  ,subsec;n #bde7#b7 wd n apply 6! issue
  (! pref]r$ %>es z s* issue is n reg>d$
  a misuse (a provi.n (! ,act or an
  abuse (! ,act r1d z a :ole4





                                     #cd