News of Note

Herman Grad 2000 Family Trust – Ontario Superior Court of Justice finds that trusts, whose Alberta-lawyer trustees did not make substantial decisions, were resident in Ontario

In finding that a family trust and a spousal trust, that had two Alberta lawyers as their trustees, were resident in Ontario, Wilton-Siegel J noted that, in the context of an investment trust, “the principal decisions taken by trustees pertain to the investment of the assets of the trust and distributions to beneficiaries,” and noted the principle that “management and control of a trust may rest with a trustee who has little investment experience provided that the trustee has the power to retain others for advice and remains the ultimate decision-maker.” He found here that the ultimate decision maker instead was the family patriarch along with the CFO of the family companies, in the absence of evidence that there was any real decision-making by the trustees in relation to the core investing function or with respect to all but perhaps one of the trust distributions.

Neal Armstrong. Summary of Herman Grad 2000 Family Trust v. Minister of Revenue, 2016 ONSC 2402 under s. 2(1).

Income Tax Severed Letters 19 October 2016

This morning's release of seven severed letters from the Income Tax Rulings Directorate is now available for your viewing.

Further translations of French severed letters are available

The table below links to full-text translations of French technical interpretation that were released last Wednesday and in the week of February 10 and January 27, 2016. They are paywalled in the usual (4-days per week) manner.

Bundle Translated severed letter Summaries under Summary descriptor
2016-10-12 30 June 2016 External T.I. 2015-0583561E5 F - Déduction pour gain en capital - contamination Income Tax Act - Section 248 - Subsection 248(1) - Net Income Stabilization Account Agri-Québec and AgriInvest accounts included
Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Share of the Capital Stock of a Family Farm or Fishing Corporation AgriInvest accounts do not taint family farm or fishing corporations
Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1.1) AgriInvest accounts do not affect qualification of family farm or fishing corporations
2016-02-10 28 January 2016 External T.I. 2015-0617771E5 F - Bump calculation Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) - Subparagraph 88(1)(d)(i) future income tax liabilities not treated as obligations to pay an amount
2016-01-27 7 December 2015 External T.I. 2015-0585171E5 F - 7(1)(b) benefit and 110(1.1) election Income Tax Act - 101-110 - Section 110 - Subsection 110(1.1) election not available if employee stock options on Target shares are purchased by the purchaser rather than surrendered to Target

Proposed s. 152(9) might not alter the outcome in Last

Finance responded to the finding in Last, that the prohibition of an increased assessment on appeal is to be applied on a source-by-source basis, by proposing to amend s. 152(9) to provide that additional arguments can be advanced to support "all or any portion of the total amount determined on assessment." “However, it is worth considering whether [this] selected method to address Last would alter the outcome of the decision,” given that this language does not engage with the source-by-source finding in Last.

Neal Armstrong. Summary of Derrick Hosanna, "Alternative Arguments on Appeal: Does Finance Get the Last Word?", Tax For The Owner Manager, Vol. 16, No. 4, October 2016, p. 3 under s. 152(9).

Proposed s. 212.1(4) discriminates against foreign buyers

The proposed version of the s. 212.1(4) safe harbour from the application of s. 212.1(1) “discriminates against foreign buyers” – notwithstanding that “there is no difference to the Canadian tax base whether purchasers are Canadian or foreign or whether they deal at arm's length or not (as shareholders) with the Canadian corporation that acquires the non-resident corporation.”

Neal Armstrong. Summary of Nathan Boidman, "Judicial and Legislative Developments Threaten Indirect Canadian Acquisitions", Tax Notes International, Vol. 84, No. 2, 10 October 2016, p. 163 under s. 212.1(4).