Landrus: Specificity Ousts GAAR

On April 16, 2009, the Federal Court of Appeal affirmed the decision of the Tax Court of Canada in The Queen v. Gary Landrus, holding that the general anti-avoidance rule ("GAAR") did not deny the deduction of a "terminal loss" under subsection 20(16) of the Income Tax Act (Canada) ("ITA"). Landrus involved a reorganization in which two partnerships transferred buildings that had declined substantially in value to a new partnership comprising the same partners. The transfer triggered a terminal loss which the Minister disallowed by invoking GAAR, on the basis that the transactions were abusive since the partners continued to own an interest in the property through the new partnership, and so did not realize a "true" loss.