Lehigh – Tax Court of Canada rejects application of s. 95(6)(b) to double dip structure: there was only U.S. tax avoidance

The use of a double-dip structure (i.e., taxpayer borrows to contribute to an LLC which is a partnership for US purposes, with the LLC lending to US Opco) was unsuccessfully challenged under s. 95(6)(b) as no Canadian tax was avoided: the relevant comparator was for the taxpayer to use the borrowed money to invest directly in U.S. Opco.

This structure no longer "works" under the upstream loan rules as U.S. Opco was a sister of the taxpayer rather than a controlled foreign affiliate.

Neal Armstrong.  Summary of Lehigh Cement Ltd. v. The Queen, 2013 TCC 176 under s. 95(6)(b) (with diagram).