News of Note

In relation to five requirements for information (“RFIs”) issued pursuant to s. 231.2(1) to four resident individuals and a corporation, Southcott J found:

• Although the RFIs themselves did not name all the particular parties that the Minister was investigating, this was acceptable since the requirement to first seek judicial authorization under s. 231.2(3) before issuing the RFIs to “unnamed persons” meant only that such persons were “unknown to the Minister” rather than being “unnamed in the RFI.”
• Furthermore, “the unnamed persons provisions are not engaged where a requirement seeks information related to an unnamed person that is not the subject of the Minister’s investigation.”
• Although he was not convinced “that the statutory scheme of the ITA permits the Minister to require production of foreign-based information through s 231.2(1),” it was acceptable to issue requirements under both ss. 231.2 and 231.6 with it to be sorted out later which of the requested information was foreign-based information that was subject to the limitations in s. 231.6 rather than being subject to a potential compliance order under s. 231.7 (for non-foreign based information).
• It was acceptable for some of the RFIs to seek material dating back 21 years.
• “[T]he ITA does not require that the party from whom the information is sought be given any details as to the purpose of the requirement.”
• An RFI request for “any additional information or explanations that are relevant in determining whether or not the rules of former section 94 of the Act (for taxation years before 2007) applies to the Royce and Regent Trusts in respect of the transaction described in the background of this query” was too vague to permit a proper response and needed to be redone.

Neal Armstrong. Summary of Ghermezian v. Canada (Attorney General), 2020 FC 1137 under s. 231.2(1).

We have published a translation of a CRA interpretation released last week and a further 7 translations of CRA interpretation released in August and July, 2009. Their descriptors and links appear below.

These are additions to our set of 1,344 full-text translations of French-language Roundtable items and Technical Interpretations of the Income Tax Rulings Directorate, which covers all of the last 11 1/3 years of releases of Interpretations by the Directorate. These translations are subject to the usual (3 working weeks per month) paywall.

A TFSA, which had been assessed on the basis that its securities’ trading was a business, had obtained, pursuant to an Access to Information request, a Finance table (prepared before the release of the TFSA legislation) comparing the treatment of an RRSP and the then-proposed “LSP” (an initial version of the TFSA), including a cryptic reference to non-exemption of income from an unrelated business. The taxpayer posed various written questions under Rule 113 regarding the table, including whether it reflected an intent that related business income was to be exempted.

After having canvassed a number of authorities, including quoting the admonition in Pepper v. Hart that a court should “be very cautious in opening the door to the reception of material not readily or ordinarily accessible to the citizen whose rights and duties are to be affected by the words in which the legislature has elected to express its will,” and before confirming the dismissal by Pizzitelli J of the taxpayer’s motion to compel answers to these and other questions, Locke JA stated:

In the end, though there are good reasons to be reluctant to consider non-public documents in the exercise of statutory interpretation, it is difficult to state unequivocally that such documents could never be relevant. The better question is whether the documents in question in the present appeal have an institutional quality such that they could represent the government’s position concerning the legislation at issue. If not, such documents are not relevant.

The implication may be that because it would have been reasonable for Pizzitelli J to consider that the preliminary thinking of Finance was not part of the final background package that accompanied the enactment of the TFSA legislation, the table (and more background on it) would not be admissible. Locke JA also found that Pizzitelli J had not made reviewable errors in refusing to order production of unredacted copies of various other requested internal documents – and, in this regard, he agreed with Pizzitelli J’s application of the view “that earlier drafts of a final position paper do not have to be disclosed, and … that even where relevance is established, the Court has a residual discretion to refuse document production.”

Neal Armstrong. Summary of Ahamed v. Canada, 2020 FCA 213 under Tax Court of Canada Rules (General Procedure), s. 116(2).

CRA provided more detailed comments on the consequences of a corporation receiving a $40,000 loan under the Canada Emergency Business Account (“CEBA”) program than those provided recently in 2020-0861461E5. Comments included:

• The financial institution making the loan would reasonably be viewed as a person described in s. 12(1)(x)(i), and the forgivable portion of the loan would be included in income for the corporation’s taxation year ended December 31, 2020 under s. 12(1)(z)(iv) as assistance in the form of a forgivable loan in respect of an outlay or expense (the expenses funded by the loan).
• The corporation, to avoid the s. 12(1)(x) income inclusion, could file the s. 12(2.2) election with its income tax return for its 2020 taxation year to reduce the amount of non-deferrable operating expenses (“whether deductible or not”) incurred in that year, the subsequent year or a prior year.
• If the loan was not repaid as to at least 75% by December 31, 2022, so that the conditions for a forgiveness of $10,000 of the loan were not satisfied, there would be deductions under s. 20(1)(hh) as the forgivable (now, no longer forgivable) portion of the loan was repaid. In this regard, the corporation and the financial institution could agree that any amount repaid by the corporation would be applied first to repayment of the forgivable portion of the loan, so that immediate s. 20(1)(hh) deductions could be generated.
• If there was no such agreement, repayments would be considered to be made pro rata as between the forgivable and non-forgivable portion of the loan, thereby stretching out the s. 20(1)(hh) deductions.

Neal Armstrong. Summaries of 7 October 2020 APFF Roundtable Q. 18, 2020-0862931C6 F under s. 20(1)(hh) and s. 12(1)(x)(iv).