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Under the ruled-upon transactions: The Holdco shareholders transfer a portion of their Holdco common shares on a s. 85(1) rollover basis to Opco in consideration for tracking preferred shares of Opco; The key employee immediately purchases those Holdco common shares from Opco in consideration for five annual instalments, with each annual instalment based on the most recent year’s earnings (plus, in the case of the first instalment, the opening shareholders’ equity), with adjustments to the purchase price on any IPO or business acquisition; and Each instalment payment is immediately dividended by Opco to the Holdco shareholders on the tracking preferred shares. ...

For example, Father transfers shares of Opco (a small business corporation whose shares are eligible for the CGE) to his children in consideration for a note that is payable over 10 years, claims the capital gains reserve, but does not claim the CGE. The children transfer the Opco shares to a new Holdco in consideration for a note of Holdco, with a view to Opco dividends funding note repayments. ...

26 July 2018- 6:51am CRA confirms the use of average monthly exchange rates in a GST/HST context Email this Content ETA s. 159 (which is quite truncated as compared to ITA s. 261) provides that the consideration for a supply expressed in a foreign currency shall be converted using the exchange rate on the day the tax became payable “or such other day as is acceptable to the Minister.” ... In picking an FX rate, the registrant may use: the day the consideration for the supply is paid the day the foreign currency is acquired (as to which CRA provides a simplistic example of the day on which a money order for US$1,000 is acquired, with Canadian funds, to pay a USD invoice in that exact amount) an average rate of exchange for the month in which the tax becomes payable (as to which CRA provides an example in which only two USD invoices were rendered in a month, showing that this method can be used even if it would be practicable to be more precise) CRA provides a somewhat broad list of the acceptable sources for determining the exchange rate to use: the source used for an actual conversion (that is, the source where the foreign currency was exchanged for Canadian dollars) the source the person typically uses for actual conversions (for example, if a US company regular exchanges currency with a local US bank, it can use that bank as its source of FX rates) a Canadian chartered bank the Bank of Canada the CBSA rate used for purposes of converting the value for duty of imported goods An example of an unacceptable source is a commercial database service. ...

He also found that there was no income inclusion in the RRSP annuitants’ income under s. 146(9)(b), on the basis that such mortgage interests had a fair market value that equaled rather than being less than the cash consideration paid by the RRSPs therefor, stating that: The fact that they paid a price similar to the price paid by 117 other individuals evidences that they negotiated the price in “a market not exposed to any undue stresses and composed of willing buyers and sellers dealing at arm’s length”. … …[P]aragraph 146(9)(b) does not apply in a situation where a taxpayer directs his/her RRSP to make an investment with an arm’s length party for what the taxpayer believes is a fair market value consideration and the investment turns out to be a poor investment. ...

II would generally exempt a single supply of a “multidisciplinary health care service” where substantially all of the consideration for the supply is reasonably attributable to two or more particular services listed in ss. 5 to 7.3 of that Part. CRA has inferred that if the “substantially all” test is not satisfied, all of the consideration for the composite supply is taxable. ...

20 April 2020- 12:49am San Domenico Vetraria – ECJ finds that a secondment was a taxable supply for VAT purposes Email this Content Although the European VAT Directive provided that supplies of services (or goods) for consideration were taxable for VAT purposes, Italian VAT legislation provided that the secondment of staff where only the payroll costs were reimbursed was to be ignored for VAT purposes. In finding that this Italian legislation was contrary to the VAT Directive, so that VAT was applicable to the payments made by an Italian subsidiary (San Domenico Vetraria) to its Italian parent (Avir) to reimburse the latter for the payroll costs of a staff member who had been seconded to San Domenico Vetraria, the 7 th Chamber of the European Court of Justice stated: [A] supply of services is effected ‘for consideration’ … if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient. …. ...

18 May 2020- 11:14pm Drolet – Quebec Court of Appeal finds that a written conveyance by a tax debtor to his spouse was not fleshed out as a written separation agreement by virtue of a subsequent retroactive divorce judgment Email this Content After a rift and the taxpayer’s husband moving out, he conveyed a ½ co-ownership interest in the family home to the taxpayer for nominal stated consideration but on the understanding that she would not be seeking support from him. ... Unfortunately for her, there was nothing in writing at the time of the transfer of the co-ownership interest to her, other than the conveyance itself, which made no mention of the alleged consideration provided by her to him of foregoing support and, in fact, it did not even state that they were separated. ...

25 October 2020- 11:24pm Healius – Federal Court of Australia, Full Court finds that lump sum payments made to lock-up doctors at medical centres effectively controlled by the payer were capital expenditures Email this Content A subsidiary (“Idameneo”) of an Australian public company provided medical centre facilities and services to doctors in consideration for 50% of the fees generated by them. In order to induce a doctor to join one of the medical centres operated by it, it would typically pay a lump sum in the range of $300,000 to $500,000 to the doctor in consideration for the doctor’s promise to conduct his or her practice from the medical centre for a specified period of around five years, along with an exclusivity covenant. ...

23 December 2021- 11:56pm CRA denies that a manager can earn a management fee directly from an investment limited partnership rather than its GP Email this Content Before discussing the somewhat new rules in ETA ss. 272.1(3)(b) and (8), generally deeming the general partner of an investment limited partnership to be making monthly or other periodic taxable supplies to the ILP for consideration equaling the FMV of its services, CRA seemed to indicate that a similar result would obtain under the more general test in 272.1(1) (regarding whether the partner is relevantly acting qua partner). ... Regarding the determination of such FMV: it “should take into consideration the industry standard for the management of investments in comparable situations” which “includes management fees and performance fees”. these “will usually be described in the limited partnership agreement, the offering memorandum provided to investors and/or the management agreement.” ...

9 April 2023- 10:59pm CRA indicates that s. 110.6(14)(f)(i) can apply to an amalgamation and that s. 110.6(1)(e) applies to successive share substitutions (including an amalgamation) Email this Content S. 110.6(14)(f)(i) provides that, for purposes of the requirement in s. 110.6(1)(b) that mooted qualified small business corporation shares ("QSBCSs") must not have not been owned during the 24 months preceding their disposition (the “determination time”) by anyone other than the disposing individual or a related person or partnership, such shares will be considered to have been so owned prior to their issuance by a “bad” owner unless they were issued as consideration for other shares (the “original shares”). ... X) exchanges his majority shareholding of Opco for shares of a new personal holding company Holdco) and then, around a year later, receives replacement shares of Amalco on an amalgamation of Holdco with Opco followed by a sale by him (and the minority shareholder) of their Amalco shares to a third party, CRA accepted that s. 110.6(14)(f)(i) applied on the amalgamation, i.e., that the Amalco shares could be regarded under the scheme of the Act as being “issued” in consideration for the shares of the relevant predecessor (Holdco). ...