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Similarly to the back-to-back loan rules, there is a connection test which considers causal connections between incoming royalty arrangements received by an intermediary and outgoing royalty arrangements provided by the intermediary. When the licensor under an incoming royalty arrangement deals at arm's length with the taxpayer, the connection test will be satisfied only if one of the main purposes of this arrangement is to reduce or avoid withholding tax, or to avoid the back-to-back royalty rules. ...

In rejecting this argument, Russell J, after first citing Savage, stated: [T]he broad wording of paragraph 6(1)(a) requires only the slightest connection between the benefit and employment. That does not preclude benefits received where, in addition to the required connection between benefit and employment, there also may have been considerations extraneous to employment. Here, the absence of the slightest connection to Mr. Baker’s employment was not established given that the EBP, by its very terms, restricted beneficiaries to employees, and Mr Baker had not established that the two other trustees making the unanimous distribution decision had not taken into account his substantial contribution to the company over the past 12 years qua CEO. ...

CRA found this exemption to be available for a Canadian subsidiary which, in connection with distributing products in Canada that had been manufactured by its U.S. parent, was required to pay to a U.S. third party a copyright royalty for the use of an artistic work that was used in connection with the manufacture and sale of the products (e.g., some sort of artistic work appearing on the product itself?) ...

Jackson J stated: The term that is used to indicate a connection between the relevant amount of income, whatever that may be, and each of the United States tax and the Australian tax is 'in respect of'. ... No doubt, in each case the connection cannot be a distant, arbitrary or illogical one. But to the extent that it is necessary to identify the connection more precisely, that must be done in accordance with the provisions of the law of Australia. ...

It is suggested that: [C]ase-law principles should be applied to determining whether beneficiaries of a trust constitute a group of persons in the following manner: 1) There must be sufficient common connection between the beneficiaries in addition to their being beneficiaries of the same trust. A common identifying feature (such as being non-residents, as in Silicon Graphics) is insufficient to establish such a connection. 2) The common connection might include but is not limited to a voting agreement, an agreement to act in concert, or a business or family relationship. 3) Beneficiaries may share a mutually beneficial objective, such as maximizing the value of their investments in the trust, without being considered a group. 4) Beneficiaries can participate in modern corporate or commercial steps, such as granting a proxy or participating in a reorganization of the trust (for example, a fund merger pursuant to section 132.2), without being considered a group. 5) Whether the beneficiaries know, can identify, or communicate with each other is relevant in determining whether they are a group. ...

4 January 2024- 11:25pm Procon – Federal Court of Appeal doubts that “losses incurred by disposing of property that is ‘inextricably linked’ to the ongoing operation of the business are on income account” Email this Content The appellant, a mining contractor, subscribed for shares of two junior mining companies in connection with being awarded mine development work by each company. ... Monaghan JA found no reversible errors in the following findings of the Tax Court: [T]he shares “were acquired and held …in connection with [the appellant’s] business”, “were not acquired for trading purposes”, and “constituted an investment …in the equity of the [mining companies]… intentionally [made]…with a view to further strategically enhancing its future growth, and recoveries/cash flow generated from its business.” ...

In connection with allowing most of Airzone’s projects, largely in connection with expanding its techniques for testing for airborne compounds, as qualifying as SR&ED, Hogan J made a number of pithy general observations, including: The taxpayer is required to demonstrate satisfaction both of “how factors,” namely “that the work was carried out by way of systematic investigation or search through experiment and analysis of a hypothesis … [and the] results of the work must also be preserved” and also a “why factor,” namely “that the work was carried out to resolve technical uncertainties that could not be solved through standard procedures and methods.” ...

In the alternative, he found, in light of the broad meaning of “in connection with” and the important and ongoing role which the R&D services played in meeting the immediate demands of smartphone customers (e.g., teleco carrier testing and bug fixes), that the exclusion in s. 95(3)(d), for “services performed in connection with the … sale of goods,” applied. ...

Among other findings: “Diamond Fields paid the Fees in order to entice Falconbridge to make an offer pursuant to the merger arrangements” so that it was “reasonable to consider that the Fees were received by Falconbridge as an inducement for the purposes of s. 12(1)(x)”; “The Fees were linked to Falconbridge’s operations as a nickel mining company”, which “required access to ore deposits” so that they were received “in the course of” those activities (a phrase which she essentially equated with "in connection with"); furthermore, “the Fees were linked to an acquisition of shares that had the capacity to produce property income” so that they were “also received in the course of earning income from property”. S. 12(1)(x) was enacted to ensure the recognition for tax purposes of tenant inducement payments and of the relocation allowances addressed in Consumers' Gas, i.e., in connection with assets used directly in the income-generating process. ...

In concluding that GEFI was not so resident, Falk LJ stated: The US connections required by s.269B are limited to a) stapling of more than 50% by value of the foreign corporation's shares to those of a domestic corporation, and b) direct or indirect ownership as to 50% or more by US persons. … Neither [branch] requires any form of link between the company itself and the United States, whether a formal legal one (such as incorporation, the location of its registered office or similar) or a factual one (such as place of management). … In contrast, the criteria specified in Article 4(1) all describe legal or factual connections between the entity itself and the relevant Contracting State of a kind that may justify worldwide taxation. ...