Gleig – Tax Court of Canada finds that promissory notes were a prescribed benefit for tax shelter purposes where the holder had no intention of demanding their payment

Although the language of the definition of a prescribed benefit in Reg. 231(6) (now Reg. 3100(1)) is aimed at more sophisticated arrangements that this, Lyons J found that promissory notes issued by investors to a promoter in consideration for the promoter incurring resource expenditures on their behalf were a prescribed benefit on the basis of the promoter’s testimony that it never intended to demand payment of the notes. Accordingly, the arrangement was a tax shelter as the resource deductions promised to them were mostly funded by the notes rather than cash. This is similar in the result to finding that the notes were shams.

Neal Armstrong. Summary of Gleig v. The Queen, 2015 TCC 191, under s. 237.1(1) – tax shelter.