Kanji - Ontario Superior Court finds that instructions to "minimize tax" did not entail routine tax deferral arrangements

The taxpayer settled a family trust with himself as one of the beneficiaries and trustees, with the result that he would be ineligible pursuant to s. 107(4.1) for s. 107(2) rollover treatment on a transfer of trust property to his children.

Brown J. denied the taxpayer's application for a rectification order.  The taxpayer did not meet the burden of proving his alleged intention, when forming the trust, of eventually having the trust's assets transferred to his children on a tax-deferred basis.

Brown J.'s decision, if correct, means that a taxpayer's instructions to a tax or estate lawyer do not implicitly entail instructions to arrange transactions to secure reasonable tax advantages.  For example, the taxpayer's general instruction to counsel to "minimize tax" apparently did not include the specific tax deferral that the taxpayer later sought in the rectification order.

Scott Armstrong.  Summary of Kanji v. Attorney General of Canada, 2013 ONSC 781 under General Concepts - Rectification.