Window Dressing

Table of Contents


Chad v. The Queen, 2022 TCC 18

sham is deceitful misrepresentation of a transaction’s nature, whereas window dressing is deceptively making the facts look better

Before denying a motion of the Crown to add an allegation of “window dressing” in its pleadings, Sommerfeldt J stated (footnote 39).

It is my understanding that the ordinary dictionary meaning of the term is “an adroit presentation of facts etc. to give a deceptively favourable impression” (Katherine Barber (editor), Canadian Oxford Dictionary, 2nd ed. (Don Mills: Oxford University Press, 2004), p. 1783); or “[t]he deceptive arrangement of something, usu. facts or appearances, to make it appear more attractive or favorable” (Bryan A. Garner (editor), Black’s Law Dictionary, 10th ed. (St. Paul: Thomson Reuters, 2014), p. 1835). Based on those dictionary meanings, it appears that, while a sham involves deceitfully misrepresenting the nature of a transaction, window dressing would seem to entail deceptively making facts appear better or more favourable than they actually are.

Words and Phrases
sham window dressing
Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 54 the Crown could not resile from an oral representation that it would not argue “tax shelter” at trial 506

See Also

Grenon v. The Queen, 2021 TCC 30

window-dressing is a deception about intention

In order that the taxpayer’s RRSP could indirectly invest in operating businesses in which he(and/or tow business colleagues) had a management role, he instigated the formation of various unit trusts (the “Income Funds”) which were intended to be mutual fund trusts on the basis that 171 individuals (the “Investors”) - immediate and extended family members, friends, employees, business associates and others - each subscribed approximately $750 for units of each Income Fund. The taxpayer’s RRSP then invested a large sum (e.g., over $150 million for one of the Income Funds) in subscribing for additional units. The Income Funds invested in underlying LPs carrying on the businesses through an intermediate sub trust and master limited partnership, or more directly.

Smith J sustained assessments of the RRSP under s. 146(10.1) on the basis that the Income Funds did not qualify as mutual fund trusts and, even if they had, their use as “alter egos” for the taxpayer would have been an abuse under GAAR. However, in rejecting CRA arguments based on the “window-dressing” doctrine, he stated (at paras. 402-403):

In the end, although the case law cited above suggests that “window dressing” is “a deception that is not about the legal validity of a transaction, as in sham, but about the taxpayer’s intention for entering into the transaction” (my emphasis), I find that that analysis …is circumscribed by the “economic realities” of the transaction(s) at issue and is limited to an enquiry as to whether “the legal relations were bona fide”: Singleton.

Although the Court has concluded that the Income Funds were not qualified investments for RRSP purposes, and while it certainly finds that the Appellant had ulterior motives in connection with his RRSP, that is not sufficient to reach a finding that the Income Funds were “window dressing”.

Words and Phrases
window dressing
Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 4801 - Paragraph 4801(a) - Subparagraph 4801(a)(i) - Clause 4801(a)(i)(A) distribution of units that included significant purchases by minors and by adults who did not pay for their own units, was unlawful 755
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) purported establishment of “alter ego” MFTs through which an RRSP could invest in operating businesses was an abuse engaging GAAR 605
Tax Topics - Income Tax Act - Section 204.2 - Subsection 204.2(1.1) alleged distribution from non-qualified investment was not an over-contribution 277
Tax Topics - Income Tax Act - Section 207.1 - Subsection 207.1(1) non-qualified investments not “included” in annuitant’s income because it was never assessed 346
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) CRA’s assessing listed taxable RRSPs in a T3GR global return was not of the taxpayer’s (also listed) RRSP /inappropriate reliance in legal opinion on certificate of fact was carelessness 441
Tax Topics - Income Tax Act - Section 207.2 - Subsection 207.2(3) CRA’s assessment of Pt. XI.1 shown on the T3GR for all RRSPs of one type did not start the normal reassessment period for the taxpayer’s RRSP since no tax shown for it 370
Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(d.2) distribution was not lawful because the issuer had not complied with the OM exemption, which was the exemption that it had chosen to rely on 291

Edison Transportation, LLC v. The Queen, 2016 TCC 80

appearance of 3rd party ownership was window dressing

Two Florida LLCs of two Florida residents (Pouncy and Vitrano) effectively had a joint venture to provide bussing services to the Olympic organizing committee for the 2010 Vancouver Olympics ("Vanoc"). A third LLC (“Edison”) was formed to provide many of the services. Although the documentation purported to make Edison’s key Canadian employee (Hill) the owner of its shares, Pizzitelli J found (at para. 28) that the purported transfer of shares to Hill was mere “window dressing to hide Pouncey’s involvement in the Appellant before Vanoc.” Accordingly, he rejected the Minister's position that purported fees paid by Edison to Pouncey's company were disgused consideration for Hill's purchase of Edison's shares.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Incurring of Expense discretionary finder’s fee not deductible 413

Standard Life Assurance Company of Canada v. The Queen, 2015 DTC 1113 [at 687], 2015 TCC 97

acts purporting to evidence a Bermuda business were window dressing

Prior to the introduction of mark-to-market rules in 2007, the taxpayer (which to that point only carried on its life insurance business in Canada) scrambled to achieve a step-up to fair market value in the cost amount of its assets by purporting to commence carrying on business in Bermuda in December 2006.

Pizzitelli J found that the intended Bermuda business did not commence until 2008. In the meantime, there were just a few isolated acts, such as hiring a bookkeeper with essentially nothing to do, entering into a reinsurance contract with an affiliate which was backdated to December 2006, and getting a Bermuda licence which prohibited any business with third parties. This all was "window dressing" (para. 156). Pizzitelli J stated (at para. 158):

[T]he Supreme Court of Canada has distinguished a "sham" from "window dressing", which was recognized in Ludco Enterprises Ltd. v Canada, [2001] 2 S.C.R. 1082, 2001 SCC 62, Backman v Canada, [2001] 1 S.C.R. 367, 2001 SCC 10 and Spire Freezers Ltd. v Canada, [2001] 1 S.C.R. 391, 2001 SCC 11, as a deception that is not about the legal validity of a transaction, as in sham, but about the taxpayer's intention for entering into the transaction.

See summary under s. 138(11.3).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 138 - Subsection 138(11.3) property of a newly multinational insurer is neither "designated" nor "not designated" in the preceding year, but rather outside the scope of s. 138 604
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Start-Up and Liquidation Costs starting a business entails taking "serious and continuous steps" to implement the "essential elements" of the business's goals 383