Précis: Mr. Wild and his wife originally owned all of the shares of P.W. Rentals Ltd. (“PWR”). Starting in 2003 they went through a complex corporate reorganization the had the effect of substantially increasing both the adjusted cost base (ACB) and paid-up capital (PUC) of Mr. Wild’s holdings beyond their original ACB/PUC of $110. Mr. Wild used his lifetime capital gains exemption and no tax was paid on any of the transactions. CRA reassessed Mr. Wild and 1245989 Alberta Ltd. (1245) using GAAR on the basis that “the transactions had been undertaken in a manner that defeated the object, spirit and purpose of section 84.1 and subsection 89(1) of the Act” [para. 3]. The GAAR assessment was sustained in the Tax Court and Mr. Wild appealed to the Federal Court of Appeal. The Court of Appeal allowed Mr. Wild’s appeal, holding that while the reorganization created the potential for a tax-free distribution of corporate retained earnings, there had been no such distribution so accordingly there had been no misuse or abuse of section 84.1. Thus the appeal was allowed and the reassessment of Mr. Wild was vacated. A similar result followed in the appeal of 1245. Each party was to bear their own costs. The Court of Appeal specifically provided that the decision was without prejudice to CRA’s right to assess any future attempt to distribute corporate surplus on a tax-free basis.
Wild v. R. – FCA: GAAR assessment based on corporate reorganization set aside as prematurePlus >