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26 January 2022- 10:56pm CIBC – Tax Court of Canada states that the continued correctness of PC Bank “now hangs by a thread” because of the narrowing of the financial services definition Email this Content After President's Choice Bank (the “2009 Decision”) determined that services supplied by a subsidiary of Loblaw (“PC Bank”) to CIBC were exempt arranging-for “financial services,” the ETA definition was then retroactively amended (through the addition of paras. ... (r.4) and (r.5), and further stated: The judgment … rendered [in the 2009 Decision] now hangs by a thread because of the new financial services definition. ... The Queen, 2022 TCC 26 under General Concepts – Res Judicata. ...

15 February 2022- 11:47pm Harding – Tax Court of Canada applies the Chopp principle that a s. 15 benefit is conferred where the shareholder ought to (but did not) know of the benefit Email this Content The taxpayer was the sole shareholder and director of a holding company which, in turn, was the majority shareholder of a logging company, which had been paying significant premiums on insurance policies (arranged by the taxpayer’s stepdaughter, a licensed insurance broker) on the life of the taxpayer and of his spouse and for which, at times, the beneficiaries were his spouse and stepchildren. In confirming the reassessments of the taxpayer under s. 15(1) in the amounts of the premiums, St-Hilaire J stated: … Chopp confirmed… that a benefit may be conferred without any intent or actual knowledge on the part of the shareholder if the circumstances are such that the shareholder ought to have known. ... The purchase of policies … for which significant premiums were paid and for which there were several changes to the beneficiaries over several years, is not and cannot be treated as a simple bookkeeping error. ...

17 February 2022- 10:44pm Hong Kong Style – Tax Court of Canada indicates that a CRA program to detect “zapped” sales did not alter the taxpayers’ burden to displace the Minister’s assumptions Email this Content Two incorporated restaurants were alleged by the Minister to have used “zapping” software to delete a portion of their sales, with the proceeds for the deleted sales being appropriated by their individual shareholder. ... Before so concluding, he volunteered his views on the likely irrelevance of the Algorithm to the matter of the burden on the taxpayers to displace the Minister’s assumptions as to unreported income, stating: The Appellants are under no obligation to prove that the … Algorithm is deficient or unreliable. ... The Queen, 2022 TCC 9 under General Concepts – Onus. ...

28 February 2022- 11:04pm Ghermezian – Federal Court finds that s. 231.1(1) authorizes CRA to compel the production of existing documents, but not to compel written answers Email this Content The Minister applied for s. 231.7 compliance orders respecting CRA requests for various documents made pursuant to s. 231.1(1) (and s. 231.2(1)). ... However, he accepted that “s 231.1 … does not authorize issuance of a demand compelling the recipient to provide, through written answers to questions, substantive information relevant to a taxpayer’s tax position” as contrasted to “authoriz[ing] compulsion of only pre-existing documentation.” ... Ghermezian, 2022 FC 236 under s. 231.1(1), s. 231.2(1), s. 231.6(2), s. 244(5) and General Concepts – Evidence. ...

17 March 2022- 11:12pm Burke – Federal Court of Appeal reverses an administrative tribunal decision rather than referring it back for reconsideration Email this Content In 2017, the Minister of Employment and Social Development determined that Ms. ... In this regard, she referred to the statement in Vavilov as to the desirability of avoiding an “endless merry-go-round of judicial reviews and subsequent reconsiderations,” noted that the facts were not in dispute and also stated that “other factors identified … [in] Vavilov such as concerns about delay, fairness to the parties, costs to the parties and the efficient use of public resources, support a finding that the matter should not be remitted to the Appeal Division for redetermination.” ... Burke, 2022 FCA 44 under Federal Courts Act, s. 52(c)(i) and Statutory Interpretation – Absurdities. ...

9 May 2022- 11:01pm CS Communication – Court of Quebec finds that that expenditures under an agreement to develop software for a 3rd party pursuant to its specifications qualified for SR&ED ITCs Email this Content A software development company (CS Canada) entered into an agreement with Pratt & Whitney for the sale to of aeronautical control system software. ... Agence du revenu du Québec, 2022 QCCQ 1175 under s. 127(9) – contract payment- (a). ...

30 May 2022- 11:04pm Khanna – Federal Court of Appeal finds that a gross negligence penalty could not be sustained where the trial was all about the taxpayer’s husband and she was ignored Email this Content The taxpayer conceded that she had unreported income from rental properties owned equally by her and her husband, but appealed the imposition of a gross negligence penalty. Monaghan JA noted that the taxpayer was not called to testify (which the Crown could have done) and that essentially the only testimony was of the taxpayer’s husband, which “was almost entirely about his actions and inactions,” so that essentially “nothing on the record address[ed] her involvement in or knowledge about the details of the rental business … and nothing on the record establish[ed] whether … the appellant knew she had unreported income prior to receipt of the reassessments.” ...

7 June 2022- 11:15pm Investissements 3,38 – Court of Quebec finds that a lender’s gain from selling a foreclosed home was a business profit Email this Content A closely-held corporation (“3.38”) run by a retired notary (Blouin) made a mortgage loan to an individual who, a year after the second advance under the loan, defaulted, with 3.38 then foreclosing and, five months later (after having done some minor work on the home) selling it at a gain, representing 32% of the sales proceeds. ... Agence du revenu du Québec, 2022 QCCQ 2534 under s. 9 – capital gain. v. profit – real estate. ...

26 July 2022- 12:11am Thinaddictives – Court of Quebec finds that a contribution of capital by a US shareholder was incorrectly recorded as debt, and reversed thin cap assessments Email this Content The Canadian taxpayer (“Thinaddictives”), which was initially formed by its US parent (“Nonni”) with nominal issued share capital, received approximately $19 million from Nonni to fund the cash portion of the purchase price for an asset acquisition. $10 million of this was clearly interest-bearing debt, but the balance of around $9 million did not have any resolution or other legal documentation establishing its character. ... Agence du revenu du Québec, 2022 QCCQ 3029 under s. 18(5) – equity amount – (a)(ii). ...

. – Tax Court of Canada denies the deductibility of Saskatchewan potash tax “base payments” on the basis that they were not incurred to produce income Email this Content The taxpayer, which produced and sold potash from mines in Saskatchewan, was subject to both a profit tax and to the making of “base payments” under the Mineral Taxation Act, 1983 (Saskatchewan). ... Owen J went on to find that deduction of the base payments was also denied for those taxation years by former s. 18(1)(m) – on the basis that this provision essentially denied deductibility of a tax that could "reasonably be regarded as being in relation to” mineral production, and on his view that the potash sales on which the base payment tax actually focused “related” to the antecedent production. ... The Queen, 2022 TCC 75 under s. 18(1)(a) – income-producing purpose and s. 18(1)(m). ...