A partnership of which the taxpayer was a member ("Roseland II") and another partnership ("Roseland I") owning a similar and adjacent condominium development, sold all their assets to a newly-formed partnership ("RPM") with the purchase price being paid by way of set-off against the subscription price for the partnership interests in RPM, with such partnership interests in RPM being distributed to the partners of Roseland I and II.
In response to a submission of the Crown that various stop-loss provisions in the Act evidenced "a general policy to disregard dispositions of property to persons amongst related parties or parties within 'the same economic unit", Noël, J.A. noted (at para. 44) that "the precise and detailed nature of these provisions show that they are intended to deny losses in the limited circumstances set out in these provisions" and stated (at para. 47) that "where it can be shown that an anti-avoidance provision has been carefully crafted to include some situations and exclude others, it is reasonable to infer that Parliament chose to limit their scope accordingly." After noting (at para. 56) that he accepted "that the transactions in issue would be arguably abusive if they had given rise to the tax benefit in circumstances where the legal rights and obligations of the Respondent were otherwise wholly unaffected," he went on to note that here the changes in the position of the taxpayer were "material both in terms of risk and benefits" (para. 57) given that as a result of the transactions, the taxpayer acquired an undivided interest in assets that were double in size and shared in an expanded rental pool. Finally, having regard to the "overall result" test established in the Lipson case, the overall result in this case did not frustrate the object, spirit and purpose of the relevant stop loss provision (s.20(16)). (Noël, J.A. also noted (at para. 69) that the " the same terminal loss would have been realized if the limited partners, rather than proceeding with the transactions in issue, had simply dissolved the partnership and distributed the partnership assets to the partners.") Accordingly, the Crown's appeal was dismissed.