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. … There is no established principle (or rule of law) in Canadian jurisprudence that provides that the nature of a debtor's trade debt or of a debtor's gain from the forgiveness of a trade debt changes automatically merely because of the passage of time in a taxation year or a number of taxation years. … British Mexican has been distinguished in a number of subsequent Canadian decisions, including Alco Dispensing … [indicating that] the release of the liability to pay the bonuses could not be treated as having changed the character of the liability, … [and] it was contrary to common sense … to assert that the passage of a year end effects some sort of a magical conversion of executive compensation operations from current account transactions to capital account transactions. ...

In confirming this interpretation, CRA stated: [P]aragraph 84.1(2.3)(b) … does not apply for the purposes of section 110.6 … and, therefore, it does not reduce a taxpayer’s capital gains deduction. In addition, paragraph 84.1(2.3)(b) … does not otherwise affect a taxpayer’s ability to rely on the deeming rule in paragraph 84.1(2)(e) …. ...

. … [T]he CRA is committed to: Arriving at reasonable assessing positions that are timely and transparent; Communication to taxpayers when adopting positions that deviate from long standing interpretations, especially when there are publicly stated positions … CRA also referenced its “commitment … to resolve disputes at the earliest possible stage.” ...

. … If the excess arose as a result of the taxpayer's negligence, carelessness or ignorance of the requirements of the Income Tax Act, the CRA will not generally waive the tax payable on the excess contributions. … While the mere fact that a taxpayer relies on third-party advice is not, in and of itself, sufficient to conclude that an assessment arising from such advice is a reasonable error, in certain situations the CRA may consider it appropriate to waive tax arising from a third-party error, depending on the circumstances. … [H]ere are examples of … excess contributions [considered] to be the result of a reasonable error: The taxpayer's notice of (re)assessment) indicated an RRSP deduction limit of $0, where in fact the limit was a negative amount, so that the taxpayer may have mistakenly believed that the taxpayer was entitled to the $2,000 allowance …; The taxpayer, through no personal fault, had over-contributed due to inaccurate information provided on the RRSP deduction limit statement [or by] the CRA…; The taxpayer's RRSP deduction limit had been reduced retroactively, due to events such as the late submission of a pension adjustment or amended pension adjustment, or the late submission of an exempt past service pension adjustment or T215 slip … for exempt past service pension adjustments; The taxpayer, a TFSA holder, had made multiple contributions to and withdrawals from his TFSA with the objective of maintaining a TFSA account balance below the contribution limit. ...

The Trust and its beneficiaries then used their sales proceeds to subscribe for the shares of a newly-incorporated holding company (Holdco): Trust – 50% of the Holdco shares; Mr. and Mrs. X – 20% each; and Child X and Y – 5% each). Holdco generated $150,000 from investing these funds in the stock market and paid a $100,000 dividend pro rata to its shareholders with Trust, in turn, distributing its $50,000 dividend to Mrs. ...

. … [S]ubsection 7(2) does not serve to deem the existence of an agreement to issue or sell shares for the purposes of section 7 where such an agreement does not, in fact, exist. … Since this was such a discretionary plan, the employee benefit plan rules instead applied. ... Finally, it should be noted that … McNeeley [under appeal] … considered a discretionary trust plan similar to the one in the situation described and concluded that the EBP rules applied. ...

IV tax on such dividends based on the total DR received by Aco, in accordance with s. 186(1)(b): Bco: $100,000/$600,000 X $138,333 = $23,055; Cco: $500,000/$600,000 X $138,333- $115,278. ... After noting that this ERDTOH-NERDTOH shift resulted “from the fact that paragraph 186(1)(b) makes no connection between the type of RDTOH account entitling Aco to the DR and the type of dividend received by Bco and Cco,” CRA agreed that, here, “the conversion of an amount of ERDTOH into an amount of NERDTOH results in an increase in the tax payable by the Shareholder … but only at … the stage where the amount of dividends paid is limited to the amount necessary to give entitlement to the DR of the ERDTOH and the NERDTOH of Bco and Cco totalling $138,333.” However, CRA indicated that this “conversion of an ERDTOH amount into a NERDTOH amount … does not ultimately result in additional tax to the Shareholder once all of the dividends received from Aco are paid to the Shareholder by Bco and Cco.” ...

CRA responded: Generally … to be a right or thing … the individual would have to be legally entitled to receive the amount at the time of the individual’s death (the right would have to exist) and the value of that right would have to be determinable at that time. … By virtue of paragraph 138.1(1)(f), the taxable income of the related segregated fund trust is deemed for the purposes of subsections 104(6), (13) and (24) to be an amount that has become payable in the year to the beneficiaries under the segregated fund trust and the amount therefor in respect of any particular beneficiary is equal to the amount determined by reference to the terms and conditions of the segregated fund policy. … We understand that, regardless of the method of income allocation used by the insurer, no amount is actually paid or payable to a related segregated fund policyholder in respect of income allocations made by the insurer. ... Consequently, income and capital gains allocated to a related segregated fund policyholder in accordance with the terms of the policy … are not rights or things for the purposes of subsection 70(2) …. ...

For example, in Scenario 1, the FX rate is US $1 = CDN $1 at Time 1 and US $1 = CDN $1.2 at Time 2, and at Time 2, Can Opco pays a dividend of $120 to Can Holdco. And in Scenario 2, the exchange rates are US $1 = CDN $1.2 at Time 1 and US $1 = CDN $1 at Times 1 and 2, respectively- and at Time 2 Can Opco pays a $100 dividend to Can Holdco. ...

In finding that the NCLs accumulated by Holdco likely could not be deducted in computing Amalco's taxable income in light of the ss. 87(2.1) and 111(5) restrictions, CRA stated: [O]n the limited basis of the facts submitted … it would be reasonable to consider that the business that generated the losses, namely the management services business that was carried on by Holdco prior to the acquisition of control … ceased to be operated after the amalgamation. This conclusion is based in particular on … the management activities performed by the Amalco employee [being] intended solely to support the corporation in the manufacturing field, and … not in themselves represent[ing] the carrying on of a business. … Regarding the factual variation where Amalco had two divisions: one carrying on the manufacturing business; and the second division for management services, including those previously rendered by Holdco to Opco, CRA stated: [C]reating two divisions with a separate financial statement for the management services and manufacturing businesses would not change our conclusion … that it would be reasonable to consider that the management services business that was carried on by Holdco ceased to be carried on after the amalgamation of Holdco and Opco. ...