Search - consideration

8 September 2020- 11:10pm Valovic – Tax Court of Canada finds that shareholders’ services were not consideration for dividends received by them for s. 160 purposes Email this Content An electrician and his spouse provided their services as electrician and administrator to their equally-owned corporation, and received dividends and salary. In rejecting their submission that, for s. 160 purposes, the annual dividends were paid for equivalent consideration, being a portion of their services, Monaghan J noted that decisions of the FCA/TCC “accepted and endorsed the view expressed in Neuman that dividends relate to shareholding and rejected the argument that there was consideration for the dividends.” ...

17 July 2015- 12:11am CRA finds that s. 108(7) does not apply to qualify a usufruct trust as a personal trust where the usufruct was created for valuable consideration Email this Content S. 108(7)(b) provides that where all the beneficial interests in an inter vivos trust, which were acquired by way of transfer of property to it, were acquired by one person (s. 108(7)(a)) or by related persons (s. 108(7)(b)), their beneficial interests are deemed to have been acquired for no consideration (so that inter alia the trust can qualify as a personal trust). Where father transfers the bare ownership of land to his son for consideration, so that father becomes a usufructuary, ss. 248(3)(a) and (d) deem father to have settled a trust of which he and his son are the beneficiaries. CRA considers that in this situation "as the bare owner did not transfer, assign or dispose of any property to the deemed trust… paragraph 108(7)(b) cannot apply to deem the beneficial interest of the bare owner to have been acquired for nil consideration." ...

1 January 2019- 11:04pm The consideration for the proposed Pan American acquisition of Tahoe includes future contingent Pan American share deliveries Email this Content Under the proposed acquisition of Tahoe Resources by Pan American Silver pursuant to a B.C. ... Because the right to receive Pan American shares under the CVRs is not absolute, the CVRs are considered to represent “boot” rather than share consideration for s. 85 election purposes. ... The U.S. tax disclosure treats the Arrangement as a “D” reorg, The CVRs are likely just deferred share consideration. ...

30 September 2021- 10:58pm Odette Estate – Tax Court of Canada finds that a promissory note subsequently repaid in cash could not be equated to cash consideration for s. 118.1(13)(c) purposes Email this Content The appellant estate donated shares of a private company (Edmette), which were non-qualifying securities, to a private foundation with which it did not deal at arm’s length. ... The donation of the Edmette shares was deemed by s. 118.1(13)(a) to not be a gift except to the extent “of the fair market value of any consideration (other than a non-qualifying security of any person) received by the donee [i.e., the foundation] for the disposition” by it of the Edmette shares. ... The only consideration received at the time of the disposition was the Promissory Note. … Parliament does not want to grant a tax credit where the donor is not impoverished and the charity is not enriched. ...

I forgot to mention the consideration Email this Content Private investors have financed and constructed public projects such as hospitals and contracted for a stream of regular future payments (e.g., management or operating fees) from the government until maturity, when the financing is paid off.  Following a favourable ruling, many such projects have been structured on the basis that, in consideration for the agreement of the consortium to construct the facility and operate it during the term to maturity, it is granted a licence to use the property, which qualifies as a Class 14 depreciable property. When asked what happens when the participants forget to state that the construction costs are incurred in consideration for the grant of the licence, CRA expressed incredulousness that "such an important matter" could be missed; and stated that it was "possible" that some other evidence could be found establishing the cost of the licence. ...

Tech India – Delhi High Court finds that the mere right to customize software purchased for resale does not render the consideration a royalty Email this Content The Indian case law on the distinction between a software royalty (subject to withholding) and the purchase of software as a product apparently is well developed. ... Bakhru J. stated: In cases where payments are made to acquire products which are patented or copyrighted, the consideration paid would have to be treated as a payment for purchase of the product rather than consideration for use of the patent or copyright. ...

Koffyfontein finding that the consideration paid for shares on a debenture conversion is to be determined at that conversion time Email this Content Agnico convertible debentures, which had been issued for U.S.$1,000 per debenture, were converted into common shares at a time that the U.S. dollar had depreciated in value, thereby in the view of CRA giving rise to a s. 39(2) FX gain. However, Woods J found that the relevant date for translating the amount paid by Agnico on settling the debentures should be viewed as the date when the "true consideration" for the shares (with which Agnico repaid the debentures) had been received, which she found was the date when the U.S.1,000 was received on the prior issuance of each debenture. ... Koffyfontein, [1904] 2 Ch. 108] (CA) arguably casts doubt on the correctness of Agnico given the finding there that the consideration paid for shares on the conversion of debentures usually is to be determined at the time the obligation to repay is extinguished, and not when the debentures are issued. ...

15 June 2016- 10:50pm CRA might apply s. 15(1), but likely not s. 56(2) or 246(1), where a family member subscribes nominal consideration for Opco shares and receives a large discretionary dividend Email this Content CRA appears to consider that in the scenario where a company owned by Mr. ... A for nominal consideration, and then pays a substantial dividend to Mrs. ... A as consideration for the share does not represent the fair market value of such share at the time of subscription.” ...

19 September 2016- 10:50pm Proposed Vail Resorts acquisition of Whistler includes exchangeable share consideration (likely bearing dividends) and an exchange-rate adjusted cash component Email this Content Vail Resorts is proposing to acquire Whistler Blackcomb under a BC Plan of Arrangement for a combination of shares and cash, paid by a B.C. subsidiary of Vail Resorts (Exchangeco). Resident Whistler shareholders who so elect will receive the share consideration in the form of exchangeable shares of Exchangeco under a largely conventional exchangeable share structure, with those shares being listed on the TSX and having a sunset date seven years out. The cash component of the consideration is nominally in Canadian dollars, except that it is based on an exchange rate of 0.7765 so that, for example, if the exchange rate is less than this six days before the Arrangement implementation date, the Whistler shareholders will receive a correspondingly lower amount. ...

25 January 2017- 7:07am Stock ’94- European Court of Justice finds that interest on a loan funding a taxable supply of goods was part of the consideration for a single supply of the goods Email this Content A Hungarian company was set up to assist Hungarian farmers by lending them money to fund the purchase by them from it of current assets needed in their business. The European Court of Justice (subject to some further findings of facts to be made by the local court) essentially applied the single supply doctrine to find that the loan interest was part of the consideration for the sale of products by the company to the farmers, so that the interest was subject to VAT (even though, of course, interest on loans viewed as being for a separate supply was VAT-exempt). ... However, it is not obvious that the Tax Court could not treat interest on the deferred purchase price for a taxable supply as itself being part of the taxable consideration for a single supply. ...