Window Dressing

Table of Contents

See Also

Edison Transportation, LLC v. The Queen, 2016 TCC 80

appearance of 3rd party ownership was window dressing

Two Florida LLCs of two Florida residents (Pouncy and Vitrano) effectively had a joint venture to provide bussing services to the Olympic organizing committee for the 2010 Vancouver Olympics ("Vanoc"). A third LLC (“Edison”) was formed to provide many of the services. Although the documentation purported to make Edison’s key Canadian employee (Hill) the owner of its shares, Pizzitelli J found (at para. 28) that the purported transfer of shares to Hill was mere “window dressing to hide Pouncey’s involvement in the Appellant before Vanoc.” Accordingly, he rejected the Minister's position that purported fees paid by Edison to Pouncey's company were disgused consideration for Hill's purchase of Edison's shares.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Incurring of Expense discretionary finder’s fee not deductible 397

Standard Life Assurance Company of Canada v. The Queen, 2015 DTC 1113 [at 687], 2015 TCC 97

acts purporting to evidence a Bermuda business were window dressing

Prior to the introduction of mark-to-market rules in 2007, the taxpayer (which to that point only carried on its life insurance business in Canada) scrambled to achieve a step-up to fair market value in the cost amount of its assets by purporting to commence carrying on business in Bermuda in December 2006.

Pizzitelli J found that the intended Bermuda business did not commence until 2008. In the meantime, there were just a few isolated acts, such as hiring a bookkeeper with essentially nothing to do, entering into a reinsurance contract with an affiliate which was backdated to December 2006, and getting a Bermuda licence which prohibited any business with third parties. This all was "window dressing" (para. 156). Pizzitelli J stated (at para. 158):

[T]he Supreme Court of Canada has distinguished a "sham" from "window dressing", which was recognized in Ludco Enterprises Ltd. v Canada, [2001] 2 S.C.R. 1082, 2001 SCC 62, Backman v Canada, [2001] 1 S.C.R. 367, 2001 SCC 10 and Spire Freezers Ltd. v Canada, [2001] 1 S.C.R. 391, 2001 SCC 11, as a deception that is not about the legal validity of a transaction, as in sham, but about the taxpayer's intention for entering into the transaction.

See summary under s. 138(11.3).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 138 - Subsection 138(11.3) property of a newly multinational insurer is neither "designated" nor "not designated" in the preceding year, but rather outside the scope of s. 138 580
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Start-Up and Liquidation Costs starting a business entails taking "serious and continuous steps" to implement the "essential elements" of the business's goals 371