On January 8, 2009, a majority of the Supreme Court of Canada (4:3) dismissed the taxpayer’s appeal in Lipson v. The Queen. The facts in Lipson were similar to the facts of the Singleton case (which was decided by the Supreme Court in favour of the taxpayer); however, Lipson involved the transfer of company shares between spouses financed with borrowed funds secured against the taxpayer’s residence which triggered the application of the spousal attribution rules. Unlike Singleton, the Minister of National Revenue challenged the transactions in Lipson under the general anti-avoidance rule (the "GAAR") rather than relying on an "economic realities" argument, which had been rejected by the Supreme Court in Singleton. Lipson represents the first time the Supreme Court has had a chance to review the general framework for GAAR’s application which it established in The Queen v. Canada Trustco Mortgage Company and Kaulius v. The Queen.

type Tax Law Bulletin - January 2009 - Lipson's "Spousal Twist" Subject to GAAR