Laliberté – Federal Court of Appeal confirms that the Cirque du Soleil’s bearing most of the $41.8M cost of a space trip for its controlling shareholder gave rise to a shareholder benefit

The founder and controlling shareholder of Cirque du Soleil, had been found by the Tax Court to have received a taxable benefit under s. 15(1) (or alternatively, under s. 246(1)) equalling approximately 90% of the $41.8 million cost of sending him on a trip to the international space station in September and October 2009, given that the cost was borne by his family holding company and then largely passed through to the top operating company (“Créations Méandres “) in the Cirque du Soleil group, but with there being a matching contribution of capital by the holding company to Créations Méandres so that independent shareholders would not bear any of the cost of the trip.

In dismissing the appeal, Geason JA rejected a submission that the Tax Court had focused insufficiently on whether there had been a corporate intent to impoverish the corporations, stating that “even if intent to impoverish the corporation were required, such intent cannot be equated with a controlling shareholder’s subjective intent and most especially not with an intent that was formulated [as in the case here] after the corporate expenditure was engaged”.

She also effectively indicated that, consistently with Youngman, it was appropriate for the Tax Court to have “calculated the value of the shareholder benefit at the end of the case based upon all the evidence tendered” rather than there having been a shifting of the burden to the Minister to establish this value once the evidence demonstrated that the Minister’s assumption of a 100% taxable benefit was incorrect.

Neal Armstrong. Summaries of Laliberté v. Canada, 2020 FCA 97 under s. 15(1) and General Concepts – Onus.