Section 67

Cases

Peach v. Canada, 2016 FCA 173

Before sending the case back to the Tax Court for redetermination of the s. 67 issue, Trudel JA stated (at paras. 5-7):

Under section 67, the...

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Beaudry v. The Queen, 2010 DTC 1266 [at 3853], 2008 TCC 17, aff'd Romar v. The Queen, 2010 DTC 5076 [at 6816], 2009 FCA 48

The taxpayers deducted the price to develop antibodies for diagnostic kits. The price amounted to $1.75 million per antibody. Evidence showed that...

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Hammill v. Canada, 2005 DTC 5397, 2005 FCA 252

The taxpayer purchased gems for an amount in excess of their worth, and then paid a total of $1,651,766 in charges purportedly made to secure a...

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Petro-Canada v. Canada, 2004 DTC 6329, 2004 FCA 158

A joint exploration corporation which was dealing at arm's length with its two shareholders (who were acting in concert with each other) acquired...

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Locations of other summaries Wordcount
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 - General Concepts - Purpose/Intention purpose test satisfied even if multiple purposes 77

Global Communications Ltd. v. Canada, 99 DTC 5377 (FCA)

S.67 would have applied to reduce a purported expenditure on CEE (if, in fact, it had qualified as CEE) from $15 million to $1.8 million because...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (a) no exploration use of seismic data by taxapyer 256

Shell Canada Ltd. v. Canada, 99 DTC 5669, [1999] 3 S.C.R. 622

In refusing to apply s. 67 to interest that was found to be reasonable in amount for purposes of the reasonableness limitation expressed in s....

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Substance legal relationships prevail over economic realities 201
Tax Topics - General Concepts - Tax Avoidance taxpayers entitled to rely on structure of their transactions 170
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) borrowing in legal substance was in weak currency 174
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange FX hedging gain was capital gain as hedged borrowing was on capital account 225
Tax Topics - Statutory Interpretation - Specific v. General Provisions 96

Mohammad v. The Queen, 97 DTC 5503 (FCA)

The taxpayer had his acquisition of a co-ownership interest in a residential property by assuming his share of a first mortgage and by borrowing...

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Graves v. The Queen, 90 DTC 6300 (FCTD)

Counsel for the Crown argued that costs incurred by the taxpayers in attending conventions in the United States were unreasonable given the...

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Maduke Foods Ltd. v. The Queen, 89 DTC 5458, [1989] 2 CTC 284 (FCTD)

Accrued remuneration incurred by a family-owned corporation for two weeks per year of work at the store by the wife of one of the minority...

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

An individual ("K.C. Irving") who controlled the taxpayer and an arm's length supplier of Middle East crude ("Socal") sought to share the...

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The Queen v. Chrapko, 84 DTC 6544, [1984] CTC 594 (FCTD), rev'd 88 DTC 6487, [1988] 2 CTC 342 (FCA)

It was found that the Minister could have invoked section 67 (if he had done so on a timely basis) to deny the deduction of a portion of an...

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Antoine Guertin Ltée v. The Queen, 81 DTC 5268, [1981] CTC 351, 81 DTC 5045 (FCTD), aff'd 87 DTC 5458, [1988] 1 CTC 117 (FCA)

A sister of the taxpayer's president attended meetings of the board and performed various errands on behalf of the taxpayer. A reduction for tax...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Old 95

Gabco Ltd. v. MNR, 68 DTC 5210, [1968] CTC 313 (Ex Ct)

A successful family-owned construction company followed a policy of paying bonuses to its employees in proportion to their shareholdings, which in...

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Frontenac Shoe Ltée v. MNR, 63 DTC 1129 (Ex Ct)

The taxpayer's controlling shareholder who in his spare time had developed a detailed catalogue to facilitate sales of shoes by the taxpayer, sold...

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See Also

Gervais Auto Inc. v. Agence du revenu du Québec, 2021 QCCA 459

The taxpayer financed its inventory of used automobiles held for resale through unsecured loans from the family Holdcos that were its...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) 10% interest rate on unsecured loans from shareholders was not unreasonable 503
Tax Topics - General Concepts - Onus Court of Appeal free to re-weigh the evidence once the failure of the trial judge to apply onus correctly was established 318

Banque Laurentienne du Canada v. The Queen, 2020 CCI 73

In order to finance an acquisition, Laurentian Bank issued subscription receipts to two private placement investors (the Caisse for $100 million...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) fees paid by the issuer of subscription receipts to the investors themselves were deductible under s. 20(1)(e) 291

Gervais Auto Inc. v. Agence du revenu du Québec, 2019 QCCQ 5894, rev'd 2021 QCCA 459

The taxpayer financed its inventory of used automobiles held for resale through unsecured loans totaling $6 million from its shareholders, bearing...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) a 10% interest rate on an unsecured loan was unreasonably high 391

Alberta v ENMAX Energy Corporation, 2018 ABCA 147

After quoting from Gabco, and in concluding that the reference is s. 20(1)(c)(i), as it applied for the purposes of computing payments to be made...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) interest on a loan from a tax-exempt parent should be at an arm’s length rate reflecting implicit parental credit support 494
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) arm’s length interest rate to sub could not be manipulated by structuring the loan as a junk bond without implicit parental credit support 293
Tax Topics - General Concepts - Tax Avoidance right to structure affairs to reduce taxes (or, here, payments in lieu) inapplicable where consumer assistance purpose defeated 189
Tax Topics - Statutory Interpretation - Hansard, explanatory notes, etc. purpose inferred in part from Legislative Assembly statement of Minister 83

Bell v. The Queen, 2016 TCC 175

A husband-wife team owned and managed a construction firm doing work in the general Vancouver area with the husband managing the business...

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Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87 excessive bonuses not connected to reserve 644

ENMAX Energy Corp. v. Alberta, 2016 ABQB 334, rev'd 2018 ABCA 147

Before finding that interest payable by the appellant on a subordinated intercompany note bearing interest at 11.5% was in a “reasonable...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) 11.5% interest rate on unsecured intercompany note was reasonable under s. 20(1)(c) notwithstanding that this exceeded an arm’s length rate of around 8.5% 513
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) arm's length comparables for intercompany interest rate not dispositive 308

Anderson v. The Queen, 2016 TCC 106 (Informal Procedure)

The taxpayer commenced to act as an independent distributor of coffee for a company (“Organo Gold”), which was a multi-level marketing...

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6051944 Canada Inc. v. The Queen, 2015 TCC 180 (Informal Procedure)

A private company with a new home construction business with revenues in the $12M to $16M range had a profitable 2009 fiscal year and when the...

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McLarty v. The Queen, 2014 DTC 1162 [at 3556], 2014 TCC 30

On December 31, 1993, the taxpayer and other parties to a joint venture acquired (through the joint venture operator ("507") the rights to exploit...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency participations contrary to agreement were disregarded 111
Tax Topics - General Concepts - Illegality participations contrary to agreement were disregarded 113
Tax Topics - General Concepts - Sham sham cannot apply to just part of transaction 145
Tax Topics - General Concepts - Tax Avoidance sham cannot apply to just part of transaction 145
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) revenues 10% of interest 186

Tri-O-cycles Concept Inc. v. The Queen, 2013 DTC 1084 [at 467], 2009 TCC 632

After finding that the taxpayer had been carrying on a business of developing pedal and steering systems for adult tricycles, Paris J found that...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Start-Up and Liquidation Costs lengthy development period preceding first revenue 206

Massicolli v. The Queen, 2013 DTC 1049 [at 266], 2012 TCC 344

The taxpayer was a securities broker for National Bank Financial ("NBF"), and worked there with another investment advisor ("Auger") in the what...

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Ruff v. The Queen, 2012 TCC 105

The taxpayer, a lawyer, was bilked of $400,000 by scam artists, posing as clients, who induced him to pay for "processing " fees in connection...

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Bilous v. The Queen, 2011 DTC 1126 [at 710], 2011 TCC 154

The individual taxpayer was the principal shareholder of the corporate taxpayer, a canola farm supplier with annual sales in the tens of millions....

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Noel v. The Queen, 2011 DTC 1056 [at 313], 2011 TCC 27

The taxpayer, an independently practising lawyer, paid his wife $45,000 in the year as remuneration for bookkeeping and office management...

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Bertomeu v. The Queen, 2006 DTC 3441, 2006 TCC 85

A firm of architects of which the taxpayer was a partner was entitled to deduct the full amount of management fees that it paid to a management...

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Humphrey v. The Queen, 2006 DTC 2730, 2006 TCC 168 (Informal Procedure)

The taxpayer was assessed for amounts that she embezzled from her employer in 2000, declared bankruptcy because of this claim against her and,...

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Manchester v. The Queen, 2005 DTC 1429, 2005 TCC 402

Directors' fees that were paid to children of the taxpayer's shareholders for serving as directors of the corporation, with the amount paid to...

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McLarty v. The Queen, 2005 DTC 217, 2005 TCC 55, rev'd 2006 DTC 6340, 2006 FCA 152, aff'd supra.

Before going on to find that the purchase price for seismic data acquired by the taxpayer did not exceed its fair market value, Little J....

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Mépalex v. The Queen, 2004 DTC 2232 (TCC)

Bonuses paid to children of the taxpayer's controlling shareholders that clearly were unreasonable in amount in relation to the services rendered...

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Shaver v. The Queen, 2003 DTC 2112, 2004 TCC 10

After finding that expenses incurred by the taxpayer in connection with a trip to Las Vegas by him and six other people including his wife and...

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Costigane v. The Queen, 2003 DTC 254, 2003 TCC 67

A family trust was established which employed, on a part-time basis, three individuals previously employed full-time in the taxpayer's dental...

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Gagnon v. The Queen, 99 DTC 845 (TCC)

Before finding that expenses incurred by the taxpayer were deductible, Bowman TCJ. stated (at p. 849):

"Expenses are not unreasonable simply...

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Halifax Green Elevator Ltd. v. The Queen, 96 D.T.C 1178, [1996] 1 CTC 2955 (TCC)

Lease performance guarantee fees paid by the taxpayer to an affiliated corporation ("CMM") resident in the Dutch Vigin Islands were found to be...

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Fehrenbach v. MNR, 95 DTC 860, [1995] 1 CTC 2602 (TCC)

The taxpayer, who was a partner in a law firm, deducted that portion of the expenses attributable to a condominium in a ski area represented by...

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Canadian Propane Gas & Oil Ltd. v. MNR, 73 DTC 5019, [1972] CTC 566 (FCTD)

With respect to the statutory predecessor of s. 68, Cattanach J. stated (p. 5028):

"I should think that 'reasonable' as used in the context of...

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Administrative Policy

May 2016 Alberta CPA Roundtable, Q.15

What is the CRA policy on rental claims by a corporation for use of a workspace in a shareholder’s residence? Consider: a monthly payment based...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) reasonable rents for tangible use of shareholder's home not a benefit 294

5 January 2016 External T.I. 2015-0622991E5 - Reasonableness of intercorporate management fees

The 6051944 Canada Inc. case found that a fee paid by a private company (engaged in a new home construction business) to its two...

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Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 170 - Subsection 170(2) no change in policy re fees paid to managment holdcos following 6051944 127

20 February 2013 External T.I. 2012-0473051E5 F - Frais de gestion versés à un conjoint

In the course of a general discussion of fees paid by the taxpayer for management services of the taxpayer’s spouse, CRA stated:

The...

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19 October 2012 External T.I. 2012-0440071E5 - Section 67 of the Income Tax Act

CRA affirmed its position in 1986 Conference Report, Question 39. Where part of an intercompany management fee or similar charge is disallowed...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 214 - Subsection 214(3) - Paragraph 214(3)(a) corresponding adjustment to recipient 146

20 May 2010 External T.I. 2009-0352801E5 F - Caractère raisonnable - honoraires de gestion

When asked as to the reasonableness of management services charged to a professional partnership by a corporation owned by shareholders related to...

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13 May 2010 External T.I. 2009-0343971E5 F - Société de services pour les professionnels

Amendments to the Professional Code of Quebec resulted in several professional orders allowing their members to carry on their professional...

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1 February 2010 Internal T.I. 2010-0354671I7 F - Frais de gestion à une fiducie

The Corporation (a CCPC) pays management fees (including a bonus component) to a non-Alberta trust (“Trust A”) whose beneficiary is an Alberta...

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29 March 2006 Internal T.I. 2006-0171171I7 F - Convention de retraite

Amounts paid to a trust governed by a retirement compensation arrangement (RCA) were non-deductible in computing the corporation's income on the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Retirement Compensation Arrangement plan was not an RCA because benefits were unreasonable 33

4 January 2006 Internal T.I. 2005-0115801I7 F - Convention de retraite

A closely-held corporation that was dividending out all the profits of its business also established a purported retirement compensation...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Retirement Compensation Arrangement arrangement was not an RCA because the benefits were not reasonable 110
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) contributions to purported RCA that provided excessive benefits to employee/ultimate shareholders were included in the direct shareholders’ income under s. 56(2) 122
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(r) excessive benefits would have resulted in denial under ss. 18(1)(o.2) and 20(1)(r) had the arrangement qualified as an RCA 206
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Salary Deferral Arrangement contributions to a purported RCA that contemplated excessive benefits also were not in relation to an SDA because the contributions instead were indirect shareholder appropriations 108

24 January 2005 External T.I. 2004-0099471E5 F - Convention de retraite pour un actionnaire-employé

Are contributions by a corporation to an RCA deductible in computing its income where the contributions relate to services rendered by a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(r) no deduction regarding pre-incorporation services, and longstanding CRA position re shareholder-manager compensation 129
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(x) Part XI.3 tax and s. 56(1)(x) income inclusion apply even where RCA contribution is partially or fully non-deductible 146
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Salary Deferral Arrangement a significant reduction in bonus or salary matched by an RCA contribution likely suggests it instead is an SDA 244

2004 Ruling 2004-0092931R3 - Deductibility Shareholder Manager Remuneration

Ruling that a Canadian-controlled private corporation, which historically had paid large bonuses each year to its shareholder-managers and key...

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2004 Ruling 2004-008619

A favourable ruling on the deductibility of shareholder/manager remuneration paid out of income triggered from the proceeds of a sale of business...

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2004 Ruling 2004-0072741R3 - ATR-Shareholder/Manager Bonus&Non-Capital Loss

Favourable ruling re deductibility of a shareholder/manager bonus that would create a non-capital loss to be carried back.

10 October 2003 External T.I. 2003-0030025 F - RETRIBUTION VERSEE AUX GESTIONNAIRE

The position in Income Tax Technical News, No. 22 applies to distributions out of income earned from all types of businesses including an inactive...

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15 May 2001 External T.I. 2001-0072825 - OWNER - MANAGER REMUNERATION

"It may generally be concluded that the CCRA will not normally challenge reasonableness of salaries or bonuses paid out of business profits to...

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26 March 2001 External T.I. 2001-0064055 - DEDUCT. OF MANAGERS BONUSES&SALARIES

In response to a question as to whether the CCRA position on the reasonableness of a manager's bonus applies where he holds shares through a...

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10 April 2000 External T.I. 2000-0013085 - REASONABLENESS OF MANAGER BONUS

The position at 1981 CR, Q. 42 does not apply to managers who hold their shares through a holding company.

May 1998 Advanced Life Underwriting Round Table, Q. 1, No. 9807000

The policies of Revenue Canada on the payment of salaries and bonuses to the principal shareholder-manager of a CCPC also will apply in...

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7 March 1995 External T.I. 9428355 - ACTIVE SHAREHOLDER BONUSES

Discussion of criteria applied for determining reasonableness of bonuses paid to shareholders of a corporation.

23 June 1994 External T.I. 9403465 - SEMINAR EXPENSES

The amount in respect of a four-day seminar held during a 12-day European cruise for self-employed professionals will be deductible to the extent...

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2 April 1993 T.I. (Tax Window, No. 30, p. 8, ¶2486)

Re deductibility of bonus paid by Opco for management services of its holding company provided by the only shareholder of the holding company, and...

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93 C.R. - Q. 21

The deductibility of management fees or bonuses paid by a company to its shareholder (which is a partnership) providing the employees necessary to...

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3 March 1992 Memorandum (Tax Window, No. 17, p. 8, ¶1775)

RC will consider applying s. 67 to reduce the amount of the deduction of an employer for a per-kilometre car allowance paid to an employee where...

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91 C.R. - Q.25

Where shareholders are employees of Holdco which, in turn, provides management services to Opco, any fees paid to the corporate shareholder...

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91 C.R. - Q.26

There are no guidelines to determine the reasonableness of bonuses paid out of investment income.

21 October 1991 T.I. 912692

Management fees paid by a professional practitioner to a related corporation generally will be considered deductible if they do not exceed 115% of...

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31 December 1990 T.I. (Tax Window, Prelim. No. 2, p. 13, ¶1053)

Discussion of deductibility of bonuses received directly or indirectly by the shareholders of a holding company.

90 C.R. - Q56

Affirmation of the 81 guidelines respecting bonusing down to the $200,000 limit.

27 April 1990 T.I. (September 1990 Access Letter, ¶1417)

Where all the shares of Opco are owned by Holdco, and all the shares of Holdco are owned by individuals who are employees of Opco, then any...

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86 C.R. - Q.39

Where a taxpayer has had the deduction of part of an intercompany expense denied pursuant to section 67, RC will upon the receipt of a written...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) 13

85 C.R. - Q.16

The decision in Grant Babcock and Doug Burns are not at variance with RC's guidelines re the reasonableness of salaries.

84 C.R. - Q.82

Remuneration from a corporation to its principal shareholder-manager and to employees other than his family will not generally be considered...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) 29

81 C.R. - Q.42

Guidelines re reasonableness of salaries and bonuses paid to an employee-shareholder.

80 C.R. - Q.22

In a non-arm's length situation, a reasonable retiring allowance would be an amount not in excess of 50% of the last five years' compensation less...

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80 C.R. - Q.40

Re reasonableness of salary paid to a spouse.

79 C.R. - Q.6

RC will not give a ruling as to the reasonableness of soft costs.

Articles

Alex Klyguine, "Income Splitting After the New Private Corporation Proposals: Salaries Paid to Family Members", Canadian Tax Focus (Canadian Tax Foundation), Vol. 8, No. 1, February 2018, p. 1

Salaries not included in split income (p. 1)

The private corporation proposals, which expand the tax on split income to certain dividends paid to...

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Peters, "Innovative Share Conditions and Family-Owned Enterprises - Emerging Income Tax Issues", 1991 Conference Report, p. 8:15

Discussion of situation where bonuses are paid to shareholders precisely in proportion to their shareholdings.