News of Note

The taxpayer purchased three homes in Vancouver in succession between 2004 and 2009, demolished each one, constructed a new house and sold it less than two years after the purchase date. His position was that he had not sold in the course of a business or an adventure in the nature of trade, but had instead constructed each home for the purpose of personal occupancy, so that his sales were exempt under Sched. V, Pt. I, s. 2 rather than being taxable supplies for GST purposes made as a builder.

In dismissing the appeal, Webb JA noted:

[W]ith the guidance of the Supreme Court of Canada [in MacDonald], Mr. Wall’s “ex-post facto testimony regarding his intentions cannot overwhelm the manifestations of a different purpose objectively ascertainable from the record”. …

Evidence contradicting the taxpayer’s arguments included:

• Each house was listed for sale before the occupancy permit was obtained.
• His incurring more debt with each successive purchase contradicted his testimony that he sold to eliminate debt.
• The maximum period that he could have occupied each property before its sale (even assuming he moved in before obtaining the occupancy permit) was a matter of months rather than years.

Neal Armstrong. Summaries of Wall v The Queen, 2021 FCA 132 under ETA s. 123(1) – builder - (f), s. 191(5) and Sched. V, Pt. I, s. 3.

The taxpayer custom-fabricated pieces of heavy specialized equipment at the northern mining site of one of its mining customers. In order for its soldering work not to fracture (which required that the soldering be carried out at close to room temperature), it needed to house its operation in a pre-assembled movable shelter (an “Econox”), which it placed on a concrete foundation on land at the mining site that it leased at a nominal rent from the mining company. Whether the Econox qualified for Quebec investment tax credit purposes turned on whether it constituted a Class 29 property which, in turn, rested on whether it was a property described in Class 8(a) or (b) rather than Class 1(q).

The Court found that the Econox was a Class 1 property. Focusing on its comments regarding Class 8(a), it stated:

Here, however, the words "a building or other structure, or a part of it" appear to be a far more accurate description of the reality of the Econox than the phrase "a structure that is manufacturing or processing machinery or equipment” [in 8(a)]. One would have to do violence to the words to accept that the terms "machinery" or "equipment" more accurately convey what the Econox actually consists of and what it is actually used for than the terms "a building or other structure". …

After noting that the Court below (which it reversed) had dwelt on there being a close linkage of the Econox to the manufacturing and processing activity because it allowed it to be carried out under ideal thermal conditions, the Court went on to state:

Would one claim that a building inside which welding is done in Montreal in January becomes, by that very fact, "a structure that is manufacturing or processing machinery or equipment "? …. The respondent's Econox serves primarily … to shelter the respondent's operations from the weather … . The intent of the legislature here cannot have been that any structure or building within which machining and processing activities of the type engaged in by the Respondent are conducted ipso facto satisfy the principal requirements to qualify as "qualified property" … .

Neal Armstrong. Summary of Agence du revenu du Québec c. Adélard Soucy (1975) Inc., 2021 QCCA 1050 under Schedule II – Class 8.

We have published a further 10 translations of CRA interpretation released in October and September, 2007. Their descriptors and links appear below.

These are additions to our set of 1,612 full-text translations of French-language severed letters (mostly, Roundtable items and Technical Interpretations) of the Income Tax Rulings Directorate, which covers all of the last 13 ¾ years of releases of Interpretations by the Directorate. These translations are subject to the usual (3 working weeks per month) paywall. You are currently in the “open” week for July.

Zomaron was a registered independent sales organization (ISO) for Visa (and an “MSP” for Master Card) network purposes, who obtained the agreement of merchants to use the processing services of credit card processors, subject to the approval of the merchants’ applications by such processors. Lyons J found that “the essence for what the Processor is paying Zomaron for is to ‘arrange for’ merchants to use the Processor’s card payment services,” so that those fees were for a GST/HST exempt financial service.

CRA stated that it “will only apply the Zomaron decision to supplies made by an ISO/MSP if the same fact situation exists.” In its description of the decision, CRA emphasized that “during negotiations Zomaron had considerable latitude and autonomy to set pricing, rates and fees” and that “Zomaron delivered to the … processor fully negotiated merchants” requiring the processor’s card payment processing services – so that presumably absence of these elements might cause CRA to consider that the fees were instead for taxable promotional services.

Neal Armstrong. Summary of Excise and GST/HST News - No. 109 under “Zomaron Inc. v The Queen – Application to independent sales organizations and member service providers ,“ June 28, 2021 under ETA s. 123(1) – financial service – para. (l).