Michael Coburn, "Practical Strategies for Dealing with the Restrictive Covenant Provisions", 2014 Conference Report (Canadian Tax Foundation), 8:1-29

Summary Under
Tax Topics - Income Tax Act - Section 56.4 - Subsection 56.4(1) - Restrictive Covenant
Examples of scope (p. 7)

Examples of agreements, undertakings or waivers that appear to be caught by the definition of restrictive covenant...

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Summary Under
Tax Topics - Income Tax Act - Section 56.4 - Subsection 56.4(2)
Enforceability of restrictive covenant if no allocation of consideration (pp. 4-5)

[T]here may be a perception that to ensure the legal...

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Summary Under
Tax Topics - Income Tax Act - Section 56.4 - Subsection 56.4(3) - Paragraph 56.4(3)(b)
S. 56.4(3) as a counter to s. 68(c) (pp.21-22)

[S]ubsection 56.4(3) contains provisions that effectively allow an amount received as consideration...

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Summary Under
Tax Topics - Income Tax Act - Section 56.4 - Subsection 56.4(7) - Paragraph 56.4(7)(b)
Narrowness of non-compete description in ss. 56.4(3)(c)(ii, 56.4(6)(d), 56.4(7)(b) and 56.4(7)(c) (p. 7)

[I]f a covenant falls within the...

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Summary Under
Tax Topics - Income Tax Act - Section 56.4 - Subsection 56.4(7) - Paragraph 56.4(7)(d)
Requirement of nil proceeds for covenant: tracing issue (p.14)

[A] grantor of a Non-Competition Covenant could acknowledge that the consideration...

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Summary Under
Tax Topics - Income Tax Act - Section 56.4 - Subsection 56.4(7) - Paragraph 56.4(7)(e)
Exclusion of hybrid sales and safe income strips (p.15)

[A]ll share repurchases or redemptions, including ones that do not result in an actual...

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Summary Under
Tax Topics - Income Tax Act - Section 68 - Paragraph 68(c)
Burden on CRA of establishing unreasonableness/reasonableness of nil allocation (pp.17-19)

Effectively, the courts have created a test where the...

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