Gulf Canada Limited

The case documents a large tax-motivated acquisition. In 1985, Chevron negotiated the sale of one of its subsidiaries, Gulf Canada Corporation (Gulf) to Olympia and York Developments Limited, a Canadian company controlled by the Reichmann family of Toronto. The Reichmanns subsequently orchestrated a complex reorganization of Gulf that yielded significant tax benefits. Principal issues for discussion are: (i) Taxation is used as an instrument of public policy. (ii) An important motive for corporate reorganizations is the opportunity to step-up the tax basis of certain assets. (iii) Uncertainty over the tax treatment of a transaction may prevent the transaction. (iv) Taxes, regulation, and the legal form of a transaction are critical to the success of a large merger or acquisition.