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16 September 2019- 12:21am Robinson – Tax Court of Canada finds that costs of investigating and developing opportunities for drop down to a corporation were capital expenditures Email this Content The taxpayer (with modest success) sought to follow a pattern of first developing assets (e.g., a patent portfolio) and then contributing them to a corporation (one for each such venture) for an equity interest therein. Monaghan J first indicated that these personal-level activities had “more of the hallmarks of seeking an investment opportunity to earn income from property than business” – but did not pursue this point, as the Crown had not suggested that the source was not a business. ... The Queen, 2019 TCC 181 under s. 18(1)(b) – start-up expenditures and s. 3(a). ...

7 October 2019- 11:41pm Kurnik – Tax Court of Canada finds that legal costs of defending against of countersuit by the employer could be deducted under s. 8(1)(b) Email this Content After the former CFO of a company (Mr. ... In allowing the deduction of the latter amount as well, Bocock J stated: [T]here is no question that the initial lawsuit spawned the subsequent one. … The primary issue within that second lawsuit is the entitlement and quantum of remuneration payable by the employer to the employee. This falls squarely within the wording of paragraph 8(1)(b) …. Neal Armstrong. ...

23 October 2019- 11:33pm Aubin – Court of Quebec finds that there was no taxable benefit in paying the employee’s costs of attending a retreat hosted by a client Email this Content A senior employee (Aubin) of the National Bank of Canada was invited by an important client of the Bank (Colabor) to attend, along with his spouse, a conference hosted by Colabar in Vienna in 2011 and in Chile in 2012 for Colabor’s senior employees and commercial partners. ... In finding that there was no taxable benefit under the Quebec equivalent of s. 6(1)(a), Forlini JCQ stated: [Their] participation … was principally for the benefit of the Bank and not for the taxpayers. Furthermore, the taxpayers as well as their spouses attended at the conferences at the express request of their employer. … Doubtless, the taxpayers experienced a certain pleasure in visiting museums, wineries and tourist attractions during the conferences, but such pleasure had an accessory and secondary character to the purpose of the activity, i.e., developing a business relationship between the Bank and an important client. ...

24 October 2019- 11:57pm Stockton – Federal Court of Australia finds that a US teen who came to Australia for nine months on a “working holiday visa” was a non-resident Email this Content The taxpayer was a US citizen who, in her “gap year” after high school, came to Australia for nine months on a “working holiday visa.” ... In finding that the taxpayer was not resident in Australia under general principles, Logan J stated: … Here, the only habit or pattern in Ms Stockton’s choice of accommodation was that of opportunism antithetical not just to settling in any one locale but to settling anywhere at all in Australia while she was here. … Ms Stockton’s association with Australia during the 2017 income year was only ever casual. ...

11 November 2019- 12:05am Kufsky – Tax Court of Canada finds that a dividend that had not been declared nonetheless was a dividend for tax purposes Email this Content In finding that a corporation should be treated as having paid dividends to its shareholder, so that CRA validly assessed the shareholder under s. 160 for a tax debt of the corporation, even though no dividend had been declared, and the only evidence of the payment of a dividend was the cash movements and the corporation’s subsequently-fired accountant issuing T5 slips to the taxpayer, MacPhee J stated: [A] reported dividend, even if not in compliance with the provincial statute, remains valid for tax purposes …. ... See e.g., Cangro Resources (“dividend” was to be given its “accepted ordinary meaning” – that is, of a pro rata distribution to all shareholders, other than a formal reduction of paid-up capital or liquidating distribution.”) ...

14 November 2019- 12:31am Diamond Stacking – B.C. Supreme Court finds that a purchaser could not rely on a vendor’s GST exemption certificate where he knew of the property’s commercial use Email this Content ETA s. 194 provides that where a supplier has incorrectly certified that a sale of real estate was of exempt residential real estate, then the sale price is deemed to have been inclusive of the applicable GST/HST (so that it is that supplier rather than the purchaser who bears that GST/HST) – except where the purchaser “knows or ought to know that the supply is not an exempt supply.” ... Accordingly, since the contract was silent on GST, the vendor was entitled under ETA s. 224 to recover its GST assessment from the purchaser – but had no entitlement to recover interest that CRA has assessed against it. ...

2 December 2019- 11:31pm Singh – Tax Court of Canada applies the markers of possession, use and risk in ascertaining beneficial ownership Email this Content Before finding that there had been a transfer to the taxpayer of ½ of the beneficial ownership of the family home for s. 160 purposes from her husband (rather than her having been the full beneficial owner all along), MacPhee J adopted a previous judicial formulation of the concept of beneficial ownership, viz: The primary attributes of beneficial ownership include possession, use and risk. ... The Queen, 2019 TCC 265 under s. 160(1) and General Concepts – FMV- Land. ...

19 December 2019- 12:18am Adélard Soucy – Court of Quebec finds that a building for warming equipment qualified as “manufacturing or processing machinery or equipment” Email this Content The taxpayer custom-fabricated pieces of heavy specialized equipment at the northern mining site of one of its mining customers. ... The Econox also was fixed equipment which permitted the plaintiff to manufacture and process industrial and mining items. … In default of being able to speak of permanent physical integration, one can certainly speak of a functional integration as the plaintiff could not carry out its operations in the Great North without the Econox. ... Agence du revenu du Québec, 2019 QCCQ 6956 under Schedule II – Class 8(a). ...

29 December 2019- 11:57pm Gestions Calce – Court of Quebec departs from written terms of lease to find that a rental property was used principally in the active business of a related person Email this Content One of the exceptions from the rule that a rental property cannot qualify as a “former business property” for purposes of the replacement property rules in ITA ss. 13(4) and 44 references the situation of a “property … leased by the taxpayer to a person related to the taxpayer and used by that related person principally for any other purpose.” ... Agence du revenu du Québec, 2019 QCCQ 7377 under s. 248(1) – former business property. ...

23 January 2020- 8:33am [Corrected title] CBS – Federal Court of Appeal finds that Galway did not permit the Crown to resile from a settlement agreement negotiated in good faith Email this Content The Justice Department entered into a settlement agreement with the taxpayer in which it agreed to permit the taxpayer to carryforward an agreed portion of a $23.4M non-capital loss – and then promptly sought to repudiate the agreement on the basis that CRA had discovered that the non-capital loss in question did not exist, so that implementing the settlement would be contrary to law, which Galway said was bad. ... Third, the Crown does not suggest that the defect within the settlement agreement is self-evident to the Court as it was in Galway. … The general rule is that parties should be bound by the agreements that they make. ...