News of Note
CRA rules that the aunt’s renunciation of her trust income interest, resulting in the corpus distribution to her nieces/nephews as approved by her, does not trigger proceeds to her
Email this ContentDaughter1 and Daughter2 (sisters) had been the equal income beneficiaries of a testamentary trust (the Fund). However, on the death of Daughter2, ½ of the Fund property had been distributed in accordance with the Fund terms to her issue.
Daughter1, who has no children, will now execute a written renunciation of her income interest in the Fund. However, Daughter1 will also approve a scheme of distribution (prepared by a trust company serving as trustee) for the distribution of the Fund property (mostly, marketable securities and MFT units, to be distributed in specie), to the three children of Daughter2 in equal shares.
This will occur as an interim distribution, and then a final distribution after a clearance certificate is received.
Rulings included that the renunciation by Daughter1 of her income interest in the Fund will not result in her being considered to have received any proceeds of disposition for purposes of ss. 40(1), 106(2) and 107(1), and that the transactions (other than the property distributions by the Fund, governed by s. 107(2)) will not result in a disposition of any property of the Fund..
Neal Armstrong. Summary of 2022 Ruling 2021-0919101R3 under s. 106(2).
Stack – Tax Court of Canada finds that legal advice transmitted by a financial planning firm to an accountant for the taxpayers was protected by privilege
In finding that an email from an individual at a financial planning firm to an accountant was protected by solicitor-client privilege, Bocock J indicated that the email contained protected confidential legal advice and that “use of an accountant as a representative in the course of obtaining legal advice or legal assistance for a client does not nullify otherwise privileged communications” (citing Imperial Tobacco and Susan Hosiery).
Neal Armstrong. Summary of Stack v. The King, 2024 TCC 137 under General Concepts – Solicitor-client privilege.
C.W. Carry – Federal Court finds that it was unreasonable for CRA to deny a request for relief from a mistake on the basis that it was the taxpayer, not CRA, that made the mistake
A CRA audit of the CEWS benefits received by the Applicant revealed that, due to a transposition error of an employee, it had made an erroneous choice of methods (the Alternative Method rather than the General Method) resulting in the overpayment of CEWS benefits to it of over $1 million. The Applicant sought to change the due date for its first qualifying period (Q2) by requesting CRA to use the combination of ss. 125.7(10) and 125.7(16) to both extend the time for filing an application for Q2 and to enable the Applicant to revoke the election of the Alternative Method and elect for the General Method. It justified the availability of a s. 125.7(16) extension on the basis of not yet being a qualifying entity in Q2.
CRA denied the request on the basis that:
- S. 125.7(16) could not be used because, based on the Applicant’s revenue, it could not possibly become a qualifying entity; (Battista J found that this was jumping the gun – the Applicant was requesting the extension of the time for determining whether it was a qualifying entity);
- S. 125.7(16) accorded CRA with the discretion to accept late-filed s. 125.7 applications but not to change the due date for the claim period; (this simply was an incorrect reading of the s. 125.7(16) wording); and
- The onus was on the Applicant to submit accurate original wage subsidy applications on time and the error was not caused by CRA.
Regarding the third ground, Battista J found that this CRA “logic would result in the refusal of extensions in virtually all cases of mistake and the discretion to allow for extensions based on mistakes would be rendered meaningless” and that the decision should “have explained how the decision was responsive to its context, specifically, the purpose and nature of the CEWS program and the factual context”.
The decision was quashed and remitted for redetermination.
Neal Armstrong. Summary of C.W. Carry Ltd. v. Canada (Attorney General), 2024 FC 1983 under s. 125.7(16).
1184369 B.C. – BC Court of Appeal finds that the taxpayer was required to disprove the Minister’s assumption as to a property’s FMV (based on its property assessment value)
The Crown pleadings in the appeal of the taxpayer (“118”) of a property tax assessment stated an assumption as to the property’s FMV (which had been determined as its assessed value as determined by BC Assessment), rather than the lower value inferred by the purchaser from a related share purchase agreement.
Skolrood JA referred with approval to the finding in Preston that tax assumptions containing statements of mixed fact and law will not be invalidated simply on that basis if the factual underpinnings are clearly stated, there is no dispute about the legal principles and no prejudice results, and further noted that Preston had found that “[f]air market value is predominantly factual”. He found that the chambers judge had erred in setting aside the Minister’s assumption of fair market value on the basis that this was a statement of mixed fact and law.
In this regard, after noting that “this Court has held that except in certain limited circumstances, the tax assessed value is not proper evidence of fair market value”, Skolrood JA went on to state that “the courts do not engage in a deep inquiry into the basis for the Minster’s assumptions; instead, the analysis goes to whether the assumption has been successfully disproven on a balance of probabilities”, which 118 did not do.
Neal Armstrong. Summaries of British Columbia v. 1184369 B.C. Ltd., 2024 BCCA 380 under General Concepts – Onus, FMV- land.
CRA has released the final version of the 2024 APFF Financial Strategies and Instruments Roundtable
CRA has released the final version of all the questions and answers at the 10 October 2024 APFF Financial Strategies and Instruments Roundtable. We did not notice any substantive changes from the versions that were made available at the time.
For your convenience, the table below sets out the descriptors and links to the summaries, and translated questions and answers, which we prepared in October.
Income Tax Severed Letters 18 November 2024
This morning's release of 12 severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Releases for the next two weeks will be on Tuesday.
GFL Environmental – BC Court of Appeal finds that assumptions: should be struck where there is insufficient evidence of their making; but they can contain statements of law
The taxpayer (GFL), for a monthly charge, provided portable toilets, cleaned them and disposed of the waste. Skolrood JA found that there were no reversible errors in the findings of the chamber judge that it was appropriate to “unbundle” the single consideration that GFL charged on a monthly basis to its customers for BC PST purposes: 80% to the non-taxable waste disposal service; and 20% to the taxable lease of the toilets and to the cleaning services provided “to” the toilets.
Before so concluding, Skolrood JA also confirmed the conclusion below that all of the Minister’s pleaded assumptions should be struck, as there was insufficient evidence on the record to permit the court to determine that those assumptions in fact had been made by the Minister.
He also stated:
I endorse the principle … in Preston that tax assumptions containing statements of mixed fact and law will not be invalidated simply on that basis if the factual underpinnings are clearly stated, there is no dispute about the legal principles and no prejudice results.
On this basis, he found that the chambers judge should not (in the alternative) have struck various assumptions involving issues of mixed fact and law or statements of law – it was generally only where the assumptions are “wholly conclusory and lack any factual basis to support the conclusions offered” that they should be struck.
Neal Armstrong. Summaries of British Columbia v. GFL Environmental Inc., 2024 BCCA 379 under PSTA (BC), s. 1(1) – related service, and General Concepts – Onus.
GST/HST Severed Letters June 2024
This morning's release of 11 severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their June 2024 release) is now available for your viewing.
Foix – CRA reiterates that Foix overruled a more restrictive approach to s. 84(2) in some earlier cases (and restricts Geransky)
CRA provided detailed comments on Foix (where the FCA found that s. 84(2) applied to a particular hybrid sale transaction) in 10 October 2024 APFF Roundtable, Q.3. Now, in brief oral comments when a question about this case was repeated, CRA indicated:
- the reasons in Foix should be carefully considered in connection with any proposed hybrid sale (with exception of transactions identical to those in Geransky);
- the decision reinforces the broad scope of s. 84(2); and
- it represents a departure in some respects from the more restrictive view of s. 84(2) evident in some earlier cases.
Neal Armstrong. Summary of 3 December 2024 CTF Roundtable, Q.14 under s. 84(2).
We have translated 6 more CRA interpretations
We have translated a further 6 CRA interpretations released in April and March of 2001. Their descriptors and links appear below.
These are additions to our set of 3,030 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 23 ¾ years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
| Bundle Date | Translated severed letter | Summaries under | Summary descriptor |
|---|---|---|---|
| 2001-04-13 | 15 September 2000 Internal T.I. 2000-0038337 F - RETENUES A LA SOURCE-REMUNERATION | Income Tax Act - Section 153 - Subsection 153(1) - Paragraph 153(1)(a) | directors’ settlement of liability for unpaid remuneration of bankrupt corporation was subject to s. 153(1)(a) withholding |
| Income Tax Regulations - Regulation 100 - Subsection 100(1) - Remuneration | directors’ settlement payment of liability for unpaid employee remuneration of bankrupt corporation was subject to source deductions as “remuneration” | ||
| 2 March 2001 Internal T.I. 2001-0070687 F - REGIME D'ASSUR. MEDICAMENTS DU QUE. | Income Tax Act - Section 118.2 - Subsection 118.2(1) | unlike Quebec, prescription drug premiums for a year are not recognized until their payment | |
| 30 March 2001 Internal T.I. 2001-0074087 F - DEPENSES POUR SITE WEB | Income Tax Regulations - Schedules - Schedule II - Class 14.1 | part of purchase price for existing website may be attributable to clientele and goodwill | |
| 9 February 2001 Internal T.I. 2000-0055757 F - ALLOCATION PERIODIQUE | Income Tax Act - Section 56.1 - Subsection 56.1(4) - Support Amount | amounts paid to ex-wife each time she took the 2 children were not allowances since there was no regularity to the visits | |
| Income Tax Act - Section 118 - Subsection 118(1) - Paragraph 118(1)(b) | s. 118(1)(b) credit available where sporadic amounts required to be paid to ex-wife when the children visited her did not qualify as support amounts | ||
| 12 March 2001 Internal T.I. 2000-0037637 F - Partie 1.3 Aide gouvernementale/Surplus | Income Tax Act - Section 181.2 - Subsection 181.2(3) - Paragraph 181.2(3)(a) | government grants were other surplus | |
| Income Tax Act - Section 181 - Subsection 181(3) | grants deducted from carrying value of capital assets and disclosed in the notes were reflected on the balance sheet | ||
| 2001-03-30 | 26 March 2001 External T.I. 2000-0060185 F - Évaluation actions assurance-vie décès | Income Tax Act - Section 70 - Subsection 70(5.3) | allocation of CSV of corporate life insurance policy among different classes of life insurance shares |