During the week of October 22, 2012, the Tax Court of Canada (TCC) found that Canada’s general anti-avoidance rule (GAAR) did not apply because all the transaction-steps were undertaken primarily for a non-tax purpose (Spruce Credit Union v. The Queen, 2012 TCC 357).  The facts involved all the credit unions in British Columbia in connection with a government-driven restructuring of the deposit insurance scheme then applicable in the province.  In brief, the province-mandated restructuring resulted in a large “assessment” being levied on the credit unions by a deposit insurance corporation that was owned by the provincial government (“CUDIC”).  As a practical matter, this assessment could only be paid from funds held by another deposit insurance corporation that was owned by these credit unions (“STAB”).  Accordingly, STAB decided to pay (tax-free) dividends to the credit unions – as opposed to some other theoretical distribution method – in order to enable the credit unions to pay their large (tax-deductible) CUDIC assessments.  The CRA did not like the tax result of these transactions: it reassessed the credit unions to include the dividends from STAB in their taxable income, pursuant to certain technical rules in s. 137 or (alternatively) the GAAR in 245.  The CRA lost on both accounts.  With respect to the GAAR assessment, the TCC found, as a fact, that none of the transaction-steps were undertaken for the primary purpose of obtaining a tax benefit.  Accordingly, there were no “avoidance transactions”.  This meant there was no need to even consider whether any of the transactions-steps resulted in “abusive tax avoidance” under the GAAR.