MacKay et al v. Her Majesty the Queen

Date Closed

March 19, 2008

Lead Office


On February 22, 2007, the Tax Court of Canada released an important decision with respect to the interpretation of the General Anti-Avoidance Rule (GAAR), and specifically the scope of the term “avoidance transaction” for the purposes of subsection 245(3) of the Income Tax Act. It was the taxpayers’ position that GAAR did not apply to certain of its transactions because the primary purpose of each was to achieve the taxpayers’ business objectives. The Crown argued that three of the transactions were undertaken primarily for a tax purpose, and therefore, regardless of the purpose of the other transactions or the overall purpose of the transactions, GAAR applied. It was determined that the transactions, individually and as a whole, were undertaken or arranged primarily for a non-tax purpose, and therefore GAAR did not apply. The Crown successfully appealed the decisions (R. v. MacKay et. al, 2008 FCA 105). The Federal Court of Appeal found that unless “the non-tax business objectives required” that certain steps be taken to implement a transaction, those steps will be “avoidance transactions.” Further, the overall purpose of the transactions is irrelevant.

McCarthy Tétrault LLP represented the appellant with a team led by Ed Kroft.