In this case, the taxpayers sought equitable relief from
negative tax consequences resulting from transactions entered into
that appeared to comply with the then current law to avoid taxation
but were later found to lie outside the saving provisions of the
law based on subsequent jurisprudence.
In 2008, Todd Collins, principal of Rite-Way Metals Ltd., and
Floyd Cochran, principal of Harvard Industries Ltd., each
incorporated a holding company and each arranged for the
establishment of a family trust which included the holding company
as a beneficiary. Funds were loaned by each holding company to the
respective trusts to purchase shares in the operating
companies.
The operating companies paid dividends to the trusts, which
dividends were attributed to the holding companies under subsection
75(2) of the Income Tax Act (Canada) (the
"Act"). 2 The holding
companies, in turn, claimed an offsetting deduction in computing
taxable income in respect of those dividends
