Prairielane – Tax Court of Canada finds that a “main reason” for a stacked partnership structure was tax deferral rather than generating SBD tax savings
MacPhee J found that the main tax reason for implementing a stacked partnership structure for holding interests in a farm equipment dealership (prior to the introduction of s. 34.2 to cut off this type of planning) was to defer the recognition of corporate tax rather than to access the small business deduction. He also noted that one of the two taxpayers (PLH) had taxable capital in excess of $15 million, so that at most it could only have generated a SBD for one year before its high taxable capital caught up with it under the applicable lagged calculation, and stated:
PLH would not have as a main reason for the creation of the new corporate structure access to the SBD for one year as the cost of creating the newly created structures, as well as the ongoing costs, far exceeded the SBD obtained in 2011.
Neal Armstrong. Summary of Prairielane Holdings Ltd. v. The Queen, 2019 TCC 157 under s. 256(2.1).