In Louie, the taxpayer engaged in swap trades using her TFSA account. The FCA concluded that the swaps were a part of a series of transactions per paragraph 207.01(1)(b). According to subsection of the 248(10) of the Income Tax Act, a series of transactions “shall be deemed to include any related transactions or events completed in contemplation of the series.”

The court relied on the related interpretation in Copthorne Holdings Ltd. v. Canada, 2011 SCC 63 (CanLII), [2011] 3 SCR 721, which held that “nothing [in s.248(10)] suggests that the related transaction must be completed in contemplation of a subsequent series…”. A series of transactions does not require uniformity.

The FCA did not agree with the Appellant that she was dealing at arm’s length with her brokerage, trustee of the accounts. The Appellant conceded that the transactions would not have happened in the open market and one of the main purposes was to realize tax free gains.

The FCA’s decision centred on the analysis of “arm’s length” and “single directing mind”. The FCA and TCC chose to rely on three factors referred to in paragraph 62 of the Supreme Court of Canada decision in Canada v. McLarty, 2008 SCC 26 (CanLII), [2008] 2 SCR 79, taken from CRA Income Tax Interpretation Bulletin IT-419R2 “Meaning of Arm’s Length” (June 8, 2004):

The following criteria have generally been used by the courts in determining whether parties to a transaction are not dealing at “arm’s length”:

was there a common mind which directs the bargaining for both parties to a transaction;

were the parties to a transaction acting in concert without separate interests; and

was there “de facto” control.

Both courts confirmed that not all factors need apply. The TCC and FCA found that 2 of 3 did apply, which was sufficient to rule against the Appellant.