News of Note
Gaitanis – Tax Court of Canada finds that there could be no frustration of a qualifying purchase intent if the taxpayer never had that intent
Email this ContentIn 2014, the appellant became a co-purchaser with his niece of a single-unit residential complex (the “property”) in order to assist with the financing of its purchase.
By virtue of the then-current version of ETA s. 262(3), each of them was required to satisfy the s. 254(2)(b) requirement of acquiring the property as a place of residence of that individual or a relation, in order to generate the $24,000 Ontario new housing rebate. The appellant did not satisfy this test since, at the time of entering into the purchase agreement, his intent was for the property to be acquired as the primary place of residence of his niece and not of him, and she was not a relation. She was not a relation because inter alia ITA s. 251(6)(a) stated that persons are connected by blood relationship if one is the child or other descendant of the other or one is the brother or sister of the other.
Bodie J rejected a submission of the appellant that a frustrating event excused his failure to comply with s. 254(2)(b), namely that they were unable to arrange permanent mortgage financing of the property and, accordingly, were forced to sell the property before they occupied it: there could not be considered to have been frustration of an intent of the appellant to acquire the property as a primary place of residence of him or a relation because he did not have such requisite intent at the time of signing the purchase agreement.
Neal Armstrong. Summary of Gaitanis v. The King, 2025 TCC 186 under ETA s. 254(2)(b).
Brown – Tax Court of Canada confirms that interest on an s. 160(1) reassessment accrues from the time of the original s. 160(1) assessment
In 2010, the taxpayer was assessed under s. 160(1) in respect of transfers to her by a corporation in 2005 and 2006. in 2020 she was reassessed pursuant to a consent to judgment to reduce the assessed amounts to agreed amounts, with interest on such agreed amounts running from the dates of the original s. 160(1) assessments.
Spiro J. confirmed that the arrears interest had indeed accrued from the 2010 dates of the original s. 160(1) assessments. Although the taxpayer’s counsel had correctly cited Abrahams for the proposition that once such reassessments were sent to the taxpayer in 2020, they were the only assessments in existence, this did not affect the 2010 balance due dates that had been established on the date of the original s. 160(1) assessments.
Furthermore, s. 160(1)(e) did not constitute an overarching aggregate liability limit so as to prevent the assessment of arrears interest over and above the lesser of the two amounts referred to in s. 160(1)(e). Indeed, as noted in 1455257, the effect of 2013 amendments was to confirm that interest accrued from the date of original assessment under s. 160(1).
Neal Armstrong. Summary of Brown v. The King, 2025 TCC 184 under s. 160(2).
GST/HST/UHT Severed Letters February 2025
This afternoon's release of eight severed letters from the Excise and GST/HST Rulings Directorate, including Underused Housing Tax (UHT) interpretations (identified by them as their February 2025 release), is now available for your viewing.
CRA confirms that bare trusts are not required to file T3 returns for their 2025 taxation year
A CRA webpage has added the following update:
… Based on proposed legislation in Bill C-15, and consistent with the Explanatory Notes … the CRA does not expect bare trusts to file a … T3 return … including … Schedule 15 … for taxation years ending in 2025. Certain bare trusts will be required to file for taxation years ending on or after December 31, 2026.
Neal Armstrong. Summary of CRA Webpage, Filing a trust’s T3 return - What has changed - The latest changes affecting trusts and trust reporting - Proposed amendments related to trust reporting - Updated: December 16, 2025 under s. 150(1.3).
Amicarelli – Tax Court of Canada finds that an individual’s loss through fraud of her Bitcoin was on income account
The taxpayer, an Air Canada employee, purchased over 100 Bitcoin in 2017 through the cryptocurrency exchange QuadrigaCX, whose “co-founder and CEO … was most likely a fraudster who misused client assets”. Her account balance vanished in December 2017, resulting in a total loss.
Before concluding that her loss was deductible in computing her income for 2017, Sorensen J. found inter alia that:
- she had purchased her Bitcoin with a view to profit;
- her regular purchases and routine engagement in monitoring of the account and the market were “more then dabbling and were more akin to activities of a trader or dealer”; and
- the Bitcoin did not generate any income, such as interest, dividends, or distributions; and there was no personal use or benefit.
Neal Armstrong. Summary of Amicarelli v. The King, 2025 TCC 185 under s. 9 – capital gain v. profit – cryptocurreny, and General Concepts – Evidence.
Income Tax Severed Letters 17 December 2025
This morning's release of four severed letters from the Income Tax Rulings Directorate is now available for your viewing.
The situs of cryptoassets should be determined by the location of where functional control thereof is exercised
Pursuant to s. 233.3, “reporting entity” Canadian taxpayers are required to file information returns disclosing holdings of “specified foreign property”, including “intangible property … situated, deposited, or held outside Canada” where the total cost amount at any time in a taxation year exceeds $100,000.
It is suggested that the situs of cryptoassets should be determined with reference to functional control, namely, the authorized ability to use and transfer them, is exercised.
Where cryptoassets are held with a registered Canadian crypto trading platform (which, as such, is required to comply with custodial requirements imposed by provincial securities regulators), or on a cold storage device in Canada, the meaningful decisions and actions regarding their use are executed in Canada, thereby satisfying the above test.
Neal Armstrong. Summary of Jeffrey Lu and Jason Rosen, “Applying Foreign Property Reporting Requirements to Cryptoassets,” Canadian Tax Focus, Vol. 15, No. 4, November 2025, p. 14 under s. 233.3(1) – specified foreign property – (a).
The relief under s. 128.1(6)(c) for a returning Canadian is reduced if the (non-TCP) subject property has declined in value.
Individuals returning to Canada and electing under s. 128.1(6)(a) can retain the original adjusted cost base (ACB) of their taxable Canadian property (TCP) owned by them continuously from the emigration time. This avoids the property’s deemed disposition at the time of emigration, thereby cancelling the departure tax.
Furthermore, if a former Canadian resident returns to Canada after owning capital property that was not TCP during the period of non-residency, that taxpayer may elect under s. 128.1(6)(c) to adjust the proceeds of disposition upon emigration and the ACB arising on immigration of every property disposed of under s. 128.1(1)(b) upon re-establishing residence.
For example, the taxpayer, on departing Canada, has shares with an FMV of $1 million and an ACB of $100,000. That FMV declines to $500,000 at the time of return. S. 128.1(6)(c) allows the reduction of the proceeds of disposition at the time of immigration by the lesser of the initial capital gain upon emigration ($900,000) and the FMV of the property on immigration ($500,000). If the taxpayer then elects under s. 128.1(6)(c) to reduce the departure tax, the capital gain upon emigration becomes $400,000, i.e., ($1,000,000 - $500,000) - $100,000.
Thus, full tax deferral is allowed if the FMV remains at $1 million, but not if it decreases.
Neal Armstrong. Summary of Balaji Katlai and Jin Wen, “Disposition of Capital Property by Returning Residents: Relief and Exceptions,” Canadian Tax Focus, Vol. 15, No. 4, November 2025, p. 12 under s. 128.1(6)(c).
To avoid multiple deductions of a life insurance policy’s ACB where there are multiple CCPC recipients of the death benefit, separate policies might be issued
Where a life insurance policy names several beneficiary corporations, the entire adjusted cost basis (ACB) of the policy is allocated to each of them for the purposes of computing their respective capital dividend accounts (CDAs), rather than being allocated in proportion to the death benefits received.
Suppose, for instance, that a holding company held a $2 million life insurance policy on the life of its main shareholder, having an ACB of $400,000, and two operating companies (A and B), were designated as the equal beneficiaries. Upon the death of the insured shareholder, each such beneficiary would receive a death benefit of $1 million. However, as reflected in 2017-0690311C6, the CDA for each corporation would be reduced by $400,000, rather than the policy ACB being allocated proportionately between the two corporations.
One solution would be for each of the two beneficiary corporations to purchase a separate $1 million policy on the life of the shareholder, with an ACB of $200,000. This would generally only result in a marginal change in the overall cost of the insurance as compared with a single policy, while avoiding the double deduction of the ACB.
Neal Armstrong. Summary of Gheys Jabbar, “Undue Reduction of the CDA for Multiple Beneficiaries of a Life Insurance Policy,” Canadian Tax Focus, Vol. 15, No. 4, September 2025, p. 11 under s. 89(1) – CDA – (d)(iii).
We have translated 7 more CRA interpretations
We have translated a CRA interpretation released last week and a further 6 CRA interpretations released in December of 1999. Their descriptors and links appear below.
These are additions to our set of 3,400 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 26 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
Neal H. Armstrong editor and contributor