The new purpose tests in section 55 make creditor proofing problematic. The 55(3)(a) exception remains, however, for deemed dividends. Perhaps it’s possible, then, to achieve creditor proofing by engaging in a 55(3)(a) butterfly. Not so fast. The CRA’s comments at the CTF conference roundtable in November 2015 “suggest its willingness to apply GAAR to certain situations in which deemed dividends are created in lieu of ordinary dividends.” Asif N. Abdulla, “New Subsection 55(2) Issues” (January 2016) 24:1 Canadian Tax Highlights.
