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The King, 2022 TCC 7-- summary under Subparagraph 40(2)(g)(ii) Summary Under Tax Topics- Income Tax Act- Section 40- Subsection 40(2)- Paragraph 40(2)(g)- Subparagraph 40(2)(g)(ii) maintaining rental income could be a good s. 40(2)(g)(ii) purpose The appellant, a non-testamentary discretionary trust, made non-interest bearing loans to two companies (“Roseau” and “Spec”) which were owned, directly or indirectly, by its sole trustee and by another family trust – but it had not direct or indirect shareholding in those companies. In finding that s. 40(2)(g)(ii) precluded the recognition of a business investment loss when the two companies became insolvent and were placed into receivership, St-Hilaire J stated (at para. 25, TaxInterpretations translation): Contrary to the circumstances of the Byram case … in this case the appellant trust had no "legitimate expectation of dividend income" since it is not a shareholder of Roseau and Spec or any other company in the group of companies listed in the organizational chart …. Regarding a submission that the loans were made in order to preserve a source of rental income, she stated (at para. 29): I agree with … [Scott] that subparagraph 40(2)(g)(ii) … should not be interpreted more strictly than Parliament intended. ...

Noël C.J. also agreed with the Tax Court’s rejection of the taxpayer’s submission that given that the word “pour” used in the French version of s. 160(1)(e)(ii) was narrower than “in respect of” used in the English version, s. 160 did not extend to interest that had accrued on the tax payable by the affiliate subsequent to the 2003 transfer date, stating (at paras. 46-47): The phrase “in respect of” is broad and all encompassing … and the word “pour” in the French text can have a similarly broad meaning. … It can be seen that both texts can be read so as to capture interest that accrues on the transferor’s liability from the year of the transfer onwards. This aligns with the purpose of subsection 160(1) which is to allow for the collection of “the total of all amounts” that the transferor is liable to pay under the Act without any distinction as to the makeup of these amounts … and without any time limitation. … Words and Phrases in respect of ...

Before providing such declaration, Davies J stated, based on the expert testimony (at para. 17): Under European law, Luxembourg law and Dutch law, pursuant to the principle of universal succession … all liabilities of LMGI to tax, including under foreign law (that is, the relevant Australian tax acts), will transfer to LMA by operation of law pursuant to the principle of universal succession upon completion of the merger, as will the rights and obligations of LMGI in respect of such tax liabilities …. ... Regarding her acceptance in this regard of “Luxembourg law and Dutch law [which] apply the same principle of universal succession to cross-border mergers” (para. 22), she stated (at paras. 21- 22): Where a question arises under Australian law as to the status of foreign entity, Australian common law choice of law rules look to the law of incorporation of the entity to determine questions of the entity’s status … Metliss [1958] AC 509 …. ... Moreover, LMA, as the “taxpayer” under s 175A of the Income Tax Assessment Act 1936 (Cth) … will be entitled to object against assessments which have been issued to LMGI, or which are issued to LMA in its place, and will be “the person” entitled to appeal … in relation to objections from those assessments …. ...

Before voiding the search warrant for the law firm premises and ordering the related documents to be returned, Hilton JCA stated (at paras. 43, 44, 47, 48, 51): Justice Arbour reminded…in Lavalee, Rackel & Heintz v. Canada … [2002] 3 S.C.R. 209 [para. 49]: …Before searching a law office, the investigative authorities must satisfy the issuing justice that there exists no other reasonable alternative to the search. … The Agency had an affirmative obligation, which it disregarded, to demonstrate that there was no other alternative solution, and the judge could not ignore this. … [T]he simple fact that a Trimax representative had mentioned that there were documents at his lawyer did not establish that such documents could not be found elsewhere. … The absence of an alternative solution was not at all addressed in the information and the judge could not satisfy her formal review obligation respecting such absence on the basis of other alleged facts. … [I]t would appear that it was ease and convenience which motivated the request for a search warrant for the law firm…. ...

-dollar short-term debt obligations and derived around 86% of its income from such debt and from cross-currency and interest rate swaps with an arm’s length bank to effectively convert much of its income stream into fixed rated Canadian-dollar interest – although it also made intercorporate loans and loans to drivers working as distributors for a US affiliate. ... The context of the FAPI regime, which was to classify a foreign affiliate’s income and “not provide a method for assigning capital to the different businesses within a single corporation” (para. 49), confirmed this reading – and the contrary reading would cause the failing of the test by CFAs in their early years with significant capitalization but still building a customer base – and conversely, “it would be untenable to say that a foreign affiliate is conducting business with a lender or investor decades after receiving money from them” (para. 62). ... 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 … but this does not change the fact that the corporation remains the party conducting business” – and treating oversight by a parent corporation as shifting the responsibility for conducting business was incompatible with the FAPI regime, in that if there is a “ controlled foreign affiliate … there is necessarily corporate oversight by its parent” (para. 64). ...

…It would be incoherent — and indeed, unjust — for shareholders to benefit from limited liability while at the same time gaining a right of action in relation to faults committed against the corporation in which they hold shares…. The corporate veil is impermeable on both sides; just as shareholders cannot be liable for faults committed by the corporation, so too are they barred from seeking damages for faults committed against it …. ... In particular (para. 42): [T]he loss of value from the trust patrimony that was suffered by Fiducie corresponds to the net value of the seniors’ residences once owned by Groupe Melior …. ...

CRA asserted that the MAP proceedings did not result in binding agreements between Sifto and CRA and, even if they did, they did not fix the arm’s length transfer price – so that CRA was not only authorized, but was required, by the ITA to issue the post-audit reassessments once in possession of the new audit information. ... To suggest that the MAP agreements simply addressed double taxation of Compass ignores the factual context in which the agreements were reached by the Minister and the IRS through their respective representatives. … …[I]n a letter from the USCA to Compass dated January 25, 2011 … the USCA states: … A mutual agreement has been reached regarding the transfer price of the transaction between Compass and...Sifto…. … This correctly recognizes that the adjustments to income allowed by paragraph (1) of Article IX of the Convention are the result of a transfer price and that it is impossible to agree to the adjustments to the Appellant’s income without also agreeing to the implicit transfer price that yields those adjustments. ...

Canada (Attorney General), 2023 FC 356-- summary under Rule 303 Summary Under Tax Topics- Other Legislation/Constitution- Federal- Federal Courts Rules- Rule 303 respondent changed from CRA to AGC Before ordering that the respondent be changed from the CRA to the Attorney General of Canada (AGC), Southcott J stated (at paras. 24-25): As the Respondent submits, Rules 303(1) and (2) of the Federal Courts Rules … provide that, where an application does not directly affect another person other than a tribunal in respect of which the application is brought, the application shall name the AGC as a respondent. As CRA is effectively the tribunal in respect of which the application is brought, the Respondent takes the position that the appropriate respondent is the AGC. … I agree with the Respondent’s analysis …. ...

Respecting ITA s. 159, Little J stated (at paras 53, 54): … Parliament could have chosen to make all beneficiaries of the estate liable as well but chose not to do so. … [T]hat is sensible – the beneficiaries have no control over when or how much is distributed. Presumably for similar reasons, Parliament chose not to deal with whether a legal representative could seek indemnity from beneficiaries. … Little J further found that the Respondents were under no obligation to indemnify the Applicant for any income tax or penalties imposed on the Applicant as a result of her failure to obtain a clearance certificate before distributing the estate, stating (at paras 61-63): … Ms. ...

. … 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. ...