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11 September 2022- 11:02pm 4432002 Canada – Tax Court of Canada finds that a sale agreement did not have a reverse earn-out so that s. 12(1)(g) applied Email this Content The taxpayer and another company sold their rights to software for lump-sum payments plus additional payments (labeled in the sale agreement as “Earn-Out Payments”) calculated as a declining percentage of the software sales made by the purchaser (“MITT”) over the following three years, except that the total payments (to both vendors) were capped at US$8 million. ... In rejecting the taxpayer’s principal argument that the purchase price cap established that such payments were received pursuant to a “reverse earnout” arrangement, St-Hilaire J stated: This is not … a situation where the sale agreement provided that MITT will pay the maximum amount, a portion of which may have to be repaid if certain financial targets are not met. … Rather, what one finds … are clauses providing for the payment of lump sums and the payment of additional amounts based on sales of the Software. … [T]he sales agreements … are clearly "earnout" agreements. … [T]here is nothing in the wording of paragraph 14(1)(b) to suggest that it should be accorded precedence over paragraph 12(1)(g). ...

Maso – Privy Council confirms application of minority discount to minority bloc of public-company shares Email this Content Some minority shareholders of a Caymans NASDAQ-quoted company dissented when they were squeezed out in a going-private transaction for a modest (26%) premium over the trading price. ... Summary of Shanda Games Ltd v Maso Capital Investments Ltd & Ors (Cayman Islands) [2020] UKPC 2 under General Concepts – FMV – shares. ...

Turning to the Crown’s less frivolous argument that the repairs were capital expenditures, he stated (at para. 50): … The repairs effected by the Appellant did not result in the creation of a different capital asset than what was there before. … They were meant to bring the property to the state that it previously was. ... He and his spouse flew down to Las Vegas on a vacation, but he then rented a car so that he could drive down to Phoenix (accompanied by his spouse) so that he could attend to issues regarding the rental unit – then they flew directly from Phoenix back home (in Vancouver). ... The Queen, 2021 TCC 5 under s. 18(1)(a) – income –producing purpose, s. 18(1)(b) – capital expenditure v. expense – improvements v. repairs, s. 3(a)- business source and s. 18(12). ...

30 August 2020- 11:45pm Rogers Enterprises – Tax Court of Canada finds no GAAR tax benefit where an alleged excessive CDA addition was not yet distributed to individual shareholders (and also no abuse) Email this Content To simplify somewhat, a group of private corporations owned for the benefit of the Rogers family structured their affairs such that one corporation (“CGESR”) was the beneficiary of policies on the life of Ted Rogers whereas a company (“ESRL”) holding shares of CGESR through another CCPC (“ESRIL 98”) was the policyholder and had been paying the premiums, so that its adjusted cost basis (“ACB”) was $42M. ... The Queen, 2020 TCC 92 under s. 245(1) – tax benefit, s. 245(4), and s. 89(1) – CDA – (d)(iii). ...

10 February 2020- 11:56pm Productions GFP – Federal Court declines request for judicial review of a CAVCO reversal of a preliminary ruling Email this Content The appellant (“GFP”) requested a preliminary opinion from the Canadian Audio-Visual Certification Office (CAVCO) as to the eligibility for the Canadian film or video production tax credit of a proposed production that would be in the form of a quiz contest but where the points would not matter and the focus would be on the participants being funny. ... In dismissing GFP’s application for judicial review, Pentney J stated: … [I]t is clear that the opinion provides only a preliminary indication, based solely on the information provided by the producer, and that the final decision is based on an assessment of the actual production itself. … There is nothing in the evidence to suggest that the decision was not made in good faith, that it constituted an abuse of power or that it otherwise violates the objectives of the legislation. … … I accept that in view of the architecture of the system … those who want a certificate must spend money to embark on a production, with no guarantee that they will receive the benefit of a tax credit. ... Canada (Attorney General), 2019 FC 1613 under Reg. 1106(1) – excluded production- (b)(iii). ...

11 December 2018- 11:46pm Adecco – English Court of Appeal finds that a placement service providing non-employee temps to clients was not paying the temps’ compensation on the clients’ behalf Email this Content An employment bureau (Adecco) introduced temporary staff ("temps"), who were not Adecco employees, to clients looking for a temporary worker to undertake an assignment, and if the temps accepted an assignment, Adecco paid them for the work they did for the clients – and collected those amounts plus a mark-up from the clients. ... Summary of Adecco UK Ltd & Ors v Revenue & Customs [2018] EWCA Civ 1794 under s. 123(1) – consideration. ...

1 October 2023- 11:22pm CIBC – Federal Court of Appeal confirms that the predominant element supplied by a Loblaw banking sub to CIBC was a right to access Loblaw customers, rather than a financial service Email this Content A subsidiary ("PC Bank") of Loblaw had agreed with CIBC for CIBC to provide retail banking services under Loblaw’s President's Choice trademark. ... (r.5) of the financial service definition provided an exclusion from financial service for “property … that is delivered or made available to” CIBC “in conjunction with” CIBC selling financial products of PC Bank, the supply made by PC Bank to CIBC was taxable. ... Canada, 2023 FCA 195 under General Concepts – Res Judicata, ETA s. 309(1) and s. 123(1) – financial service – (r.5). ...

14 December 2023- 11:29pm Husky Energy – Tax Court of Canada finds that a securities loan between residents of two Treaty countries eliminated access to Treaty benefits on the dividend payments Email this Content Before a Canadian public corporation (“Husky”) paid a dividend on its shares, two significant shareholders of Husky resident in Barbados (the “Barbcos”) transferred their shares under securities lending agreements to companies resident in Luxembourg with which they did not deal at arm’s length (the “Luxcos”). ... The King, 2023 TCC 167 under s. 212(2), Treaties – Income Tax Conventions – Art. 10, s. 245(1) – tax benefit, s. 245(4). ...

28 January 2020- 11:51pm Muir – Tax Court of Canada finds that s. 160 did not apply to moneys transferred subject to an informal arrangement to discharge liabilities of the transferor Email this Content A professional corporation sold all its assets for $1.2 million, with most of this sum being applied at closing to pay off corporate liabilities, but with the balance of $124,000 being paid to the corporation’s dentist shareholder (Ms. ... He stated: [I]t appears her patients and the Corporation’s creditors would have had legal rights to trace any of the monies involved had the Corporation transferred it to her for any other purpose …. … I do not accept that it was the intention of Parliament or … Livingston to have section 160 apply in circumstances where CRA not only wasn’t but could never be … in any different position whatsoever as a result of the transfer. ...

5 February 2024- 10:58pm Serres Toundra – Court of Quebec finds that a greenhouse operation is farming, not manufacturing or processing Email this Content The Quebec manufacturing and processing credits claimed by Serres Toundra in connection with equipment acquired for use by it in its greenhouse cucumber-growing operation turned on whether such equipment was Class 29 property. ... In finding that the greenhouse operation was farming, so that the exclusion applied, Vaillant JCQ stated: Greenhouse cucumber growing at Serres Toundra requires the same elements as those needed for cultivation in home gardens or farmers' fields: soil, water, light, heat and fertilizers. … [The] food-grade mineral fibre substrate [used] instead of soil … plays the same role as soil …. ... Agence du revenu du Québec, 2023 QCCQ 10441 under s. 248(1) – farming. ...