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13 October 2016- 11:22pm Aubrey Dan Family Trust – Ontario Superior Court finds that an original assessment not dealing with tax in a particular province starts the normal reassessment period for that province Email this Content A purported Alberta trust which wanted to have more time to make submissions to CRA that it was not resident in Ontario provided a related waiver on the prescribed (T2029) federal form. ... He stated (at para 17): … If the original notice does not constitute notification of no tax payable in all provincial or territorial jurisdictions, then a taxpayer receiving such a notice, could be assessed for income taxes in any other province or territory indefinitely. … Neal Armstrong Summary of Aubrey Dan Family Trust v. ...

30 October 2016- 1:00pm ONEnergy – Tax Court of Canada states obiter that services acquired long after the cessation of commercial activity may give rise to ITCs Email this Content A company (“Look”) sold all the assets of its business and then successfully sued its executives for having paid themselves inflated bonuses and option termination payments out of the sales proceeds. In finding that Look was not entitled to input tax credits for the GST on its related legal fees and, in particular, that the lawsuit was not brought “in connection with the…termination of a commercial activity” as per ETA s. 141.1(3)(a), C Miller J stated: “[I]n connection with”… is a broad expression but does not…, even on a textual reading allow for the remotest of links, such as a link only arising by way of the “but for” test. … [T]he cost of legal services to chase after directors, who the Appellant claims have absconded with its money, is a need that would have been fulfilled regardless of where the funds emanated from. … He added this helpful (likely obiter) comment: [T]his is not an issue of timing. ...

Lagotte Succession – Quebec Superior Court orders that a transfer of estate property to a beneficiary “occurred, for tax purposes, at an amount equal to its adjusted cost base” Email this Content In Quebec, as in the other provinces, the devisee or legatee of a specific bequest or devise generally receives the property without having to assume the tax liabilities of the estate (ignoring s. 160). A surviving spouse (Picard – who was not one of the residuary beneficiaries of the estate of his wife) argued that it thus was improper for the executor of the estate to choose for the devise to him pursuant to her will of an apartment building with a low tax basis to occur on a rollover basis under s. 70(6), as this foisted the property’s accrued tax liability on him. In rejecting this submission, Bisson JCS noted that the will specifically accorded the executor with the discretion to make tax elections for the benefit of any one or more legatees or for that of the general estate – so that the executor clearly was within his rights in not making a s. 70(6.2) election. ...

2 March 2017- 1:44am BC Trust – B.C. Supreme Court applies Fairmont to decline rectification relief Email this Content The trustees of Trust 1 determined not to distribute its 2012 trust income to Trust 2 (its sole beneficiary) based on CRA having designated the two trusts as one under s. 104(2). ... Weatherill J stated that “ Fairmont Hotel …made clear that rectification is limited to cases where a written instrument has incorrectly recorded the parties’ antecedent agreement.” ... Canada (Attorney General), 2017 BCSC 209 under General Concepts – Rectification. ...

28 March 2017- 1:22am Formadrain – Tax Court of Canada finds that improving the process for repairing drains qualified as SR&ED Email this Content It needn’t be rocket science to qualify as SR&ED. A taxpayer which repaired sewers and drains from the inside rather than through excavation, successfully claimed scientific research & experimental development credits for its work on a new approach involving developing a single-use light mandrel (i.e., tube) to facilitate the installation of a sheath from inside the drains, and a system for doing so from a single access point from inside a building (as opposed to using a heavier non-disposable mandrel that required two points of access in order to pull rather than push it.) ... The Queen, 2017 CCI 42 under s. 248(1)- scientific research & experimental development. ...

6 June 2017- 2:04am SLFI Group- Invesco Canada – Tax Court of Canada finds that an SPV funding MFT brokerage commissions was providing a GST-taxable management service Email this Content Citibank in the U.S. agreed to fund the payment of the upfront brokerage commissions that were payable on the issuance of units in the Invesco/Trimark funds (the “Funds”) in consideration for receiving an assignment of X% of the management fees that otherwise would have been earned by the Invesco manager (the “Manager”). ... The Funds argued that they were receiving a GST/HST exempt financial service from Funding Corp – so that this arrangement in effect eliminated the GST or HST on the portion of the management fees that was assigned to Funding Corp. ... The Queen, 2017 TCC 78 under ETA, s. 123(1) – financial service- (q). ...

10 August 2017- 12:48am MacDonald – Tax Court of Canada finds that “the law still requires a close linkage between the purported hedging instrument and the underlying asset” Email this Content An individual with a significant long-term holding in common shares of a public company (BNS) entered into a cash-settled forward which had the effect of establishing a short position against a portion of his BNS shareholding. ... The Queen, 2017 TCC 157 under s. 9 – capital gain v. income – futures/forwards/hedges. ...

6 September 2017- 12:40am Gillen – Tax Court of Canada finds that property was not used in a business for s. 110.6(14)(f)(ii) purposes when it was beneficially acquired and dropped-down on the same day Email this Content The availability of the enhanced capital gains exemption to a group of taxpayers depended on the proposition that a newly-formed limited partnership had used, in a Canadian active business, applications to the Saskatchewan government for potash exploitation rights before it transferred such property to a newly-incorporated corporation (“Devonian”), whose shares were sold a number of months later. ... The Queen, 2017 TCC 163 under s. 110.6(14)(f)(ii), General Concepts – Ownership, General Concepts – Effective Date. ...

23 October 2017- 12:26am Findmypast – Inner House of the Court of Session finds that the time of a supply of services was accelerated by prepayment only where the services were precisely identifiable Email this Content ETA s. 152(1) provides that GST/HST for a taxable supply becomes payable if the consideration is prepaid. ... Lord Drummond Young found that this test was not satisfied for a genealogical site, where customers would purchase credits which could be applied during specified time periods to download historical records (e.g., birth and death records) whose number was determined in accordance with parameters that were subject to change by the site – and with a significant number of the credits never being redeemed. ... Findmypast Ltd., [2017] CSIH 59 under ETA s. 152(1) and s. 123(1) – service. ...

29 October 2017- 11:55pm BT Céramiques – Quebec Superior Court finds that the mere suspicion of tax evasion and corrupting CRA officials is insufficient to invalidate audit information Email this Content Jarvis found that where the predominant purpose of a particular inquiry is the determination of a penal liability (e.g., under s. 239 of the ITA), CRA officials may not have recourse to the inspection and requirement tools in the ITA. In reversing the decision of the Court of Quebec to invalidate evidence obtained in a search and seizure of a Quebec registrant (BT Céramiques), which was believed to have fraudulently claimed input tax credits and corrupted CRA officials, Payette JCS stated: When it commenced the audit, the CRA only had suspicions that BT Céramiques was engaged in tax evasion and that a “grand patron” in the CRA was assisting it. … [T]he judge contrasted “auditing” and “investigation” … without noting that the audit powers themselves constitute powers of investigation, and without pausing to determine if the objective of the steps she described was to establish penal liability of the respondents. ...