Oxford Properties – Tax Court of Canada finds no abuse in bumping LPs to which the target transferred buildings pre-closing and then selling the bumped LP interests to tax exempts after 3 years

When Oxford Properties was sold to an OMERS subsidiary, the purchaser first negotiated that Oxford would drop various properties down into LPs on a s. 97(2) rollover basis, with those partnership interests subsequently being bumped under s. 88(1)(d). After the acquisition, those bumped costs were then pushed down onto the cost of interests in property-specific LPs (which had been formed following the acquisition), by winding-up the upper-tier LPs under s. 98(3) and using the s. 98(3)(c) bump. After the three-year s. 69(11) period, some of the property-specific LPs were then sold to tax exempts.

In rejecting CRA’s application of GAAR, D’Arcy J stated inter alia:

Parliament…made the positive decision to limit the application of subsection 69(11) to transfers to tax-exempt entities that occur within the three-year period. In my view, it is reasonable to conclude that Parliament was of the view that transfers after this three year-year period did not abuse subsection 97(2).

As to the alleged abuse of the s. 88(1)(d) bump, its design insofar as a partnership interest bump was concerned did not, at the time, reflect an ability to look through to the underlying (depreciable) nature of the assets of the partnership.

Neal Armstrong. Summary of Oxford Properties Group Inc. v. The Queen, 2016 TCC 204 under s. 245(4).