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10 November 2020- 10:55pm MDA Systems – Court of Quebec finds payments made by the federal government under a contract where it mostly had the risks and benefits were SR&ED “contract payments” Email this Content MDA contracted with the Government of Canada to provide computer systems engineering work on a satellite system to perform radar imaging from space. The ARQ denied tax credits for the wages cost of work performed on the contracts by MDA on the basis that the consideration received by MDA from the Government was “contract payments” – whose definition (similarly to the federal definition in ITA s. 127(9)) relevantly referred to “an amount in respect of an expenditure of a current nature … of a taxpayer … payable by the Government of Canada … or other public authority … for scientific research and experimental development to be performed for the authority.” Before agreeing with the ARQ position, Bourgeois JCQ found that: “the SR&ED work was carried out because of the requirements in the contracts between the Government of Canada and MDA” “the Government of Canada bore the major risks of the … Program” “the intellectual property developed by MDA in the space component of this project was transferred from MDA to the Government of Canada” it was a contract for services rather than for the sale of goods (although Bourgeois JCQ agreed with a CRA Policy Statement that “a contract for the sale of a good does not necessarily mean that the SR&ED work was not being performed on behalf of the payer”) More generally, “[a]lthough the contracts were not drafted specifically for doing SR&ED work, analysis of the contract terms tends to show that ultimately the SR&ED work was undertaken on behalf of the Government of Canada.” ...

28 January 2024- 11:40pm Parent – Court of Quebec finds that building repair work that matched the cost of the whole building was currently deductible Email this Content The taxpayer acquired a rental property in run-down condition for $275,000 and then incurred $290,074 in expenditures in order to restore the building. ... …What needed to be replaced was done, and without extravagance, only the minimum. … [T]he work done … was in the nature of repairs. ... Agence du revenu du Québec, 2023 QCCQ 10440 under s. 18(1)(b) – capital expenditure v. expense – improvements v. repairs. ...

Furthermore, the research agreement was similar to the development agreement in Aeronautics, which was found in that case to “constitute … a legally-enforceable arrangement capable of establishing de facto control under subsection 256(5.1)” – and the facts here were similar to Lyrtech and Solutions Mindready. Respecting the argument, in the alternative, of the Crown, that the declaration of trust constituted an agreement referred to s. 251(5)(b)(i) and, having regard to there being a discretionary trust, s. 248(25) deemed CO2 Public to be beneficially interested in CO2 Trust, Smith J stated that although it was unnecessary for him to address this argument: It appears to me however that this Court is bound by the decision … in … Propep. ... The Queen, 2019 CCI 286 under s. 127(1)- Canadian-controlled private corporation – (a). ...

14 November 2022- 11:59pm 1410109 Ontario – Tax Court of Canada finds that a “gratuity” that was required to be paid was subject to HST Email this Content The contract of an incorporated banquet hall with its event customers stipulated: “All Pricing is Subject to 13% HST and 15% Gratuities.” ... He dismissed the taxpayer’s appeal, on the basis that the gratuities were not voluntary, stating: Subsection 133(b) combined with subsection 138(a) … suggests that tips included in an agreement are part of the overall supply of prepared meals, which is subject to HST. … The ETA defines “consideration” as “any amount that is payable for a supply by operation of law.” ... The King, 2022 TCC 141 under ETA – 123(1) – consideration. ...

Boivin JA noted that: “The Judge recognized that the CRA investigators owed the appellants a duty of care … but found that the investigation was not carried out in a manner that could be characterized as negligent and was not motivated by malice or any other improper purpose”. ... Boivin JA found “no reason to disturb the Judge’s findings” – their appeal was dismissed. ... The King, 2023 FCA 12 under General Concepts – Negligence & Fault. ...

16 May 2022- 11:17pm Jefferson – Federal Court of Appeal indicates that a taxpayer had not “demolished” the Minister’s assumption where it is demonstrated to be somewhat incorrect Email this Content The taxpayer relied on a statement in Hickman that the “initial onus of ‘demolishing’ the Minister’s exact assumptions is met where the appellant makes out at least a prima facie case.” ... In rejecting this position, Monaghan JA stated that the taxpayer “places far too much emphasis on the word ‘exact’ and gives insufficient weight to the word ‘demolish’ in … Hickman. ” and further stated that “establishing some consideration for the cheques is not sufficient to demolish the Minister’s assumption,” noting in this regard that the “purpose of pleading the assumption is to provide the appellant with notice of the case the appellant has to meet” and here, the taxpayer knew that, in the context of a s. 160 assessment, he needed to establish that he had provided fair market consideration for the cheques, “not merely some consideration.” ... Canada, 2022 FCA 81 under General Concepts – Onus. ...

10 July 2023- 11:43pm CRA indicates that an s. 104(21) designation can be made re distributing the taxable half of a trust capital gain to a corporate beneficiary – who receives no CDA addition Email this Content An inter vivos Canadian resident trust pays an amount equal to its net taxable capital gains for the year to a Canadian private corporation that is a beneficiary and designates that amount pursuant to s. 104(21). ... (a)(i.1) of the capital dividend account definition, there would be no addition to the corporation’s CDA – whereas there would be such an addition if both portions of the capital gains were distributed to the corporate beneficiary. ... Summary of 20 June 2023 STEP Roundtable, Q.12 under s. 89(1) – CDA – (a.1). ...

1 February 2019- 2:33am Kaul – Tax Court of Canada finds that art work was donated at a FMV equal to its cost rather than appraised value Email this Content The taxpayers bought sets of artists’ prints (each set consisting of 11 prints) at a purchase price that might be 7 or 10 times the vendor’s cost, and then immediately donated 10 out of the 11 prints in each set to registered charities at appraised values (reflected in the charitable receipts issued) around 3 times their purchase price. ... The Queen, 2019 TCC 17 under General Concepts – FMV – Other. ...

28 March 2025- 12:33am Seabridge – BC Supreme Court finds that pre-feasibility expenses to assess whether a deposit could potentially support a mine qualified as exploration expenses Email this Content Seabridge incurred various pre-feasibility expenses in relation to a large and complex gold-bearing deposit in BC. ... Summary of Seabridge Gold Inc. v British Columbia, 2025 BCSC 558 under s. 66.1(6) – CEE – (f). ...

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). ...