Lupien – Tax Court of Canada finds that a distributor earning significant relative profits had no goodwill

Shortly before a corporation (“Antoni”) sold all its assets to a third party, it acquired all the assets of a corporation (“LCR”) owned by its shareholder’s brother, which had been distributing one of its imported product lines in North America. Although LCR earned a significant portion of the combined profits, Lamarre ACJ found that the assets so acquired from LCR did not include any valuable goodwill given inter alia that there was no evidence of a distributorship agreement with LCR that could not be terminated on short notice and that the asset sale agreement between LCR and Antoni had not listed goodwill as a transferred asset. As the consideration paid by Antoni was inflated, s. 160 applied to make LCR liable for Antoni’s unpaid taxes (jointly with LCR’s shareholder given subsequent dividends to him).

Neal Armstrong. Summary of Lupien v. The Queen, 2016 CCI 2, under General Concepts - fair market value – other.