Cases
Keybrand Foods Inc. v. Canada, 2020 FCA 201
In concluding that interest on a bank loan to fund a share subscription for shares of a company in financial difficulty (“Vidabode”) by the...
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | a transaction with a financially subordinate company was a non-arm’s length transaction | 466 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | interest was non-deductible on loan made to company that had no reasonable prospects of recovery | 335 |
MacDonald v. Canada, 2020 SCC 6, [2020] 1 S.C.R. 319
An individual with a significant long-term holding in common shares of a public company (BNS) entered into a cash-settled forward which had the...
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| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Futures/Forwards/Hedges | cash-settled forward sales were a hedge of a shareholding notwithstanding their settlement without a corresponding share sale and a stated intention to speculate | 654 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss - Hedges | cash-settled forward “objectively” was a capital share hedge notwithstanding no matching share sale | 542 |
Ranjbar v. Canada, 2016 FCA 116
The trial Judge found that a purchase of a townhome satisfied ETA s. 254(2)(b) because at the time of the agreement of purchase and sale, the...
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| Tax Topics - Excise Tax Act - Section 254 - Subsection 254(2) - Paragraph 254(2)(g) | s. 254(2)(g)(ii) satisfied as alternative to (i) | 184 |
Swirsky v. Canada, 2014 DTC 5037 [at at 6723], 2014 FCA 36, aff'g 2013 TCC 73, 2013 DTC 1078 [at 431]
Before affirming a finding of Paris J that the taxpayer's wife had not established an income-producing purpose for money borrowed by her to...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | no objectively reasonable expectation of taxable dividends | 459 |
| Tax Topics - General Concepts - Onus | applying GAAR at confirmation stage doesn't shift onus | 73 |
Petro-Canada v. Canada, 2004 DTC 6329, 2004 FCA 158
The Tax Court had allowed a deduction for only a portion of the purchase price for seismic data purchased by two joint exploration corporations...
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | joint purchase with no separate interests | 119 |
| Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (a) | no plan to use purchased seismic data | 144 |
| Tax Topics - Income Tax Act - Section 67 | paying more than FMV may not engage s. 67 | 109 |
Rich v. Canada, 2003 DTC 5115, 2003 FCA 38
Rothstein JA stated (respecting a situation where the predominant purpose of making a loan was to assist the taxpayer’s son) that a...
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| Tax Topics - Income Tax Act - Section 39 - Subsection 39(1) - Paragraph 39(1)(c) | 159 | |
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii) | subordinate income-producing purpose sufficient | 122 |
| Tax Topics - Statutory Interpretation - Business Judgment | 68 |
Ludco Enterprises Ltd. v. Canada, 2001 DTC 5505, [2001] 2 S.C.R. 1082, 2001 SCC 62
Before going on to consider whether the taxpayer had borrowed money for an income-producing purpose, Iacobucci J. stated (at para. 54):
"In the...
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| Tax Topics - General Concepts - Tax Avoidance | right to structure for tax avoidance | 129 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | ancillary purpose of earning (1%-yield) dividend income/allocation of reinvested proceeds 100% to income-producing source | 434 |
| Tax Topics - Statutory Interpretation - Certainty | inferring of subjective test is contrary to the objective of certainty | 103 |
Spire Freezers Ltd. v. Canada, 2001 DTC 6158, [2001] 1 S.C.R. 391, 2001 SCC 11
Before finding that the holding of a small apartment in a mooted partnership was sufficient to establish the existence of a partnership, the...
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| Tax Topics - Income Tax Act - Section 96 | secondary property management activity established partnership | 224 |
Backman v. Canada, 2001 DTC 5149, 2001 SCC 10, [2001] 1 S.C.R. 367
Before finding that the taxpayers had not entered into an arrangement with the requisite intention to be partners, the Court stated (at para. 22)...
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| Tax Topics - General Concepts - Tax Avoidance | 87 | |
| Tax Topics - Income Tax Act - Section 96 | essential Canadian elements of partnership not present as only momentarily "partners" in common | 298 |
| Tax Topics - Statutory Interpretation - Provincial Law | foreign "partnership" must have the attributes of a Cdn partnership | 153 |
Roseland Farms Ltd. v. R., 99 DTC 5704, [1999] 4 CTC 348 (FCTD), aff'd 2001 DTC 5392, 2001 FCA 167
Before going on to find that the decision to purchase farm land by the corporation originated with its shareholders, Sharlow J. stated (at p....
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| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate | high leverage not significant if shareholder loans | 105 |
Wu v. R., 98 DTC 6004, [1998] 1 CTC 99 (FCA)
In light of the additional word in s. 15(1.1) referring to "it may reasonably be considered", the Tax Court Judge had erred in finding that the...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.1) | 74 |
Continental Bank Leasing Corp. v. Canada, 98 DTC 6505, [1998] 2 S.C.R. 298, [1998] 4 CTC 119
Before finding the existence of a partnership, the Court stated (at para. 43):
Simply because the parties had the overriding intention of creating...
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| Tax Topics - General Concepts - Illegality | statutory statement that illegal act not invalid | 189 |
| Tax Topics - General Concepts - Substance | question of constructing the genuinely-reflective documents | 204 |
| Tax Topics - Income Tax Act - Section 96 | 5 day partnership with tax motivation | 165 |
74712 Alberta Ltd. v. Minister of National Revenue, 97 DTC 5126, [1997] 2 CTC 30 (FCA)
Robertson J.A. stated (at p. 5135) after discussing jurisprudence on paragraph 20(1)(c):
"... I see nothing in the jurisprudence ... which...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | guarantee of parent borrowing was not made re taxpayer's income-earning capacity | 197 |
Symes v. Canada, 94 DTC 6001, [1993] 4 S.C.R. 695, [1994] 1 CTC 40
In the course of a general discussion of the purpose test in s. 18(1)(a), Iacobucci J stated:
As in other areas of law where purpose or intention...
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| Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Subsection 15(1) | 90 | |
| Tax Topics - General Concepts - Evidence | 80 | |
| Tax Topics - General Concepts - Stare Decisis | 69 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | unnecessary to consider whether should be change to traditional position that child care expenses were non-deductible | 121 |
| Tax Topics - Income Tax Act - Section 63 - Subsection 63(1) | 45 | |
| Tax Topics - Income Tax Act - Section 9 - Accounting Principles | 70 | |
| Tax Topics - Statutory Interpretation - Specific v. General Provisions | deduction to extent limited by a specific provision could not be deducted under a general provision | 74 |
Maritime Forwarding Ltd v. The Queen, 88 DTC 6114, [1988] 1 CTC 186 (FCTD)
"It has often been repeated in tax matters that assertions by a taxpayer as to his intentions are only persuasive to the extent that they may be...
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| Tax Topics - Income Tax Act - Section 256 - Subsection 256(2.1) | 71 |
Mohawk Horning Ltd. v. The Queen, [1986] 2 CTC 89, 86 DTC 6297 (FCA)
It was found that any change of intention by a non-controlling member of a syndicate ("Schneider") to hold his interest in the real property of...
Don Fell Ltd. v. The Queen, 81 DTC 5282, [1981] CTC 363 (FCTD)
The intention of a company of which one person is the sole shareholder, director and officer, is the intention of that person.
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| Tax Topics - General Concepts - Evidence | 40 | |
| Tax Topics - Income Tax Act - Section 245 - Old | 87 |
Bomag (Canada) Ltd. v. The Queen, 81 DTC 5085, [1981] CTC 156 (FCTD), aff'd 84 DTC 6363, [1984] CTC 378 (FCA)
The intention of the German parent of the taxpayer in negotiating a contract for the cancellation of a franchise prior to the incorporation of the...
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| Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A | cost of obtaining surrender of previous contact was part of cost of new contract | 36 |
| Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 14 | 72 |
Kit-Win Holdings (1973) Ltd. v. The Queen, 81 DTC 5030, [1981] CTC 43 (FCTD)
The intentions of the dominant member of a land-development syndicate were attributed to the taxpayer, which was a more passive member, for the...
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| Tax Topics - General Concepts - Onus | 118 | |
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate | secondary intention not pleaded | 79 |
Robbie Holdings Ltd. v. The Queen, 80 DTC 6336, [1980] CTC 422 (FCTD)
"The motivation or motivations which lead a person to make a purchase of land are always questions of fact. What the purchaser says on this point...
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| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate | farm resold 2 months' later on capital account | 74 |
Program Properties Ltd. v. The Queen, 78 DTC 6215, [1978] CTC 320 (FCTD)
Walsh, J. stated: "The intent of this closely held company can only be determined by examing the intent of the shareholders of it and in...
See Also
632738 Alberta Ltd. v. The King, 2023 TCC 117
The appellant was assessed under s. 103(1). A representative of the appellant (Mr. Thompson, who wholly-owned it) refused to answer questions...
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| Tax Topics - General Concepts - Solicitor-Client Privilege | company could refuse to not disclose its reasons for engaging in transactions on grounds of privilege | 318 |
| Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 96 - Subsection 96(1) | claim of privilege on discovery could have Rule 96(1) consequences | 250 |
Commissioner of Taxation v Sharpcan Pty Ltd, [2019] HCA 36
Before finding that the taxpayer’s expenditures for 10-year assignable gaming licences (“GMEs”), which it required in order to be permitted...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Contract Purchases or Prepayments | 10-year gaming licences required to maintain existing gaming revenues were purchased on capital account | 350 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Concessions and Licences | periodic payments under 30-year government concession were currently deductible | 206 |
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(34) - Paragraph 13(34)(b) | 10-year gaming licences required to maintain existing gaming revenues were not for goodwill | 245 |
High-Crest Enterprises Limited v. The Queen, 2015 TCC 230, nullified on procedural grounds 2017 FCA 88
ETA s. 191.1(2) effectively deems the HST to be payable on the greater of most costs and the fair market value where the builder received...
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| Tax Topics - Excise Tax Act - Section 191.1 - Subsection 191.1(1) - Government Funding | government funding only of operating costs did not detract from its objective of increasing beds | 244 |
| Tax Topics - Statutory Interpretation - Certainty | interpretation with reasonably certain application is preferred | 176 |
| Tax Topics - Excise Tax Act - Regulations - Public Service Body Rebate (GST/HST) Regulations - Section 2 - Government Funding | government funding only of operating costs did not detract from its objective of increasing beds | 173 |
McKesson Canada Corporation v. The Queen, 2014 DTC 1040 [at at 2723], 2013 TCC 404
FCA appeal settled.
The taxpayer sold receivables to its Luxembourg parent at over twice the discount which could be supported under s. 247(2))....
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| Tax Topics - General Concepts - Evidence | expert reports without testimony | 56 |
| Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) | terms adjusted within framework of transaction chosen by taxpayer | 928 |
| Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(4) | advocacy 3rd-party report not read by taxpayer | 163 |
| Tax Topics - Treaties - Income Tax Conventions - Article 9 | 5-year limitation did not apply to secondary Part XIII assessment | 206 |
Blackburn v. The Queen, 2004 DTC 2409, 2004 TCC 180 (Informal Procedure)
Before finding that legal fees incurred to quash a conviction so as to ultimately result in reinstatement satisfied s. 8(1)(b), Bowie J stated (at...
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| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(b) | 112 |
McCoy v. The Queen, 2003 DTC 660, 2003 TCC 332
Before going on to find that a limited partnership had acquired software for the purpose of gaining or producing income, Bowman A.C.J. stated (at...
Jacques St-Onge Inc. v. The Queen, 2003 DTC 153 (TCC)
Archambault T.C.J. referred, with approval, to the statement of Rip T.C.J. in Bailey v. The Queen, [1989] T.C.J. 602 that: "what is 'reasonable'...
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| Tax Topics - Income Tax Act - Section 50 - Subsection 50(1) | wind-up of debtor was delayed | 139 |
Wong v. R., 99 DTC 458, [1999] 2 CTC 2173 (TCC)
Before going on to accept evidence that stock dividends that produced the result described in s. 15(1.1) were not declared with that purpose in...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.1) | 105 |
Vodafone Cellular Ltd. v. Shaw, [1997] BTC 247 (C.A.)
Before going on to find that a contract-cancellation payment by the taxpayer was made exclusively for the purposes of its trade, Millett L.J....
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | deductible lump-sum cancellation of profit participation payment | 190 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Contract or Option Cancellation | 153 |
IRC v. Fisher's Executors, [1926] A.C. 395 (HL)
"In any case desires and intentions are things of which a company is incapable. These are the mental operations of its shareholders and officers....
Administrative Policy
14 March 2016 Internal T.I. 2015-0609671I7 - Earnout, Amalgamation, Cost of Shares and ECE
A Canadian Acquisitionco acquired Canadian Targetco for a cash base price plus earnout obligations, and then immediately merged with Targetco...
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| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) | post-amalgamation earnout payment could be applied to increase an s. 88(1)(d) bump of capital property (but not ECP) of the amalgamated target | 317 |
| Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure | payments made by Amalco in satisfaction of earnout obligation for acquisition of one precedessor by the other were not ECE | 224 |
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | earnout payments an addition to cost of shares which had since disappeared | 90 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | position on interest deductibility following target amalgamation is based on policy and ITA scheme rather than technical | 350 |
Articles
Michael McGowan, "HMRC v Lloyds Bank Leasing (No 1) Ltd: the troublesome increase in the scope of the "sole or main object" test", [2015] British Tax Review, No.5 2015 (Thomson Reuters (Professional) UK Limited), p. 649
Facts in Lloyds Bank case (p. 649)
[K]awasaki Kisen Kaisha (K-Line) won a tender contract to acquire and operate two ships to transport liquefied...
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| Tax Topics - Income Tax Act - Section 83 - Subsection 83(2.1) | structured transactions with tax reduction as one of main objects | 118 |
David C. Nathanson, "Tax Motive Kills Partnership: Spier Freezes (cf. Continental Bank)", Tax Litigation, Vol. VII, No. 3
Includes a discussion of Norglen Ltd. v. Reeds Rain Prudential Ltd., Circuit Systems Ltd., [1998] 1 All E R 218 (HL) (respecting the irrelevance...