1207192 Ontario Inc. - Federal Court of Appeal finds that, in a GAAR analysis, the purpose of a transaction is determined objectively

In a companion case to Triad Gestco involving a similar loss-realization transaction (see previous post), the taxpayer's principal made a further argument that, because the series of transactions was implemented with the intention of giving him protection from creditors, and because he believed that "each and every step in the plan was essential" to effect such protection, no transaction in the series was aimed at achieving a tax benefit (and therefore was not an avoidance transaction).

Sharlow J.A. affirmed the trial judge's finding that at least one of the transactions in the series did not in fact advance any kind of creditor protection plan, and stated that what is required in the "avoidance transaction" branch of analysing  the general anti-avoidance rule is "ascertaining objectively the purpose of each step by reference to its consequences – rather than on the basis of the subjective motivation of Mr. Cross, or his subjective understanding of what may or may not have been required to achieve creditor protection."

Scott Armstrong.  Summaries of 1207192 Ontario Limited v. The Queen, 2012 FCA 259 under s. 245(3) and s. 245(4).