Table of Contents


Degeer v. Canada, 2001 DTC 5385, 2001 FCA 152

self-cancelling double title transfers

By an unregistered deed the taxpayer purported to transfer a farm that previously had been acquired by him from his parents back to his parents for a nominal consideration; and 35 days later received the farm back from his parents for a nominal consideration pursuant to a further unregistered deed.

This was found to be a scheme under which the taxpayer appeared to be disposing of the farm to crystallize a capital loss while, in the non-arm's length circumstances of the relationship between him and his parents (and having regard to no adjustment having been made to the $1.275 million promssory note owing by the taxpayer to his parents), he retained the beneficial ownership of the farm.

Pardee Equipment Ltd. v. The Queen, 97 DTC 5279 (FCTD)

"consignment" was true sale given that equipment could not be returned

Although the form of the document governing the delivery of equipment to the taxpayer was that of consignment, Reed J. found that the proper legal characterization was a sale subject to a security interest held by the supplier until the purchase price was fully paid. "Of primary importance for the characterization is the fact that the machines are not and cannot be returned to Deere." (p. 5283)

Locations of other summaries Wordcount
Tax Topics - General Concepts - Substance 66

The Queen v. Paxton, 97 DTC 5012 (FCA)

transfer to children pending sale closing

After the taxpayer entered into an agreement for the sale of shares then owned by him to an arm's-length purchaser ("Tandet"), he took advantage of a provision in the agreement that permitted him, prior to the closing date, to elect to transfer his shares to family members on the condition that the family members complete the sale. In finding that there was no "transfer" to the children for purposes of s. 73(5) of the Act, Robertson J.A. stated (at p. 5016) that "the type of transfer embraced by subsection 73(5) ... is, at a minimum, one which enables the purchaser to exercise the degree of control necessary to determine the ultimate fate of the family business," whereas here, the agreement deprived the children of this right and "they had no right to the use or enjoyment of the shares other than to transfer them within one day to Tandet and to retain a small portion of the sale proceeds."

Words and Phrases

Goldcorp Exchange Ltd & Ors v. Leggett & Ors, [1994] UKPC 3, [1995] 1 AC 74

no ownership of unascertained goods

At the time banks appointed receivers for a dealer in precious metals, the dealer had a stock of precious metal bullion that was substantially less than that which was required to satisfy contracts of the public for purchases of precious metals for future delivery. Before finding that those purchasers did not have a proprietary interest in any of the stock of precious metals of the dealer, Lord Mustill stated:

...the case turns not on appropriation but on ascertainment, and on the latter the law has never been in doubt. It makes no difference what the parties intended if what they intend is impossible: as is the case with an immediate transfer of title to goods whose identity is not yet known.

J. Sainsbury plc v. O'Connor, [1991] BTC 181 (C.A.)

shares subject to put-call

Although the taxpayer had agreed in principle with a Belgian company ("GB") that the shares of a joint venture company being established by them ("Homebase") would be held 70% by the taxpayer and 30% by GB, it was required that the taxpayer be the "beneficial owner" of 75% of the shares in order to be entitled to group relief in respect of losses of Homebase. Accordingly, the taxpayer subscribed for 75% of the shares and by separate option agreements of the same date the taxpayer granted GB a call option, and GB granted the taxpayer a put option, over 5% of the shares held by the taxpayer, such options not being exercisable for the first five years. In finding that the taxpayer was a beneficial owner of 75% of the shares, Lloyd L.J. noted (p. 188) that "'the beneficial owner' of shares ... means the equitable owner" and that "GB was not the equitable owner of five per cent of the shares which were the subject of the option agreement, since it could not claim specific performance until it had exercised its option under the agreement, and it could not exercise its option under the agreement until five years after the incorporation of Homebase ...".

Greenway v. The Queen, 91 DTC 5251 (FCTD)

conditions precedent not yet fulfilled

The taxpayer along with other investors did not acquire the beneficial ownership of a MURB at the time that a nominee corporation entered into an agreement of purchase and sale with the owner, in light of various conditions precedent specified in the agreement which were not fulfilled (and were not capable of fulfilment at that time).

Philips Exports Ltd. v. Customs and Excise Commissioners, [1990] BTC 5082 (Q.B.D.)

transitory ownership recognized

In considering a marketing agreement which provided that property in goods which were manufactured by the Philips group of companies for export should pass to the taxpayer (an affiliated company) either immediately before delivery to the overseas customer or immediately before title passed to the overseas customer, Roch J. disagreed with a finding of the tribunal that in order for there to be a "supply of goods" title must rest with the tranferee for a measurable length of time.

1056 Enterprises Ltd. v. The Queen, 89 DTC 5287 (FCTD)

The Minister assessed the taxpayer, whose shares were owned 99% by an individual ("John"), on the basis that John's brother ("William"), who was virtually the sole shareholder of another corporation ("Northland"), also had a 50% interest in the taxpayer. Muldoon J. found that although the brothers had an initial oral agreement to this effect, "it ceased before the brothers could carry it into effect", with the result that the taxpayer and Northland were not associated (p. 5293).

Alberta Oil Sands Pipeline Ltd. v. The Queen, 88 DTC 6059, [1988] 1 CTC 99 (FCTD)

The taxpayer was at all times the owner of linefill even though the initial linefill purchased by it had been displaced by the shippers' oil. "[T]he linefill remains for all practical purposes the same product." The taxpayer accordingly was entitled to claim CCA on the linefill.

Irving Oil Ltd. v. The Queen, 88 DTC 6138, [1988] 1 CTC 263 (FCTD), aff'd 91 DTC 5106 (FCA)

Although ownership of oil was found to shift, at the ship's permanent home connections at the loading port, almost simultaneously from the supplier to a Bermudan company ("Irvcal"), and from Irvcal to the taxpayer, the ownership of Irvcal of the oil for that instant of time was recognized.

Ward v. The Queen, 88 DTC 6212, [1988] 1 CTC 336 (FCTD)

The taxpayers were held to be the owners for tax purposes of land notwithstanding that title was held by other persons styled as trustees.

Seven Mile Dam Contractors v. The Queen in Right of British Columbia (1980), 116 DLR (3d) 398, 1980 CanLII 451 (BCCA)

A partnership ("P1") sold equipment to another partnership ("P2"). The two partners of P1 had partnership interests totalling 50% in P2. Before finding that BC social services tax was payable on only one-half of the total price paid by P2 for the equipment, Hutcheon J.A. relied on the finding in Boyd v. Attorney General of British Columbia (1917), 54 SCR 532, at 559-60 that the partners have an undivided interest in the specific assets of a partnership.

Rodwell Securities Ltd. v. IRC, [1968] 1 All E.R. 257 (Ch D)

parent does not own assets of sub

In dealing with the question whether a wholly-owned subsidiary (Securities) of a wholly-owned subsidiary (Group) of a parent company (London) was beneficially owned by the parent London, Pennycuick, J. held (at p. 260):

"According to the legal meaning of the words, a company is not the beneficial owner of the assets of its own subsidiary. ... The parent company may very well have a controlling interest right down the line, but does not own any of the assets of the subsidiaries. So here, although the London company plainly has a controlling interest in the Securities company, it does not own beneficially any of the assets of the Group company, including the shares in the Securities company."

Vineland Quarries and Crushed Stone Ltd. v. MNR, 66 DTC 5092, [1966] CTC 69 (Ex Ct), briefly aff'd 67 DTC 5283 (SCC)

"I readily accept the undisputed proposition that no shareholder, even though he holds all the shares in a corporation, has any property, legal or equitable, in the assets of the corporation and the proposition that a corporation is not, as such, the agent or trustee for its shareholders."

Bank Voor Handel En Scheepvaart v. Slatford, [1951] 2 All E.R. 779

Devlin J. affirmed the principle that the assets of a company are not the assets of a shareholder and accepted as correct a statement by the Permanent Court of International Justice, in Standard Oil Co.'s Claim [1927] BY Int'l L156, at 162:

"'... The decisions of principle of the highest courts of most countries continue to hold that neither the shareholders nor their creditors have any right to the corporate assets other than to receive, during the existence of the company, a share of the profits, the distribution of which has been decided by a majority of the shareholders, and, after its winding-up, a proportional share of the assets'."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Personality 108

See Also

Universo Home Construction Ltd. v. The Queen, 2019 TCC 87 (Informal Procedure)

construction company qualified as beneficial owner based on bearing costs and late-executed declaration of trust

CRA denied the ability of a home builder (“Universo Home”) to claim a new home rebate purportedly assigned to it pursuant to ETA s. 254(4) on the basis that Universo Home had no interest in the property at the time the home was constructed and, therefore, did not qualify as its “builder.” The difficulty centered on the fact that the 2011 purchase and 2013 sale documentation named the wife (Mrs. Dhesi) of the sole shareholder (Mr. Dhesi) of Universo Home as the purchaser and vendor of the property, and the fact that Declaration of Trust, which named Mrs. Dhesi as the nominee for Universo Homes, was found by Bocock J to have not been signed until sometime before (perhaps, shortly before) the closing of the 2013 sale.

Bocock J nonetheless found that Universo Home was the beneficial owner for some period prior to the sale, partly on the basis that it paid for the construction work and reported the property as an asset for financial statement purposes. Accordingly, it qualified as a builder for rebate purposes.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(4) backdated declaration of trust did not preclude a finding that a company was the beneficial owner of a new home construction 418
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Builder - Paragraph (a) construction company qualified as beneficial owner based on bearing costs and late-executed declaration of trust, and might also qualify based on builders’ liens 226

Ellison v Sandini Pty Ltd, [2018] FCAFC 44

family court order requiring the transfer of a portion of a larger bloc of shares likely did not result in a change in their beneficial ownership as the shares likely were not fungible

On September 21, 2010 the Australian Family Court made orders by consent between Mr and Ms Ellison that joined Sandini Pty Ltd (“Sandini”) as trustee for the Ellison Family Trust (of which Mr Ellison was a beneficiary) to the Family Court proceedings and required it within 7 days to do all things necessary to transfer 2.1M shares in an Australian publicly listed company (“MIN”) to Ms Ellison. However, Sandini was not the trustee of the Ellison Family Trust, but it did own 35M shares of MIN in its capacity as the trustee of a unit trust (“KRUT”) of which the sole unitholder was another company (“Wabelo”) as trustee for the Ellison Family Trust. In response to a request by Ms Ellison, Sandini transferred 2.1M shares of MIN, nine days later, to a company controlled by Ms Ellison (“Wavefront”) rather than to her. Mr Ellison then sought a declaration that Sandini was entitled to rollover relief under s. 126-15 of the Income Tax Assessment Act 1997 (Australia) on the basis that there was a transfer of the 2.1M shares under the consent orders that “involved” a trustee (as transferor) [i.e., Sandini] and a spouse or former spouse of an individual as transferee [i.e., Ms Ellison] “because of a court order under the Family Law Act 1975” (Australia). (A direct transfer from Sandini to Ms Ellison’s company (Wavefront) would not have engaged rollover relief.)

Whether there was a “disposal” of 2.1M shares under the consent orders turned on whether there was a transfer by virtue of the order of their beneficial ownership. In this regard, Jagot J stated (at para 99):

  1. …there is no change of ownership if a person continues to be a “beneficial owner” of an asset…;
  2. a “beneficial owner” of an asset has more than a mere proprietary interest in the asset. To be a beneficial owner the person must have rights which a court of equity would enforce involving full dominion over the asset; and
  3. if the original owner continues to enjoy rights to deal with the asset, including rights of disposal, then it could not be said that another entity is the beneficial owner of the asset, even if the other entity may have a beneficial interest in the asset.

In rejecting Mr Ellison’s submission that the order instead rendered Sandini a trustee for 2.1M shares, so that Ms Ellison became their beneficial owner, Jagot J stated (at para 148):

… [T]he weight of authority is that there can be a valid trust over a fungible pool of assets provided the assets and relevant proportions for the different beneficiaries are identified with sufficient certainty. The better view is that for the requirement of certainty to be satisfied the trust must be over all of the fungible assets in the pool, the beneficial co-ownership proportions reflecting the respective interests of the beneficiaries. … [I]t may be accepted that the beneficiary obtains a proprietary right in a proportion of the asset pool. If, given the terms of the declaration and the nature of the property, the trustee is constituted as nothing more than a bare trustee on behalf of the beneficiary in respect of the beneficiary’s proportional interest, it may well be that there has been a change of ownership within the meaning of [the definition of disposal]. For this to be the case, however, the rights vested in the beneficiary must be capable of supporting the grant of equitable remedies the equivalent of ownership, including preventing the trustee from dealing in the relevant proportion of the asset pool other than in accordance with the beneficiary’s directions. ...

However, she stated (at para. 149) that this test of fungibility appeared not to be satisfied, on the basis that “shares may have a different cost base for the purposes of capital gains tax and thus, in this sense, may not be interchangeable,” and then stated (at paras. 151-152):

As the party seeking the declarations, it was for Sandini to answer any questions about its capacity and obligations to the KRUT in respect of the MIN shares. Sandini’s inability to do so satisfactorily, weighs against its contention that the orders should be construed as it proposes, that is, as in White v Shortall [[2006] NSWSC 1379], by creating a trust over the whole of Sandini’s shareholding as to some shares on trust for the KRUT and as to 2,115,000 on trust for Ms Ellison, Sandini thereafter being nothing more than bare trustee for Ms Ellison as the beneficial owner of that proportion of the pool.

These considerations tend to support the doubt that has been expressed as to the fungible character of shares … [then citing an article that] the essence of fungibility is “a choice between legally interchangeable units”. If all shares in the company are of the same class, there is but a single asset, being the issued share capital. On this basis, as Professor Goode proposes, a single asset cannot give rise to the capacity for selection which defines a fungible asset.

In essentially returning to and concluding on the beneficial ownership issue, she stated (at para. 164):

[T]he orders vested statutory rights and a beneficial interest of some kind in Ms Ellison but … I do not consider that interest can be characterised as beneficial ownership … .

In finding that, in any event, the consent orders did not apply to the 2.1M shares, Jagot J stated (at para 168):

[T]he orders are to be construed on their own terms without reference to extrinsic material. The fact that Sandini is the trustee of the KRUT, which owned shares in MIN, is all extrinsic material. So too is the fact that Sandini was not and is not the trustee of the Ellison Family Trust. None of those matters arise on construction of the orders. … In short, on their own terns, the orders have no operation and cannot be enforced.

Words and Phrases
beneficial owner fungible
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition family court order did not effect a change in beneficial ownership of a larger bloc of shares held by the original owner (and in any event, the order named the wrong person) 744
Tax Topics - Income Tax Act - Section 73 - Subsection 73(1) - Paragraph 73(1)(b) subjective belief of parties that family court orders were efficacious did establish that a share transfer to a spouse occurred “because of” them 407
Tax Topics - General Concepts - Evidence a court order could not be interpreted in light of extrinsic evidence 100

Gillen v. The Queen, 2017 TCC 163, aff'd 2019 FCA 62

test of beneficial ownership

A limited partnership was found to have immediately transferred the beneficial ownership of applications to the Saskatchewan government for potash exploitation rights (the “Purchased Applications and Purchased Permits”) to a corporation (“Devonian”) immediately upon entering into a sale agreement of the Purchased Applications and Purchased Permits with Devonian. In this regard, D’Arcy J referred (at para. 95) with approval to the finding in Prévost Car, 2008 TCC 231 (aff'd 2009 FCA 57) that “the beneficial owner is the true owner who enjoys and assumes all the attributes of ownership, without having to be accountable to anyone, including to the legal owner, as to how the property is used or dealt with.”

Words and Phrases
beneficial ownership
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(14) - Paragraph 110.6(14)(f) - Subparagraph 110.6(14)(f)(ii) property was not used in a business for s. 110.6(14)(f)(ii) purposes when it was beneficially acquired and dropped-down on the same day 342
Tax Topics - General Concepts - Effective Date relation-back theory applied: closing retroactively confirmed previous beneficial ownership transfer 243

Mady v. The Queen, 2017 TCC 112

wife and children did not acquire beneficial interest in shares the taxpayer was to transfer to them, under tax plan, until the share transfer occurred

The taxpayer, who owned all the shares of his dental corporation (“MDPC”), agreed to sell all the MDPC shares to third-party purchaser and its affiliate (collectively, “DCC”) for $4.5 million. Immediately before the closing of the sale to MDPC, the taxpayer exchanged all his commons shares of MDPC under s. 86 for preferred shares with a redemption value of $2 million and for new common shares of MDPC, and then immediately sold 85% of those common shares equally to his wife and two children for nominal consideration. Those three family members then immediately sold those common shares to DCC for cash proceeds of $2.2 million in the aggregate.

In finding that the taxpayer’s wife and two children did not become the beneficial owners of 85% of the new common shares until the transfer to them for nominal consideration, Hogan J stated (at paras 127 and 130):

[T]here is no evidence that shows that the Appellant conveyed a beneficial interest in the aforementioned shares prior to the completion of the purchase and sale arrangement with his family member.

[T]he Appellant’s intention to carry out the pre-closing transaction steps prior to the closing date, in accordance with the tax plan is not equivalent to him being bound to do so. There is nothing in the SPA that suggests that the Appellant had granted to his wife and two daughters the right to acquire the 85 Class B, C and D common shares for nominal consideration. Therefore, the Appellant owned 100% of the new shares immediately upon completion of the capital reorganization.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(11) transfer from wife to higher-income husband was infused with his income-splitting purpose (as well as regulatory breach if she didn’t transfer) 355
Tax Topics - Income Tax Act - Section 86 - Subsection 86(2) family members did not acquire beneficial interest in new shares until after completion of s. 86 reorg 285
Tax Topics - General Concepts - Fair Market Value - Shares arm’s length sales price established FMV for closing-date internal transfer of same shares 470
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b) - Subparagraph 69(1)(b)(i) contemporaneous arm’s length sale price established that shares previously transferred at undervalue 468
Tax Topics - Income Tax Act - Section 163 - Subsection 163(2) was not responsible under s. 163(2) for the unbeknownst sharp practice of his tax advisor 658
Tax Topics - General Concepts - Price Adjustment Clause no jurisdiction to comment on application of price adjustment clause where the affected taxpayers are not appellants 223

Club Intrawest v. The Queen, 2016 TCC 149, varied 2017 FCA 151

beneficial owner did not transfer property risk
varied on other grounds

A Canadian Intrawest corporation (the “Canadian Developer” and “U.S. Developer, respectively”) transferred individual resort condos (the “Vacation Homes,” which they had acquired in Canada, the U.S. and Mexico) to the Appellant (which was a non-share corporation resident in Canada) in consideration for the Appellant transferring occupancy rights to the Vacation Homes, in perpetuity to them. The Canadian Developer and the U.S. Developer then sold “Resort Points” to members of the public in Canada and the U.S. which could be periodically applied under a booking system to obtain access to particular Vacation Homes at specified times.

In connection with considering an agency issue, D’Arcy J found that the Appellant had not established that the beneficial interests in Vacation Homes were held by it on behalf of its members, given inter alia that the risk of damage to the property through fire, misconduct of the users or normal wear and tear rested with the Appellant and the Resort Points represented only contractual rights to make reservations rather than being interests in the Vacation Homes.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency annual fees charged by non-share corporation to its members were not reimbursements for expenses incurred by it as their agent 371
Tax Topics - Excise Tax Act - Section 142 - Subsection 142(1) - Paragraph 142(1)(d) s. 142(1)(d) only applies to a supply exclusively re real property 594
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Service payment of condo operating expenses was a service 201
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply single supply of covering all time share operating costs 164
Tax Topics - Excise Tax Act - Section 168 - Subsection 168(1) GST collectible based on invoicing times 77
Tax Topics - Excise Tax Act - Section 306.1 - Subsection 306.1(1) objecting to quantum was sufficient particularity 169
Tax Topics - General Concepts - Evidence foreign law assumed the same 93

Bueti v. The Queen, 2015 DTC 1213 [at 1374], 2015 TCC 265

residuary beneficiary had no ownership of estate property

Before concluding that a residuary beneficiary in an estate had acquired a property by purchase rather than devise, Owen J observed that, under the laws of Ontario, residuary beneficiaries do not acquire an interest in any specific property in the residue of the estate and it is instead the executors who acquire the property in the residue (noting, at para. 56, that 909403 Ontario Ltd. v. DiMichele, 2014 ONCA 261 "confirmed that an entitlement to the residue of an estate under a will does not amount to a property interest in specific estate assets"). See summary under s. 70(5).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(8) - Paragraph 248(8)(a) residuary beneficiary did not acquire as a consequence of death 125
Tax Topics - Income Tax Act - Section 70 - Subsection 70(5) residuary beneficiary did not acquire as a consequence of death 224

Mariano v. The Queen, 2015 DTC 1209 [at 1331], 2015 TCC 244

no acquisition of unascertained property

Pizzitelli J found that purported gifts by the taxpayers were not effective to transfer property in the gifted licences as such licences had not yet been allocated to them by the promoter, out of the pool of licences, at the time they executed their Deeds of Gift (with the Schedule describing the gifted licences not yet attached.) See summaries under s. 118.1 – total charitable gifts and s. 104(1).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Other courseware licences valued at modest initial cost, given relevant wholesale market and depressive effect of huge volumes purchased 289
Tax Topics - General Concepts - Sham taxpayer involvement in deceit unnecessary 357
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) void for lack of certainty of objects 208
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2) delegation of power of appointment to promoter not authorized 222
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts no gift where no intent for impoverishment and where gifted property not yet identified 526
Tax Topics - Income Tax Act - Section 248 - Subsection 248(35) attempted use of initial gift to step-up ACB under s. 69(1)(c) 238

568864 B.C. Ltd. v. The Queen, 2014 TCC 373

beneficial ownership in patents

The taxpayer - which was a member of group of companies that included a producer of exterior trim boards for construction ("W.L.") – earned management fees and rental fees from W.L. In 2003, the taxpayer lent $3.5 million to an arm's length supplier of specially prepared boards ("Interact") secured by patents held by Interact's principal ("Cable").

Following the bankruptcy of Interact and Cable earlier in 2005, the trustee in bankruptcy for Cable released the patents to the taxpayer "subject to ultimate accounting for the proceeds of disposition" - by which the trustee apparently meant to address the unlikely event that the taxpayer could sell the patents for more than the amount it was owed by Interact. Legal title in the patent remained with the trustee.

The taxpayer sold the patents to a corporation owned by the taxpayer's principal's son for $1 in September 2007, and claimed a terminal loss of $3.9 million (based on it having been deemed under s. 79.1 (6) to have acquired them at a cost of $3.5 million plus $0.4 million of relevant legal costs). The trustee (who was not aware of the 2007 transfer) transferred legal title in the patents to the taxpayer in 2010, in exchange for the taxpayer reducing its secured claim by $1 million. The Minister denied the terminal loss - among other reasons, arguing that taxpayer had not become the patents' beneficial owner by the time it sold them in September 2007.

Rip J allowed the taxpayer's appeal. Based on the plain (i.e. dictionary) meaning of the words "beneficial owner, and on the "incidents of title" test in Wardean, he stated (at para. 92):

A beneficial owner of property therefore, is someone who is the real owner of the property, a person who is in possession of the property, a person who could derive income from the property or otherwise use it and who is the person who suffers any loss if the property is damaged or destroyed. The beneficial owner is the only person who can dispose of the property in his or her sole discretion without interference.

The taxpayer had obtained the incidents of title when the trustee released the patents in 2005: the taxpayer possessed the physical patent documents, the trustee confirmed to the patent agent that the taxpayer would henceforth be instructing the patent agent and did not thereafter interfere with the taxpayer's use and enjoyment, the taxpayer assumed the costs of ownership and defended the patent ownership rights against the claims of Cable's common law spouse (who claimed a constructive trust in her favour).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 79.1 - Subsection 79.1(2) beneficial ownership in patents 414
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) patents were acquired for future joint venture use 196

Olympia Trust Company v. The Queen, 2014 TCC 372, aff'd 2015 DTC 5134 [at 6411], 2015 FCA 279

RRSP trustee, not annuitant, was the "purchaser"

The Minister assessed the appellant trust company under s. 116(5) for its failure to withhold from the purchase price paid by self-directed RRSP trusts for which it was trustee from the purchase price for shares, which were taxable Canadian property, acquired from non-resident vendors (without s. 116 certificates being received). In responding affirmatively to a Rule 58 question as to whether the appellant was a purchaser under s. 116(5), Bocock J stated (at para. 31):

While use, benefit and enjoyment arising from the shares were exclusively reserved for the Annuitant, the trust and related RRSP plan documents bifurcated the other incidents of ownership and delivered possession, title and management of that very property to Olympia, as trustee. …[N]o relevant party desired to have the Annuitant be the party from whom the purchase moneys were advanced (this would have involved an RRSP withdrawal)… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 116 - Subsection 116(5) RRSP trustee, not annuitant, was the "purchaser" 154

Strachan v. The Queen, 2014 DTC 1025 [at 2645], 2013 TCC 362

beneficial ownership of dividends

In finding that the taxpayer's husband was the beneficial owner of two shares initially issued by a corporation, Rip CJ stated (at para. 23):

Mr. Strachan was the beneficial owner of the dividends paid to shareholders and received by him as owner of the two shares. He received the dividend for his own use and enjoyment. He enjoyed all the attributes of ownership of the shares and of the dividend received.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) shares issued from spouse's private corporation 123

Fourney v. The Queen, 2012 DTC 1019 [at 2575], 2011 TCC 520

presumption of resulting trust where property transfer for no consideration

Seeking to protect herself from being sued by her brother, the taxpayer transferred title to all her real properties for no consideration to corporations under her majority control. She reported rental and business income and expenses from these properties while her accountant did the same in the corporations' returns. The Minister's reassessment included the inclusion in her income of a taxable capital gain on a disposition of the properties to the corporations.

Hogan J. noted (para. 30) that "a transfer of property for no consideration generally results in a rebuttable presumption of a resulting trust" . This presumption was further supported by the fact that, following the transfer, the taxpayer continued to operate the business properties in a personal capacity. All invoices for repairs and renovations, and all rent cheques were addressed to her personally, and all income and expenses went into or came from her personal bank accounts; and the corporations held themselves out to third parties as the property owners only in limited circumstances.

Hogan J. found that the resulting trust was a bare trust, in which the corporations could reasonably be considered to have acted as mere agents for the taxpayer. The trust was therefore not a "trust" for the purposes of the Act, pursuant to s. 104(1). Furthermore, the transfer was not a "disposition" under s. 248(1) because, as per paragraph (e), the taxpayer retained beneficial ownership. The income and expenses on the properties therefore were those of the taxpayer, and she did not realize a capital gain on the transfer.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency 187
Tax Topics - General Concepts - Corporate/Separate Personality 251
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) bare trust arising on creditor-proofing transfer 251
Tax Topics - Income Tax Act - Section 163 - Subsection 163(2) line codes in electronic filings were incomprehensible to taxpayer 292
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition rebuttable presumption of resulting trust on transfer for no consideration 251

Leclair v. The Queen, 2011 DTC 1328 [at 1859], 2011 TCC 323

retroactive repudiation of gift

The taxpayer's father transferred real property to her in June 2006 without her knowledge. She discovered the transfer in December 2008 and transferred the property back on 26 February 2009 after obtaining legal advice. Angers J. found that the taxpayer was not liable under s. 160 for her father's unpaid taxes. The common law on property provides that an unwitting recipient of a gift can, as the taxpayer had done, repudiate the gift retroactively (para. 16). There had therefore been no transfer of property, and hence no liability under s. 160.

Alberta Power (2000) Ltd. v. The Queen, 2009 DTC 1514, 2009 TCC 412

person with the benefits and burdens of ownership was the beneficial owner

Although the taxpayer ("ATCO") continued to be the legal owner of a plant, the effect of the agreements between it and the Alberta government were that all the benefits and all the burdens that arose from the ownership thereof rested with the "Balancing Pool" of the Alberta government, so that it became the beneficial owner of the plant. Rossiter ACJ stated (at para. 69):

At the end of the day, what ATCO had left was really the fees to operate the plant pursuant to the [Operating Agreement] and if it was not sold and did not operate on its own, it would decommission the plant at its own cost. All the benefits, and all the burdens that arise from the ownership rested throughout, from January 1, 2001 onward with the Balancing Pool. The Balancing Pool had all the decision making power with respect to all operations of the plant, how it was to be operated, what expenditures were to be made, what the output was going to be, to whom and when it was going to be sold, and what the selling price would be to a third party. There were certainly some clauses in the agreement of sale with the third party which tied in the Appellant, but that was because a) the Appellant was still the legal title holder of the plant and b) the Appellant operated the plant to and for the benefit of the Balancing Pool.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) definition of "reimbursement;" exclusion for legal obligation from legitimate negotiations 216
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A 54
Tax Topics - Income Tax Act - Section 9 - Compensation Payments amount was received in respect of impaired capital asset (which then was transferred to payor) rather than for lost profits 107

Andrews v. The Queen, 2007 DTC 901, 2007 TCC 312 (Informal Procedure)

beneficial but not registered owner of auto entitled to CCA

The position of the Minister was that a vehicle had been acquired by the taxpayer's mother and not by the taxpayer, so that the taxpayer was not entitled to claim capital cost allowance. Webb J. found that the taxpayer had acquired beneficial ownership of the automobile when the vehicle was acquired as his mother simply financed the purchase and held title as security for the debt owing by the taxpayer to her. The fact that the motor vehicle was registered in the taxpayer's name was not determinative.

Terminal Norco Inc. v. The Queen, 2006 DTC 2897, 2006 TCC 139

In order to avoid Quebec mutation tax, the taxpayer transferred the assets of a business division to a newly-incorporated wholly owned subsidiary and then sold the shares of the subsidiary to a purchaser. The taxpayer was unsuccessful in arguing that these transactions should be viewed as an indivisible transaction or as two transactions that occurred simultaneously. Accordingly, the taxpayer was found to have controlled the subsidiary "immediately after" the transfer.

Words and Phrases
immediately after

Williams v. The Queen, 2005 DTC 1228, 2005 TCC 558

sole beneficiary was beneficial owner

The taxpayer was found to continue to be the beneficial owner of shares that he transferred to a protective trust of which he was the sole beneficiary and one of the three trustees. The trust deed provided broad powers of management to the trustees, accorded them the discretion to pay out income and capital to the taxpayer at any time and provided that the trust property was to be distributed no later than the 21st anniversary of the trust. Woods, J. noted (at para. 36) that "although the term 'beneficial ownership' is often used in the sense of full ownership except bare legal title", the ordinary meaning of the term is quite broad and includes a sole beneficiary's interest in trust property. This broad meaning was reflected in former s. 248(3)(f) (respecting Quebec properties, and similar to s. 248(3)(e)(iii) of the current Act), which she stated (at para. 43) "is designed to provide harmonization of transactions across the country." Although, in contrast to the terms of the trust at issue in Trans-Canada Investment, the taxpayer here did not have the right to require delivery of the trust corpus at any time, this merely indicated that the taxpayer in that Supreme Court decision may have had ownership, rather than merely beneficial ownership, of the shares held in the trust in that case.

Accordingly, there was no disposition of the shares (on the basis that, under the exclusion in s. (v) of the definition of “disposition,” the transfer of legal ownership occurred "without any change in the beneficial ownership") and, therefore, no taxable capital gain was realized by the taxpayer.

Words and Phrases
beneficial ownership owner
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition beneficial owner of shares held in a trust 104

CIR v. Scottish Provident Institution, [2004] UKHL 52

commercially realistic prospect of put and call not being exercised

The Special Commissioners concluded that under an arrangement whereby the respondent ("SPI") granted an option to Citibank International PLC ("Citibank") to acquire governments bonds at an exercise price equal to 90% of the face amount, and Citibank granted an option to SPI to acquire identical government bonds at an exercise price of 70% of their face amount, each option should be treated as separate because there was a commercially realistic (albeit quite unlikely) possibility that the option granted by Citibank to SPI would not be exercised (i.e., that the bonds would fall in price below 90% of their face amount).

The Court concluded that in applying the Ramsay principle the composite effect of the arrangement should be considered as the scheme was intended to operate without regard to the contingency that one of the options might not be exercised. Accordingly, it was held that Citibank did not have an "entitlement" to the property covered by its option.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) 155

Metropolitan Toronto Police Widows and Orphans Fund v. Telus Communications Inc., 2003 CanLII 25909, 30 BLR (3d) 288; [2003] OJ No 128 (ON SC)

true sale to securitization trust rather than secured loan

A predecessor of the defendant (“BC Tel”) raised $150 million by transferring receivables to a securitization trust (“RAC”) in consideration for an advance and the receipt of deferred amounts. RAC funded its payments in the commercial paper market and BC Tel serviced the receivables for no fee. The plaintiffs were bond holders who alleged that the use by BC Tel of the advance to redeem the bonds (which bore a high rate of interest) violated a Trust Deed covenant not to redeem the bonds “by the application, directly or indirectly, of funds obtained through borrowings, having an interest cost to the Company of less than 11.35% per annum.”

In finding that the transfer of the receivables was a true sale rather than a secured loan, so that this covenant was not violated, Ground J stated

  • (at para. 40) that “the wording of the Agreement throughout clearly indicates the intention of both parties that the transaction be a true sale,”
  • (at para. 43) that although “for all practical purposes the only risk of uncollectibility assumed by RAC was the possibility of an insolvency of BC Tel and accordingly, the inability to be compensated by BC Tel in the event of Purchased Receivables in excess of the amount of the Reserve being uncollectible,” nonetheless “because of that possibility, however remote, RAC did assume some risk with respect to the collectibility of the Purchased Receivables,”
  • (at para. 56) that “it does not appear…that the absence of a right in RAC to retain the surplus from the collection of accounts receivable is fatal to a determination that the securitization transaction between BC Tel and RAC was a true sale,”
  • (at para. 63) that “the fact that the Agreement contemplated that a particular receivable may, under certain circumstances, be reconveyed to BC Tel, does not…derogate from…[satisfaction of the requirement that] the subject matter of the sale must be ascertainable,” and
  • (at para. 67) that “the ultimate test to be applied to determine whether a particular transaction should be interpreted as a secured loan or as a true sale” is that in “a secured loan transaction… the borrower, upon repayment of the debt, [can] require the lender to reassign to it all of the lender’s interests in the assets secured to pay the debt” whereas here (para. 69) “nowhere in the Agreement is BC Tel given any right at its option to repurchase or redeem the Purchased Receivables upon payment of a specified amount to RAC.”
Words and Phrases

Fredette v. The Queen, 2001 DTC 621 (TCC)

A partnership was entitled to claim capital cost allowance in respect of a rental property notwithstanding that the transfer to it of the property had not been registered at the Registry Office. Although article 2098 of the Civil Code of Lower Canada provided that "in default of such registration, the title of conveyance cannot be invoked against any third party who has purchased the same property from the same vendor for a valuable consideration and whose title is registered", it was clear that the Minister is not a third party within the meaning of this article.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose 87
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) s. 245(4) did not apply to abuse of a Regulation - and not abusive to borrow at partner/shareholder level 392

Kucor Construction & Developments & Associates v. Canada Life Assurance Co. (1998), 41 OR (3d) 577 (Ont. C.A.)

actions of an LP with corporate GP were those of a corporation

After finding that the corporate general partner of an Ontario limited partnership, which held title to real estate on behalf of the partnership, was subject to the prohibition in s. 18(2) of the Mortgages Act against a joint stock company or other corporation prepaying a mortgage on the basis that because a limited partnership was not a legal entity capable of holding and conveying title to real property, provision was made in the Limited Partnerships Act (Ontario) for a general partner to conduct and manage the business of the limited partnership including acquiring and conveying real estate on its behalf, Borins, J.A. went on to state (at p. 594):

"There is no question that the general partner was authorized by the limited partners to arrange the financing and, under the Limited Partnerships Act was empowered and required to do so. Therefore, it was intended that the mortgage would be an obligation enforceable against the general partner. The fact that the beneficial ownership of the property was made up of limited partners who were individual, non-corporate investors does not detract from the fact that the mortgage was given by the corporate general partner, and accordingly, does not remove the mortgage from the exemption in s. 18(2) of the Mortgages Act, or entitle the limited partners to the right of prepayment under s. 18(1)."

Collins v. The Queen, 96 DTC 1034 (TCC)

Bowman TCJ. stated (at p. 1037) that he agreed with the proposition that "ownership for purposes of the Income Tax Act means beneficial ownership."

IRC v. Gray, [1994] BTC 8034 (CA)

partner had interest in farming partnership property

Lady Fox at the time of her death was the freehold owner of a 3,000 acre estate which was let to a farming partnership in which she had a 92.5% interest. In finding that Lady Fox should be treated for purposes of valuing her estate as having a 92.5% interest in the tenancy, Hoffmann J. stated (at p. 8042):

"As between themselves, partners are not entitled individually to exercise proprietary rights over any of the partnership assets. This is because they have subjected their proprietary interests to the terms of the partnership deed which provides that the assets shall be employed in the partnership business, and on dissolution realised for the purposes of paying debts and distributing any surplus. As regards the outside world, however, the partnership deed is irrelevant. The partners are collectively entitled to each and every asset of the partnership, in which each of them therefore has an undivided share. It is this outside view which identifies the nature of the property falling to be valued for the purpose of capital transfer tax ... ."

Low v. The Queen, 93 DTC 927 (TCC)

The taxpayer failed to establish that a Liechtenstein "establishment" held a Toronto condominium as bare trustee for the taxpayer in light inter alia of evidence that under the relevant arrangements the taxpayer's spouse was required to approve any procedure taken with respect to the assets and funds of the establishment. [C.R.: 13(21)(b); 212(1)(d); 54(c)]

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Principal Residence 35

Tétrault v. MNR, 92 DTC 2240 (TCC)

It was found that by an agreement dated January 16, 1985, the taxpayer had disposed of his shares of a corporation to a shareholder. Accordingly, a subsequent agreement signed by the taxpayer dated June 26, 1985, which the taxpayer thought only altered the agreement of January 16, 1985 in minor respects but which, in fact, named the corporation as the purchaser of the taxpayer's shares, did not have the effect of causing the taxpayer to receive a deemed dividend.

Tri-Star Leasing (London) Inc. v. MNR, 92 DTC 1786 (TCC)

Before finding that leases of equipment made by the taxpayer should be characterized as such rather than as conditional sales agreements, as submitted by the taxpayer, Sarchuk J. stated (p. 1789):

"There was, as I see it, no enforceable right during or at the expiration of the lease, to acquire the property at a price which at the inception of the lease is substantially less than the probable fair market value of the property at the time of permitted acquisition by the lessee, nor can it be said that the lessee had the right, and by this I mean enforceable right, during the lease or at its expiration to acquire the property at a price which the lessee knew at the inception of the lease was such that no reasonable person would refuse."

Location Gaétan Lévesque Inc. v. MNR, 91 DTC 1380 (TCC)

lessee with purchase option not the beneficial owner

The taxpayer, which leased heavy machinery under five-year leases which provided that the taxpayer could exercise an option to purchase the machinery for the price of the remaining rental on 60 days' prior notice, and which provided that the taxpayer was responsible for the maintenance of the machinery, was found not to have acquired the machinery and, therefore, was precluded from deducting capital cost allowance. Lamarre Proulx J. stated (p. 1385):

"... The words 'property acquired' must be taken to mean property in which the taxpayer has a right of ownership, or if not such a right, then all the attributes of a right of ownership, as in the case of a conditional sale."

Fortin & Moreau Inc. v. The Queen, 90 DTC 1450 (TCC)

The Quebec taxpayer was found to have "acquired" trucks pursuant to leases given that it had possession and use of the trucks, it had assumed all risks, it had the option, six months before the expiry of the lease, to purchase the trucks for an amount approximately equal to the fair market value of the remaining lease payment, and it was required to pay the "rent" even if the trucks were destroyed or it no longer had the use of them. However, the taxpayer was found not to be the "owner" of the trucks because, under the Quebec Civil Code, ownership could not be divided between a legal and beneficial owner, and the lessor rather than the taxpayer was the legal owner. Because the definition of "depreciable property" in its amended form required ownership of the property, the taxpayer was not entitled to claim capital cost allowance.

Words and Phrases

Disher-Winslow Products Ltd. v. MNR, 52 DTC 27 (TAB)

An individual (Edward) was the holder and beneficial owner of substantially all the shares of the taxpayer and his father (Clarence) was the holder and beneficial owner of a substantial portion of the voting shares of a second corporation ("DeWalt"). In addition, Clarence held one share of the taxpayer on behalf of Edward, and Edward held one share of DeWalt on behalf of Clarence. In finding that Edward and Clarence did not "own" shares of both corporations for purposes of s. 36(4)(b)(iii) of the Act as it then read, Mr. Fordham stated (at p. 28):

"In Stroud's Judicial Dictionary, 2nd Edition Ed., p. 1387, it is stated that the owner of a property is the person in whom (with his or her consent) it is for the time being beneficially vested, and who has the occupation, or control, or usufruct of it. In my view, Clarence ... did not have such an interest in the share of the appellant's stock registered in his name and the real owner was Edward ...".

Administrative Policy

21 June 2017 External T.I. 2017-0687961E5 - Principal residence exemption and farm property

purported retention of beneficial ownership of portion of non-severable parcel of land was ineffective

An individual owning a parcel of farming land that cannot be legally severed would like to transfer the farming portion of the property to a wholly-owned corporation, while retaining beneficial ownership of the farmhouse. In finding that the individual would not be able to claim the principal residence exemption on a subsequent sale by the corporation of this parcel, CRA stated:

[T]he essential rights of ownership of a property used as an individual’s principal residence cannot be transferred or retained separate from the ownership of the rest of the property because the individual does not retain the right of alienation (that is, the ability to transfer the property).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Principal Residence a non-severable parcel of farming land could not have two beneficial owners of the principal residence and farming portions thereof 156

5 November 2014 External T.I. 2014-0521891E5 F - Résidence principale et copropriété

whether a tacit co-ownership agreement is respected is a private law issue

Two common-law spouses ("A" and "B") purchased a condominium as their principal residence (the "Residence"), with their names initially registered on title, but with the name of B being removed when the mortgage was renewed – but with a “tacit agreement” that they would each continue to own a proportionate share of the Residence, and with each contributing to the expenses.

Respecting whether CRA would take into account a tacit agreement between the two common-law partners, CRA stated:

The legal relationship established between two parties…is a question of private law in respect of which our Directorate cannot give an interpretation. However, during…[a CRA] review, taxpayers can be required to prove the existence of such a tacit agreement.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(4) overview of s. 40(4) rule 150

9 December 2016 External T.I. 2016-0639481E5 - Specified foreign property-jointly held property

"property of" a taxpayer applies to a beneficial (or legal?) co-owner who made no financial contribution

Does a taxpayer with a joint interest in specified foreign property but who did not contribute to its acquisition, e.g., a child who was added as joint owner for estate planning purposes, have a reporting obligation? In the joint ownership case, must the taxpayer be the beneficial owner or would strictly legal ownership require reporting? After stating that the term “specified foreign property” in s. 233.3(1), which refers to property “of” a person or partnership, means property “owned” by the person or the partnership, and after referencing its discussion in S1-F3-C2 of beneficial ownership, CRA answered the first question (but seemingly not the second) as follows:

[A] reporting entity would typically be the owner (including a beneficial owner) of the property whether such ownership is jointly with another person or otherwise and irrespective of the financial contribution made by the reporting entity towards the acquisition. In the case of joint ownership, each reporting entity would report their ownership interest in the specified foreign property (i.e., if the total cost amount of specified foreign property to the entity exceeds $100,000).

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 233.3 - Subsection 233.3(1) - Specified Foreign Property co-owners of specified foreign property have T1135 reporting obligations even if they did not contribute to its acquisition 255

7 October 2016 APFF Roundtable Q. 10, 2016-0652931C6 F - Bien agricole admissible-saisine par succession

estate owns its property

One of the tests for a property to qualify as a qualified farm or fishing property of an individual is that for the previous 24 months it was owned by the individual, a personal trust from which the individual acquired the property or a parent. CRA considers that during the period that a farm is held by an executor, it is the estate (viewed as a personal trust) that owns the trust, and that the 24-month test will be satisfied where the individual acquired the farm from the estate which in turn received the farm from the individual’s parent who had owned it for the balance of the 24 months.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1.3) - Paragraph 110.6(1.3)(a) - Subparagraph 110.6(1.3)(a)(i) 3 owners if farm passes from father to estate to son 117

22 May 2014 External T.I. 2014-0519811E5 F - Droit d'usage au Québec pré-1991

usufructuary of duplex unit was de facto owner thereof

Before going on to find that the usufructuary of duplex unit (acquired before 1991) was entitled to claim the principal residence exemption on a post-1991 disposition, on the basis that she was an owner of her unit in respect of her usufructuary right, CRA stated:

2009-0310751 [concluded] that a usufructuary was the de facto owner of an immovable in accordance with the pre-1991 version of subsection 248(3)… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Principal Residence usufructuary of duplex unit (with her right acquired pre-1991) entitled to claim principal residence exemption on post-1991 disposition 159
Tax Topics - Income Tax Act - Section 248 - Subsection 248(3) effective grandfathering of right as usufructuary which arose before 1991 155

20 May 2014 External T.I. 2014-0517331E5 F - CII - exploitation agricole

co-owners entitled to pro rata ITCs

Two taxpayers, dealing at arm's length and carrying on an unincorporated farming business, purchased farm equipment in a qualifying region for use on a farm there. CRA stated:

Where there are two co-owners, we agree that it is possible for them to divide the total of qualified property eligible for the ITC between themselves… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 127 - Subsection 127(9) - Qualified Property - Paragraph (c) test is of intention on acquisition to use over 50%, during months of likely use during the equipment’s lifetime, on farm in the region 195
Tax Topics - Income Tax Act - Section 127 - Subsection 127(27) no ITC reversal if unanticipated transfer of equipment to a farm outside the region 155

22 July 2013 Interpretation RITS 145125

is real property partnership property?

The determination of whether real property is beneficially owned by a partnership or by one or more of its partners is made by reference inter alia to the terms of the purchase agreement or conveyance (e.g., the purchase is stated to be on behalf of partnership), and the terms of the partnership agreement or other documents (such as bare trust agreement) setting out the roles of the parties or use rights of the partnership or partners.

22 November 2013 External T.I. 2013-0511771E5 - Beneficial Ownership - Disposition

mother as nominee for daughter's house

As the taxpayer's daughter did not qualify for a mortgage at the time of her purchase of her home, the bank required legal title to be placed in the taxpayer's name. With the mortgage now having been paid in full by the daughter, legal title will be transferred to her. CRA stated:

[Y]our daughter is likely the beneficial owner of the home. If that is the case, then the transfer of legal title of the house to your daughter would not result in any income tax consequences… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) mother as nominee for daughter's house 88

S1-F3-C2 - Principal Residence

Meaning of beneficial ownership

2.80 ...The term beneficial ownership is used to describe the type of ownership of a person who is entitled to the use and benefit of the property whether or not that person has concurrent legal ownership. A person who has beneficial ownership rights but not legal ownership can enforce those rights against the holder of the legal title. For example, beneficial ownership frequently arises when property is held in trust for a person in circumstances where, according to the terms of the trust, that person has authority to instruct the trustee to deal with the property as requested....

2.81 Beneficial ownership must be distinguished, however, from the other types of physical possession of property which a person may enjoy. For example, a tenant of a property, or a person who is allowed to occupy it only because the true owner has no objection, is not the beneficial owner of the property. In determining whether a person has beneficial ownership, one should consider such factors as the right to possession, the right to collect rents, the right to call for the mortgaging of the property, the right to transfer title by sale or by will, the obligation to repair, the obligation to pay property taxes and other relevant rights and obligations. Not all of these incidents of ownership need occur concurrently before it is concluded that the person has beneficial ownership of the property, which is a question of fact in each particular case....

Words and Phrases
beneficial ownership

30 March 2012 Internal T.I. 2011-0408311I7 F - Résidence principale

ownership of home generally follows legal title

Mrs. X used the shares of the inheritance of her and her two minor sons (Son A and Son B) to fund the purchase of a condominium unit that served as residence. The residence was initially registered in the names of Son A and Son B but she paid all the residence expenses. Mrs. X claims that there was a verbal agreement among them that she had the right of ownership and that Son A and Son B would recover their share of the inheritance of Mr. X at the death of Mrs. X. In order to regularize the situation, Son A and Son B transferred the residence to Mrs. X in consideration for a stipulated sum, and the transfer was duly registered in the land register of Quebec. CRA stated:

In civil law, the owner of a residence is generally the one in whose name the residence is registered in the land register of Québec. According to this principle, Son A and Son B would be the owners of the Residence in the Particular Situation until the transfer of the Residence to Mrs. X … . The Residence would therefore have been disposed of by [them to] Mrs. X … .

Regarding the verbal agreement … it is up to the taxpayer to demonstrate the existence of such an agreement whose effect is to transfer the ownership of the Residence at a particular time other than on XXXXXXXXXX. If the taxpayers can provide evidence to you of that verbal agreement, you should consult … Legal Services … .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Principal Residence - Paragraph (a) must be described combination of ownership and ordinary habitation 241

23 January 2012 External T.I. 2011-0409671E5 F - Propriété superficiaire

whether tenant had Quebec right of superficies to garage erected by it determined whether it was its property

Corporation A erected, at its expense and for exclusive use in its transport business, a detached garage on the land on which the principal residence of its individual shareholder (the “Taxpayer”) is located. The land subjacent to the garage is leased to it by the Taxpayer. CRA indicated that Corporation A would be entitled to claim capital cost allowance only if it held the right of superficies to the garage (i.e., by deed it was agreed that the Taxpayer would have no right of accession to the garage).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Principal Residence - Paragraph (e) land leased to corporation for business use not part of principal residence 152
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) benefit if building constructed at corporation’s expense for business purposes becomes shareholder’s property by accession 148
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) individual shareholder not entitled to claim CCA on building constructed by the corporation for use in its business even if where taxpayer owns it 154
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property building erected by corporation on shareholder’s land not depreciable property unless shareholder renounces right of accession 213

6 December 2011 TEI Roundtable, 2011-0427101C6 - Seizure of Property

incidents of ownership

When asked to comment on the requirement in s. 79.1(2)(a) that a creditor have acquired "beneficial ownership" of property, CRA quoted the following passage from IT-437R, para. 4:

Beneficial ownership must be distinguished, however, from the other types of physical possession of property which a person may enjoy. For example, a tenant of a property, or a person who is allowed to occupy it only because the true owner has no objection, is not the beneficial owner of the property. In determining whether a person has beneficial ownership, one should consider such factors as the right to possession, the right to collect rents, the right to call for the mortgaging of the property, the right to transfer title by sale or by will, the obligation to repair, the obligation to pay property taxes and other relevant rights and obligations. Not all of these incidents of ownership need occur concurrently before it is concluded that the person has beneficial ownership of the property

Words and Phrases
beneficial ownership

September 1999 Gift Planning Symposium Round Table, Q. 2, No. 2000-M020417

residual interest of settlor

Before disagreeing with the proposition that when a settlor transfers appreciated property to a trust and the settlor is the income beneficiary, the settlor recognizes only the capital gain attributable to the residual interest, the CCRA indicated that "personal property cannot be severed into life and remainder interests. That is why trusts are used to gift residual interests in personal property - the life interest is severed from the residue by creating beneficial interests in both the charity and the settlor. To effect the severance, it is necessary for the settlor to legally dispose of the entire property to the trust".

16 April 1997 Memorandum 970571

Discussion of criteria for determining whether a corporation is the beneficial owner of property or holds the property as an agent.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency 21

P-015 "Treatment of Bare Trusts under the Excise Tax Act".

24 March 1995 T.I. 950163 (C.T.O. "Principal Residence - Life Estate - Beneficial Ownership")

RC was not able to give a definitive response on whether parents who retained a life interest in a home they had gifted to their children could be said to own a principal residence.

30 March 1994 T.I. 932942 (C.T.O. "Bene Ownership of P/R Separate from Ownership of Farm")

In finding that an individual holding farm land would not be able to transfer ownership of the entire property other than beneficial ownership of the housing unit on one acre to a corporation under s. 85(1) in circumstances where a severance of the housing unit and one acre of land from the rest of the property could not be obtained, RC stated that "two essential elements of 'ownership' in the context of the principal residence are the right of alienation and the right of possession. The right to a share in the proceeds of the entire property does not constitute a right of alienation (the right to transfer said ownership to someone else) ... . The essential rights of ownership of the principal residence and one acre of land cannot be transferred or retained separate from the ownership of the rest of the property because of the legal restrictions on subdivision".

24 November 1993 Internal T.I. 7-932553

Discussion of when shares are capital property of the estate as opposed to the beneficiaries, including a finding that a flow-through of dividends to beneficiaries does not demonstrate that the beneficiaries had beneficial ownership of the shares.

Rulings Directorate Discussion and Position in Motion Picture Films and Video Tapes as Tax Shelters, Version 29/3/93 930501 (C.T.O. "Motion Picture Films - C.C.A.")

Given the lack of success of the Crown in Mandel, 76 DTC 6316 and in CFTO, 82 DTC 6139, RC generally will accept that most film shelters entail the acquisition by the limited partnership of ownership of the film and will not seek to characterize the arrangements as a loan by the partnership to the producer. In cases where the facts are similar to those in Ensign Tankers (Leasing) Ltd. v. Stokes, [1992] BTC 110, legal advice will be sought.

16 September 1992 T.I. (Tax Window, No. 24, p. 14, ¶2193)

Because the intention of the NRO legislation is not to provide Canadian investors with another vehicle for their investment portfolio, RC will look beyond the legal title of shares of a corporation to determine its beneficial ownership. In other words, "beneficial ownership" is not synonymous with "ownership". Canadian shareholders cannot beneficially own an NRO through foreign corporations in which their equity percentage is insufficient to constitute the corporation a foreign affiliate.

IT-441 "Capital Cost Allowance - Certified Feature Productions and Certified Short Productions"

Discussion of the requirements for a taxpayer to be considered to be the owner of a film.

IT-437R "Ownership of Dwelling Property"

IT-128R "Capital Cost Allowance - Depreciable Property"

CCA may only be claimed where the taxpayer owns or has a leasehold interest in the property.

91 C.R. - Q.7

A beneficiary does not own the shares of a corporation owned by the trust.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 191 - Subsection 191(2) 19

27 February 1991 T.I. (Tax Window, Prelim. No. 3, p. 29, ¶1130)

Until RC completes its study on the point, a settlor who transfers property to a bare trustee will be treated as the owner of the property in circumstances comparable to those described in the relevant Interpretation Bulletins.

IT-170R "Sale of Property - When Included in Income Computation"

Discussion of the attributes of beneficial ownership in para. 8 and 17.


D.M. Sherman, "When Does 'Ownership' Pass?", GST & Commodity Tax, Vol. XII, No. 6, July/August 1998, p. 45.

Joel A. Nitikman, "Who Owns What When: A Commentary on Paxton v. The Queen", Business Vehicles, Vol. IV, No. 2, 1998, p. 190.

Brown, "The Transfer of Property on Death: Ownership, Control and Vesting", 1994 Canadian Tax Journal, Vol. 42, No. 6, p. 1449.

Morris, Pisen, "Tax Court Examines 'Reciprocal' Options", National Real Estate Reporter, November 1992

Discussion of the decision in Kwiat v. Commissioner.

Saltman, Tobin, "Tax Ownership: The Corporate Consequences in Canada", Committee N Taxation, Section on Business Law, International Bar Association, Annual Conference, September 23, 1992.

Bies, "Agency and Canadian Income Tax Law", 1982 Conference Report, p. 927.

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