Parties to series of transactions were not dealing at arm’s length

Taxpayer was sophisticated investor who opened tax-free savings account (TFSA) in January 2009. Taxpayer decided to move stocks from her Canadian trading account to her TFSA and RRSP accounts in order to eliminate or defer tax payable on possible future gains, choosing which stocks and how many of them to transfer in and out of TFSA, and choosing values that would be used and recorded for each stock. In 2009, taxpayer completed 71 swap transactions relating to her TFSA. Minister reassessed taxpayer for 2009, 2010 and 2012 taxation years, assessing taxpayer on basis that she had received advantage within meaning of that term as used in s. 207.01(1) of Income Tax Act. Taxpayer’s appeal was allowed in part . Tax Court of Canada dismissed appeal for 2009 year but allowed appeals for 2010 and 2012 taxation years, concluding that taxpayer had received “advantage” in 2009 but had not received “advantage” in 2010 and 2012. Taxpayer appealed in respect to 2009 taxation year and Crown cross-appealed in respect to 2010 and 2012 taxation years. Appeal dismissed and cross-appeal allowed. Tax Court did not err in concluding that all transactions were completed in contemplation of series. Taxpayer had not demonstrated any extricable error of law or any palpable and overriding error of fact that would justify intervention. Section 251(1)(c) of Act was applicable. Tax Court did not err in finding that taxpayer was single mind directing all of swap transactions. Taxpayer had not demonstrated any palpable and overriding error in conclusion that parties to series of transactions were not dealing at arm’s length. Result of taxpayer’s strategy was to inflate value of TFSA so as to benefit from tax-free distribution from her TFSA and Tax Court did not err with respect to this issue.

Louie v. Canada (2019), 2019 CarswellNat 5514, 2019 FCA 255, M. Nadon J.A., Eleanor R. Dawson J.A., and Anne L. Mactavish J.A. (F.C.A.).

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