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 SCR 1082, 2001 SCC 62, Backman v Canada, [2001] 1 SCR 367, 2001 SCC 10 and Spire Freezers Ltd. v Canada, [2001] 1 SCR 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).