What is the CRA position on D & D Livestock? CRA stated (TaxInterpretations translation):
[S]ubsection 245(2) was not applied in this case. However, the CRA would not hesitate to invoke the GAAR in similar files. … The CRA considers among other things that transactions or series of transactions permitting the double utilization of the same amount of safe income in order to reduce a capital gain realized on an ultimate disposition of shares of a corporation are abusive and go against the object of subsection 55(2). Moreover, Justice Graham emphasized at paragraphs 27 and 28 of the decision… that the transactions in the case resulted in stripping of capital gains.
Furthermore, the CRA is also concerned by planning which can result in an unjustified duplication of fiscal attributes, for example, the duplication of the adjusted cost base of a share, regardless of the fact the that adjusted cost base exists by reason of safe income of a corporation. Similar transaction will be contested by the CRA, as appropriate.