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6 June 2019- 12:58am Glatt – Federal Court orders CRA to pay interest on a refund where CRA thought there was no statutory authority for interest Email this Content Following his assessment for a s. 163.2 penalty, the taxpayer paid $1M to CRA so as to offset interest which would be borne by him if the assessment were upheld. After the assessment was vacated pursuant to a consent judgment, CRA issued a Notice of Reassessment showing the cancellation of the penalty and a refund of the $1M but denying any refund interest on the basis that s. 164(3) requires a taxation year to be specified in order for interest to be paid – and a s. 163.2 penalty is not calculated by reference to any particular taxation years. ...

19 June 2019- 11:48pm Moras – Tax Court of Canada finds that s. 20.1(2)(c) allowed a taxpayer to deduct interest on personally-owed debt following a drop-down Email this Content Prior to the transfer of his accountancy practice in 2007 to his corporation, the taxpayer borrowed under a home equity line of credit to fund alleged expenses of that practice. ... An oddity is that CRA initially had disallowed the deduction of all of the HELOC-financed expenses, and then at trial conceded that 2/3 of them were deductible – yet Favreau J allowed all of the related interest to be deducted under s. 20.1(2)(c). ...

26 June 2019- 12:35am Aquilini Estate – Tax Court of Canada finds that partnership income and losses should be allocated proportionately to capital invested and recognizing work performed Email this Content The facts of this case, involving the successful application by CRA of s. 103(1.1), are perhaps too extreme to merit an extensive description. ... Pizzitelli J rejected submissions that “all circumstances, including personal family circumstances and personal estate planning goals must be considered” and that the income and loss allocation methodology could be supported from the standpoint of estate planning objectives – and instead thought that “the reasonable business person would only consider factors relevant to their own business considerations having regard to their own business interest,” which confirmed his view that the focus should be on the respective capital invested and work performed. ...

28 June 2019- 12:45am Bitton Trust – Supreme Court of Canada finds that the ARQ could issue a requirement to a Calgary branch of a Quebec bank Email this Content The ARQ, which was seeking to determine whether a supposed Alberta trust was resident in Quebec, issued a requirement to a Calgary branch of the National Bank of Canada for various bank records respecting the trust under the Quebec equivalent of ITA s. 231.2(1). ... Before concluding that the ARQ had not exceeded its territorial competence in making this requirement, Rowe J found that the sending of the requirement to the Calgary branch (which was deemed to be a separate entity only for the limited purposes of s. 462) did not detract from the fact that it was sent to a person (the bank) that operated in Quebec, stating: It would be absurd if the procedural requirements imposed by s. 462(2) … were understood to affect the ARQ’s authority to issue a formal demand to a bank that operates within its territorial jurisdiction. ...

28 June 2019- 12:46am Collins Family Trust – B.C. Supreme Court follows Pallen even though it was “undermined” by Fairmont Email this Content Giaschi J granted an application for rescission of transactions “which concerned an almost identical set of facts” to those in Pallen (i.e., transactions which used s. 75(2) for alleged surplus-stripping, and which did not work in light of Sommerer). ... Summary of Collins Family Trust v Canada (Attorney General), 2019 BCSC 1030 under General Concepts – Rectification. ...

3 July 2019- 11:50pm Moore – Tax Court of Canada vacates the penalty assessed on a careful Canadian for late-filing a T1135 Email this Content The taxpayer (Mr. ... … I cannot imagine why in a case such as this the CRA would prefer to have Mr. ...

10 July 2019- 12:00am Promised Land Ministries – Tax Court of Canada finds that charity’s failure to generate receipts for Christian mission work in “cash economies” justified a one-year suspension Email this Content After poor record-keeping was identified on audit, a registered charity (PLM) entered into a compliance agreement with CRA. ... In rejecting PLM’s submission that a one-year suspension was too harsh a consequence in the circumstances, Lyons J indicated that difficulties in securing receipts in “cash economies” did not justify the failures, and stated: [T]he breach justifies the lesser sanction of the Suspension especially since there has been repeated non‑compliance involving receipts for expense amounts for activities outside Canada, it could only account for half of such expenses and the production of documentation and such receipts were not timely and the fact remains that PLM has still not produced all such receipts …. ...

29 August 2019- 12:05am Loiselle – Court of Quebec finds that filing a revocation of a waiver confirmed that the waiver had been validly given Email this Content The taxpayer, after being asked by the ARQ to substantiate her capital gain computation for a share sale, met with the ARQ auditor (Mr. ... Drapeau all the particulars necessary in order that she could give a free and enlightened consent by signing the waiver. … [T]he revocation only served to confirm her acceptance of the waiver. ...

10 September 2019- 12:26am Lost Forest Park – Tax Court of Canada finds that an incorporated RV camp carried on a specified investment business Email this Content Smith J found that a corporation with one employee, that owned and ran a campground consisting of approximately 150 fully-serviced sites for use by mobile home/RV’s for about half the year (with storage available for the vehicles for the balance of the year), in the case of 90 of the sites, or for most of the year (for the balance), was carrying on a specified investment business. ... Second, he stated that: I am not satisfied that the services provided by the Appellant, including limited event planning, garbage pick-up, office hours and “on-call” availability, changed the legal character of the income to something other than that of rental income contemplated by the definition of a SIB …. ...

11 December 2019- 12:58am Deshaies – Federal Court of Appeal criticizes the Federal Court for suggesting to CRA that it provide relief to a taxpayer Email this Content In affirming the decision below to deny judicial review of a decision of CRA to not recommend a remission order under s. 23(2) of the Financial Administration Act, Boivin JA stated: The granting of a remission order is an exceptional measure which entails a derogation not only of the general taxation rules but also of the principle of equal treatment before the law. ... Boivin JA stated (at para. 7): [These] remarks … were ill-considered. ...