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CRA did not explain when or how crypto can be considered to be “issued” to anyone, and perhaps it considers this to be possible. ...

After confirming that neither spouse would thus satisfy the 20-hour test in s. 120.4(1.1)(a), CRA turned to the “excluded business” safe harbor, and indicated that the greater the involvement in the management or current activity of the business, the more likely it is that the individual will be considered to participate in the business on a regular, continuous and substantial basis; and that the more an individual’s contributions are integral to the success of the business, the more substantial they would be. ...

Although CRA considered that other requirements of IT-426R, para. 2 would not be satisfied in this situation, it made a helpful comment to the effect that the requirement of subpara. 2(c) – that “[i]t is reasonable to assume that the earnout feature relates to underlying goodwill the value of which cannot reasonably be expected to be agreed upon by the vendor and purchaser at the date of the sale” — can be satisfied where (as here) “a particular vendor is not directly involved in the negotiations for the sale of shares.” ...

4 August 2022- 11:21pm CRA indicates that a trust cannot get a deduction for distributing phantom income if the trust deed lacks a phantom income clause Email this Content Regarding a trust that receives FAPI from a CFA or a s. 84(1) dividend from a Canadian corporation, and then distributes an equivalent cash amount to its beneficiaries, CRA reiterated the general principle that “[i]f the amount cannot be paid in accordance with the terms of the trust and the relevant trust law, the amount cannot be considered to have become payable for the purposes of subsections 104(6) and (13),” and then stated, more specifically: [W]here an amount included in the taxable income of a trust is not recognized as income or capital for trust law purposes (referred to as “phantom income”), the terms of the trust must specifically permit an amount equivalent to the phantom income to be paid or payable or, alternatively, provide the trustees with the discretion to pay out or make payable amounts that are defined as income under the Act in order for the phantom income to become payable to any beneficiary. ...

11 August 2022- 10:59pm Stroud – Tax Court of Canada applies the Moldowan REOP tests for GST/HST purposes Email this Content Moldowan indicated that an activity should have a reasonable expectation of profit (REOP) to qualify as a business, and suggested that, in determining whether there is a REOP, the “following criteria should be considered: the profit and loss experience in past years, the taxpayer’s training, the taxpayer’s intended course of action, the capability of the venture as capitalized to show a profit after charging capital cost allowance.” ...

Although the MRPS had some debt-like features (10-year maturity, no voting rights except as provided under the Luxembourg commercial law, and cumulative and preferred fixed dividends), the court considered that the MRPS involved no evident mismatch between the legal form adopted (share capital) and the underlying economic reality of the provision of funds by a single shareholder to its subsidiary. ...

(It is not at all apparent what difference this would have made even if he had considered those clauses.) ...

It was suggested to CRA that in determining safe income on hand, the accounting contingencies and reserves should be considered to reduce first the unrealized gains rather than the safe income on hand. ...

CRA rejected the suggestion that classification of a qualifying non-residential building in a separate Class 1(a) or 1(b) on the taxpayer’s return was sufficient for the it to be considered to have made the election, noting that the text of Reg. 1101(5b.1) effectively indicated that the “taxpayer must … send to the Tax Centre … a letter attached to the taxpayer's income tax return stating the taxpayer's election for each eligible non-residential building for the taxation year in which the subject building is acquired.” ...

Treaty to avoid double taxation of a s. 104(4)(b) gain Email this Content CRA indicated that it considered that it was within the IRS’s jurisdiction and not its jurisdiction to determine whether the trust is eligible to elect pursuant to Art. ...