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ARTICLE · 21 OCTOBER 2005

Taxpayers, Put up Your "Duke(S)": SCC Speaks on GAAR

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On October 19, 2005, the Supreme Court of Canada ("SCC") released two muchanticipated decisions considering the general anti-avoidance rule ("GAAR") under the Income Tax Act (Canada).

CanadaTax
Bruce Sinclair, C.A.
Bruce Sinclair, C.A.
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Originally published October 2005

On October 19, 2005, the Supreme Court of Canada ("SCC") released two muchanticipated decisions considering the general anti-avoidance rule ("GAAR") under the Income Tax Act (Canada). In Her Majesty the Queen v. Canada Trustco Mortgage Company and Eugene Kaulius, et al. v. Her Majesty the Queen, the SCC ruled that the GAAR will not apply to deny a tax benefit where it may reasonably be considered that the transactions were carried out in a manner consistent with the object, spirit or purpose of the provisions of the Tax Act, as interpreted textually, contextually and purposively.

In Canada Trustco, a unanimous panel of SCC judges enumerated the following seven guiding principles in determining the applicability of the GAAR:

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