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19 April 2018- 1:39am Le – Tax Court of Canada finds that an individual whose designation as a first director was defective, and who did not perform a director’s role, was not liable qua director Email this Content The taxpayer had intended to form a partnership with another party, who was under the misapprehension that a corporation was required in order to form a partnership, and drafted documents for her to sign that reflected this confusion. ... The taxpayer in fact “engaged in no acts of management … let alone any actions specific to a director.” ...

2 May 2018- 11:56pm Takenaka – Federal Court requires CRA to reconsider a penalty imposed for failure to timely file a T1135 by a taxpayer with a nil Part I tax liability Email this Content The taxpayer, who had no Part I tax payable for her 2011 and 2012 years, decided in 2014 to file returns for those years in order to make Canada child tax benefit claims. ... CRA assessed late filing penalties under s. 162(7)(a) respecting the late T1135s – and then, on a second-level review, cancelled the penalty for 2012 but not for 2011. ...

9 May 2018- 12:04am Moules Industriels – Tax Court of Canada finds that a numerical cap on trustees’ discretion to allocate income or capital did not stop tainting under s. 256(1.2)(f)(ii) Email this Content S. 256(1.2)(f)(ii) provides that where a beneficiary’s share of the income or capital of a trust is in the discretion of the trustees, the beneficiary is deemed to own shares held by the trust for purposes of the associated corporation rules. ... Lamarre ACJ agreed with the CRA position (foreshadowed in 2003-0052261E5) that 100% of those shares instead were effectively attributed to those beneficiaries, stating: This clause does not have the effect of eliminating the discretionary power contemplated by … the deeds. ...

1 June 2018- 12:27am 626468 New Brunswick – Tax Court of Canada finds that safe income was reduced by corporate income taxes that would be computed on that income Email this Content An individual rolled his apartment building into a Newco in consideration for a mortgage assumption and shares with nominal paid-up capital, and then rolled those shares into a new Holdco. Following the realization shortly thereafter by Newco of a taxable capital gain and recapture of depreciation on a sale of the building, Newco increased the adjusted cost base to Holdco of its shares by effecting a series of s. 84(1) dividends (including a capital dividend) – following which the individual sold his shares of Holdco to a third party for a sale price based on the amount of cash sitting in Newco. ...

14 June 2018- 12:02am Toronto-Dominion Bank – Federal Court finds that the deemed trust for unremitted GST defeated the mortgagee’s priority on a voluntary sale of the mortgaged home Email this Content TD Bank made a mortgage loan to an individual who, unbeknownst to it, had unremitted GST collections. ... First Vancouver – it “would have a general chilling effect on commercial transactions.” ...

15 June 2018- 12:22am Motter – Court of Quebec finds that a purported “tenant inducement payment” was a capital expenditure Email this Content An individual in the business of constructing and renting commercial real estate, entered into a lease agreement with Téléglobe respecting a building which he was to construct, that provided Téléglobe with “an initial Improvement Allowance” of $25.00 per square foot (or $2M). ... Agence du revenu du Québec, 2018 QCCQ 3483 under s. 18(1)(b) – improvements v. repairs/running expense. ...

29 June 2018- 12:13am PPP Group – Federal Court of Appeal confirms that automobile replacement “warranty” payments did not qualify for ITCs Email this Content The Court of Appeal has briefly affirmed a decision of Tardif J respecting a Quebec company (“PPP”) which, through car dealers, offered motor vehicle replacement “warranties.” ... The Queen, 2017 TCC 2, briefly aff'd 2018 CAF 123 under ETA s. 175.1, 169(1) and General Concepts – Illegality. ...

2 July 2018- 12:18am Tusk Exploration – FCA finds that Part XII.6 tax (effectively double-taxation) was payable on CEE purportedly renounced on a look-back basis to NAL shareholders Email this Content Tusk Exploration, a Canadian exploration company, unsuccessfully argued that it was not subject to Part XII.6 tax on Canadian exploration expenses that it had purported to renounce under the look-back rule- but which were now admittedly not eligible for look back because the flow-through share investors were non-arm’s length – because the reference in Part XII.6 to CEE that it “purported” to renounce under the rule referred only to expenses which had been validly rather than invalidly renounced under the look-back rule. ...

10 July 2018- 11:35pm Automodular – Supreme Court of Ontario finds that there was no implied term in a settlement agreement for grossing up a settlement amount for ETA s. 182 tax Email this Content Counsel to the parties in an action for wrongful termination by the defendant of an agreement for the long-term supply of parts to it by the plaintiff agreed by exchange of emails on the weekend before the trial that the action would be settled by the payment by the defendant of a $7M sump sum. ... It cannot be said that term the plaintiff seeks was so obvious as to “go without saying” in the eyes of an objective person. … The simple fact of the matter is that the plaintiff stipulated the sum it was prepared to accept and did not seek to allocate it in any way. ...

10 July 2018- 11:35pm BCS Group – C Miller J disagrees with some of his colleagues in finding that a corporation can appear “in person” without counsel Email this Content In Masa Sushi, Graham J found that a corporation could not appear “in person” in a General Procedure matter and had to appear through counsel, so that a Rule purporting to permit a corporation to appear in person with the Court’s consent would be ultra vires. ... C Miller J disagrees, stating: Yes, there is common law jurisprudence to the effect that “in person” can only mean by the presence of a visible person … but there has been no such jurisprudence, until Masa Sushi, from the Tax Court of Canada. ...