After the cancellation of an agreement for the sale of the shares of the taxpayer by its parent ("Continental Bank") to a third party ("Central Capital"), the taxpayer transferred, purportedly on a rollover basis pursuant to s. 97(2), the assets of its leasing business to a partnership in which two subsidiaries of Central Capital acquired a 1% partnership interest. Five days later, following a winding-up of the taxpayer into Continental Bank, Continental Bank sold its partnership interest to the two Central Capital subsidiaries.
In finding that the taxpayer was a partner until its winding-up, Bastarache J. noted that there was no termination of the taxpayer's contracts with its customers during the relevant period and (at p. 6517) that "simply because the parties had the overriding intention of creating a partnership for one purpose [i.e., tax avoidance] does not, however, negate the fact that profit-making and profit-sharing was an ancillary purpose". Furthermore, the duration of the taxpayer's membership in the partnership was not relevant.