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13 June 2021- 11:24pm Bresse Syndics – Federal Court of Appeal finds that a trust deed requirement that the trustees be the Pubco directors gave Pubco de facto control of a trust subsidiary Email this Content A public company (CO2 Public), operating a high-tech business, carried on its SR&ED through a private company (CO2 Technologies) that was held by a discretionary trust whose beneficiaries were CO2 Public and special-purpose subsidiaries thereof. ... He stated: Fiducie’s deed of trust operated in such a way that by electing Public CO2’s board of directors, Public CO2’s shareholders also elected Fiducie’s trustees, as they had to be directors of Public CO2. … Thus, Public CO2 had the power to terminate the trustees’ functions by revoking or not renewing their mandate as directors. … [T]he mechanism put in place clearly gave Public CO2 the ability to change the appellant’s board of directors or to influence in a very direct manner those who had that ability. ...

30 September 2021- 10:58pm Odette Estate – Tax Court of Canada finds that a promissory note subsequently repaid in cash could not be equated to cash consideration for s. 118.1(13)(c) purposes Email this Content The appellant estate donated shares of a private company (Edmette), which were non-qualifying securities, to a private foundation with which it did not deal at arm’s length. ... The only consideration received at the time of the disposition was the Promissory Note. … Parliament does not want to grant a tax credit where the donor is not impoverished and the charity is not enriched. A non-arm’s length promissory note creates no real obligation to pay. … [I]t is important to show that the charity is actually enriched and the donor is in fact impoverished. ...

23 November 2021- 10:40pm Newave – Federal Court states that allegations of procedural fairness at the audit stage can be addressed at the objection or appeal stage Email this Content After a lengthy audit, CRA concluded that the “business” of the applicant (Newave) consisted of generating fraudulent input tax credit claims. ... Regarding the first application, he stated: [T]he real goals of the applicant’s first Notice of Application were not to remedy alleged procedural fairness concerns, but instead were to halt and attempt to control CRA’s reassessment process. … In substance, the content of the pleading is an attempt to interfere with the Minister’s statutory duty to assess. … [A]ny allegations about procedural fairness at the audit stage can be remedied at the objection or appeal stage…. ...

Irving – Quebec Court of Appeal finds that servicing fees paid by a property user to the owner for services that it performed on behalf of the owner were not leasing revenues Email this Content A loss consolidation transaction involved a company (“IPPL”) in the Irving group of companies transferring, in December, its pollution control equipment on a rollover basis to an affiliated lossco, which then sold the equipment for $120M to the group profitco (“JDI”), which then claimed $120M of CCA and, in January of the next year, transferred the equipment back to IPPL on a rollover basis. ... In rejecting the ARQ submission that IPPL did not validly operate the equipment on behalf of JDI, Mainville JCA stated (at paras. 43-44, 46): [I]t is undisputed that a taxpayer may carry on a business through an agent. … The fact that the agent and the principal are related companies does not change this principle. This was the case in Stubart …. As the trial judge concluded, we are dealing with clear contracts and uncontradicted evidence that confirm that the designation of the transactions as services agreements does reflect their true legal effects. ...

13 September 2022- 10:54pm Distributions Maroline – Quebec Court of Appeal finds that a Quebec employer must pay Quebec health and QPP premiums on rewards paid to a 3rd-party’s Ontario employees Email this Content The taxpayer (“Maroline”) was assessed for failure to include rewards that it paid to salespersons employed by independent retailers in Ontario in the payroll total on which it reported Quebec health premiums (“contributions”) payable by it pursuant to the Act respecting the Régie de l'assurance maladie du Québec (the “LRAMQ”). ... The Court noted that the literal wording of the relevant provisions (which were similar in this regard to ITA Regs. 100(1) – “employee” and 100(4)) had the effect of deeming those salespersons to be employees of Maroline who reported for work at the Quebec Maroline office out of which the rewards were paid. ... The liability arises from the fact that the wages are paid by the respondent from an establishment in Quebec. … [T]he judge was of the view that the interpretation advocated by the appellant accords the LRAMQ extraterritorial application. ...

27 September 2022- 11:37pm Abdat – Federal Court finds that CRA reasonably refused remission of tax that had been agreed to be paid pursuant to a settlement agreement Email this Content After having reached a settlement with CRA on favourable terms of his Tax Court appeal of net worth assessments, Abdat brought an action against CRA for damages (which later was dismissed). ... Grammond J further stated: It stands to reason that a remission order should not normally be used as an alternative avenue of appeal for a taxpayer who has failed to pursue the remedies available under the Income Tax Act, let alone as a means of overriding a settlement to which the taxpayer has agreed. … Internal disagreement alone does not prove the outcome of the objection and appeal process to be wrong …. ...

FQM – Ontario Court of Appeal finds that the denial of loss carryforwards of the target was covered by an indemnity clause for reasonably foreseeable loss Email this Content Under the share purchase agreement (“SPA”) for the purchase of a Finnish mining company (Kevitsa) by Boliden from FQM, FQM represented inter alia that “[t]here are no grounds for the reassessment of the Taxes of [Kevitsa and its subsidiary].” ... The Court found that the application judge- who had noted the contrast between the above representation, and other representations and warranties in the SPA which were limited to the knowledge of the sellers – had reasonably concluded that such representation could be untrue as of the time of closing even if the prospect of reassessment was not reasonably expected by FQM. ... FQM Kevitsa Sweden Holdings AB, 2023 ONCA 105 under General Concepts – Tax Indemnity. ...

20 March 2023- 11:15pm Goldhar – Tax Court of Canada finds that the taxpayer could rely on his accountants regarding his taxation years being statute-barred and avoiding penalties for T1134 filing failures Email this Content In finding that CRA could not reassess beyond the normal reassessment period to include substantial amounts as alleged unreported shareholder benefits from non-resident corporations in the income of the taxpayer (Mr. ... Goldhar carried on an international business, and engaged professional lawyers and accountants to assist in organizing his financial affairs and in filing his personal and corporate tax returns. … Considering the complexity of Mr. Goldhar’s businesses and his lack of tax expertise, it is my view that he took all reasonable steps that a wise and prudent person would to ensure that his tax returns were filed properly during the taxation years under appeal. … Mr. ...

17 July 2023- 11:56pm Marine Atlantic – Tax Court of Canada finds that a registrant is not required to expand the information already in its possession in using an ITC allocation method Email this Content The appellant (MAI), which operated a ferry service between Newfoundland and Nova Scotia, allocated all its inputs between the taxable and exempt supplies made by it (nearly all of which were made on the vessels) by measuring the areas on its ferries used exclusively in making taxable supplies (including the provisions of passenger cabins, and restaurant and dining facilities) and those used exclusively in making exempt supplies (the general seating areas and vehicle passenger decks) to determine relative percentages for those two categories of use, and then treating those percentages as also being applicable to the use of the common areas on the ferries (including corridors, walkways, stairways, public washrooms, the exterior deck, crew cabins, the engine room and navigation facilities), and to the terminal and corporate office areas and the use of fuel. ... The CRA cannot simply substitute its method for that of the GST registrant. … [A] GST registrant should be entitled to determine its input tax credits on the basis of information in its possession without having to resort to hiring expensive third parties, such as valuators or, as I will discuss, engineers to measure spaces on its ships or experts to try to determine what percentage of fuel is consumed to propel a ship and what percentage is consumed to produce electricity, heat or hot water. … He also noted that the taxpayer’s method appeared to be better than the output-based method used by it in earlier reporting periods and accepted by CRA. ...

30 July 2023- 11:40pm Sindhi – Tax Court of Canada finds that a residence was not “occupied” notwithstanding weekly overnight stays Email this Content The appellant agreed in July 2016 to purchase a new home for $413,847, but by the time of the closing in March 2018, he had lost his source of employment income and broken up with his partner. ... He accepted the “frustrating event” doctrine, but stated: To invoke frustration, the surrounding circumstances must make the frustrating event unforeseeable, beyond the buyer’s control, and deny the buyer any alternative pathway to having the property be their primary residence …. ... The King, 2023 TCC 102 (Informal Procedure) under ETA s. 254(2)(g) and Statutory Interpretation – Consistency. ...