Anthony – Federal Court of Canada finds that an inactive corporation incurred expenses on its own account rather than on behalf of its shareholder carrying on the business in question

Approximately eight years after the taxation year in question, the taxpayer made a s. 152(4.2) application to CRA to allow the personal deduction by him of rental expenses that had been incurred under leases of equipment (used in his machinist business) that had been entered into in the name of his corporation (which was inactive except for entering into those leases). Boswell J found that the taxpayer was stuck with this bad form, noting in effect that although there was a lack of tax logic in this arrangement:

Even if the Applicant’s corporation was simply a shell, it was a shell that nevertheless was the party to the lease agreement with CIT and protected the Applicant from personal liability for the rental payments.

Neal Armstrong. Summaries of Anthony v. Canada (National Revenue), 2016 FC 955 under General Concepts – Separate Existence, s. 9 – computation of profit and s. 152(4.2).