The taxpayer purchased trailers from the U.S. user of the trailers ("TLI"), with the taxpayer appointing TLI as its agent to hold title on its behalf. The taxpayer leased the trailers to an English company ("MAIL") which in turn subleased the trailers to TLI. TLI then immediately made a lump sum prepayment of all the rents payable by it under the sublease, and MAIL used a portion of this sum to make a deposit with the bank that had helped fund the purchase by the taxpayer of the trailers in an amount equal to the bank loan and paid the balance of the prepayment to a Jersey affiliate of the bank on the condition that the affiliate use those funds to purchase a Government of Canada bond to be pledged to secure MAIL's obligations under the lease.
The claiming by the taxpayer of capital cost allowance on the acquired trailer was consistent with the object and spirit of the capital cost allowance provisions of the Act which did not, except in specified circumstances, reduce cost to reflect a mitigation of economic risk. Accordingly, the transactions did not defeat or frustrate the object, spirit or purpose of the capital cost allowance provisions read textually, contextually and purposively.