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5 December 2021- 10:39pm Loblaw – Supreme Court of Canada finds that a Barbados bank sub conducted its business of investing Loblaw cash principally with arm’s length persons Email this Content The taxpayer, an indirect wholly-owned subsidiary of the Loblaw public company, wholly-owned a Barbados subsidiary (Glenhuron), that was licensed in Barbados as an international bank and that used funds mostly derived from equity injections by the taxpayer predominantly to generate income from U.S. ... Regarding the alleged relevance of the parents’ corporate oversight as part of the conducting of Glenhuron’s business, “[f]undamentally, a corporation is separate from its shareholders” and its conducting its business “in accordance with policies adopted by the board of directors on behalf of the shareholders … does not change the fact that the corporation remains the party conducting business.” ... Loblaw Financial Holdings Inc, 2021 SCC 51 under s. 95(1) – investment business – para. ...

21 February 2022- 10:31pm Dominelli – Federal Court accepts that an agreement to compromise a s. 231.7 compliance procedure would have been binding if complied with by the taxpayer Email this Content Before judgment had been rendered in an application by the Minister for a s. 231.7 compliance order regarding failure of Mr. ... Pentney J stated (at para. 59) that he agreed “with Dominelli that the scope of the Minister’s discretion to determine that she is not satisfied that he has discharged his obligations under the agreement must be limited by the terms of their agreement ….” However, he went on to find that Dominelli’s affidavit did not demonstrate that he had met his obligations under the agreement, stating (at para. 79): [T]he gap between what Dominelli promised to do and what his affidavit states is striking. … [H]is evidence does not establish that he has met the specific and detailed terms of the agreement and the Undertaking that he negotiated, and thus his motion cannot succeed. ...

7 March 2022- 10:57pm Airzone – Tax Court of Canada indicates a presumption that a taxpayer satisfying the “how” SR&ED tests will also satisfy the “why” test Email this Content The taxpayer (“Airzone”) provided comprehensive air quality monitoring services to government agencies, international organizations, and businesses. In connection with allowing most of Airzone’s projects, largely in connection with expanding its techniques for testing for airborne compounds, as qualifying as SR&ED, Hogan J made a number of pithy general observations, including: The taxpayer is required to demonstrate satisfaction both of “how factors,” namely “that the work was carried out by way of systematic investigation or search through experiment and analysis of a hypothesis … [and the] results of the work must also be preserved” and also a “why factor,” namely “that the work was carried out to resolve technical uncertainties that could not be solved through standard procedures and methods.” ... “[T]he ‘why factor’ cannot be so strictly applied that only large corporations that employ dedicated research staff can qualify for the SR&ED incentives … [as m]oving the goal post so far afield … would be contrary to the intention of Parliament.” ...

21 April 2022- 11:18pm Kufsky – Federal Court of Appeal finds that a taxpayer received dividends for s. 160 purposes because she was estopped from arguing otherwise or because the corporate insolvency did not matter Email this Content A shareholder loan balance that was owing by the taxpayer was eliminated through dividend declarations backdated to the three preceding years and paid by way of set-off. ... Webb JA found that the taxpayer was estopped from now arguing that the amounts that she had treated as dividends in fact were not dividends (so that s. 160 did not apply to their payment)- because the appropriate procedures for the declaration and payment of the amounts as dividends were not followed and because s. 38(3) of the OBCA prohibited the payment of a dividend by an insolvent corporation – on the basis of the principle that: [A] taxpayer who has benefited from having an amount included in his or her income as a dividend in a particular taxation year (and who has not objected to the assessment of tax based on having received this dividend) is estopped from claiming in any subsequent appeal related to the application of section 160 of the Act, that the previous filing position was wrong. ... Canada, 2022 FCA 66 under s. 160(1), General Concepts – FMV – Other, Onus, and Payment and Receipt. ...

24 May 2022- 11:08pm Marin – Tax Court of Canada confirms that FTC domestic and Treaty provisions are applied re the particular year in which the subject income was earned Email this Content France started imposing income tax on rental income as it was earned rather than the tax being payable one year in arrears, as previously. However, the taxpayer (a Canadian resident with a French rental property), like others, was granted transitional relief so that in 2019 he received a tax credit from the French government equal to the French tax otherwise payable by him on his 2018 income – so that in 2019 he only had to pay the current tax on his 2019 rental income. ... The Queen, 2022 CCI 49 under s. 126(7) – non-business income tax, Treaties – Income Tax Conventions, Art. 6, Art. 24. ...

Benedict Catholic Secondary School Trust – Federal Court of Appeal finds that a taxpayer is precluded from changing previous CCA claims Email this Content The taxpayer, over the course of its 1997 to 2003 taxation years, claimed capital cost allowance and generated non-capital losses. ... In finding that such CCA claims could not be treated as having been revised, Webb JA indicated that the “administrative practice [in IC 84-1] is not binding on this Court, nor can it amend the Act, noted that “ Nassau Walnut … drew a distinction between an election and a designation” and found that “the comments in Nassau Walnut with respect to an election, and the inability of a taxpayer to change an election absent a specific provision in the Act permitting such a change, are applicable in this case.” ... Canada, 2022 FCA 125 under s. 13(21)- UCC – E. ...

14 August 2022- 11:02pm Coopers Park – Tax Court of Canada grants production of documents reviewed by the GAAR Committee in a similar case that then was applied to the taxpayer Email this Content The taxpayer, which had been assessed under s. 245(2) to deny the carryforward of losses and credits, sought the discovery of proposals made by CRA to two unrelated taxpayers that set out its understanding of the facts and its legal analysis thereof. ... In finding that they were discoverable, Owen J stated: [I]n GAAR cases, the legal analysis of the Minister in support of the policy relied upon is subject to discovery. … [R]eliance is not the test for relevance. … [C]onsideration of the documents in the context of the audit of the Appellant is sufficient to make them relevant for the purposes of discovery. ... After noting that “[i]f the GAAR Committee had considered the Appellant’s case, there is no doubt that the Appellant would be entitled to discovery of all non‑privileged documents considered by the GAAR Committee in deciding to assess the Appellant under the GAAR,” Owen J stated: [T]he Appellant is equally entitled to all non-privileged documents considered by the GAAR Committee in deciding to assess under the GAAR the unrelated taxpayer described in the Similar Case … because that decision directly resulted in the subsequent decision to assess the Appellant under the GAAR. ...

7 March 2023- 11:31pm BMO Nesbitt Burns – Federal Court of Appeal confirms that providing a full spreadsheet would not breach privilege or amount to an impermissible self-audit Email this Content The Federal Court had granted a CRA application pursuant to s. 231.7 seeking an order requiring BMO Nesbit Burns (“NBI”) to provide an unredacted version of a spreadsheet in connection with CRA’s audit of suspected dividend rental arrangement transactions of NBI. ... In rejecting NBI’s claim of privilege, Kane J had stated that the spreadsheet was not more than the mere “operational outcome or end product of legal advice” and did not satisfy the requirement that it “communicate … the very legal advice given by counsel.” ... Canada (National Revenue), 2023 FCA 43 under s. 232(1) – solicitor-client privilege and s. 231.7. ...

25 June 2023- 11:31pm RBC – English Court of Appeal finds that an oil and gas royalty is not income from immovable property under the Canada-U.K. ... She concluded: … RBC does not hold, and indeed has never held, an interest in the Buchan field. ... Summaries of Royal Bank of Canada v Commissioners for His Majesty's Revenue and Customs [2023] EWCA Civ 695 under Treaties – Income Tax Conventions – Art. 6, Art. 12. ...

16 July 2023- 11:40pm Morin – Court of Quebec finds that management fees paid to a related company that performed its functions through the agency of the fee payer were non-deductible Email this Content A pharmacist (“Morin”), who previously had operated six pharmacies as proprietorships, agreed with her management company (“377”) that she would incur various of the expenses of the pharmacies as they related to services provided by technicians and support staff, as contrasted to professional staff, as agent for 377 and that the gross profits from the pharmacies would be split on a 30/70 basis between 377 and her. 377 sent quarterly invoices to Morin and issued credit notes for its computed share of the expenses. ... Tremblay JCQ stated): … Ms. Morin had no expectation of receiving any income from the management fees she paid to 377. … It seems obvious that a reasonable businesswoman, considering only her commercial interests, would not have committed herself to such an expense. ... Agence du revenu du Québec, 2023 QCCQ 2406 under ITA s. 18(1)(a) – income-producing purpose, and s. 152(4)(a)(i). ...