Taxpayer

In 2003-0026827, CRA applied Oceanspan to find that a non-resident student who has no Canadian sources of income is precluded from transferring her unutilized tuition credits to her resident father under ITA s. 118.9 because:

an individual who is not resident in Canada and who has no Canadian source income would not be entitled to the tuition and education tax credits. The individual is not liable to pay tax in Canada, and therefore has no need to utilize the provisions permitting the tax credits.

Although this federal position does not appear to have been mentioned to him, Cameron JCQ rejected a similar position advanced by the ARQ to justify the denial of a tuition credit transfer (under the Quebec equivalent of s. 118.9) by a daughter studying in Scotland, who was resident in Ontario and had no Quebec sources of income, to her father, also an Ontario resident, who had Quebec professional income allocated to him by a cross-country professional firm. Cameron JCQ stated:

The legislation does not suggest that in any year where a Quebec resident who is a student does not have liability for tax pursuant to articles 22 or 25 TA, she would not be able to transfer the unusable credit to a parent. To interpret the law as implying that would be a direct contradiction of the purpose of the legislation, that of permitting a taxpaying parent to reduce tax liability because of the support of the child for education.

He went on to indicate (at para. 49) that in any event, the daughter could be considered to be “subject to tax” (or “liable for tax” to use his preferred translation, and also essentially the phrase considered in Crown Forest):

… The income tax legislation … applies to all Canadian residents … because they may, in one year or another, earn business income in Quebec… . In that sense, the daughter is “subject to the tax” to use Revenu Québec’s phrase, because she could, potentially, depending on circumstances, get some business income generated in Quebec even without being a resident here.

Before going on to find that the individual taxpayer had committed tax evasion by filing nil returns and taking the position that he was not a taxpayer, Hicks, J. stated (at para. 44) that "the courts in this Province have found without exception that the argument to exclude so-called natural persons from the obligations of the Income Tax Act has no basis."

A reference in s. 225.1(5) to a taxpayer "should be interpreted as allowing an agent to sign on behalf of a taxpayer providing the agency is well and truly established."

"[B]oth residents and non-residents who derive income from Canadian sources are included, by definition, in the term 'taxpayer'." [C.R.: 248(1) - "Income Bond"]

"Taxpayer" "refers to resident individuals or corporations who may be liable to pay tax at some time whether or not they are, at any given time, liable therefor." A corporation with no Canadian-source income accordingly was not a "taxpayer" for purposes of s. 111(8)(b), and non-capital losses which it incurred while not a resident corporation could not be carried forward to be deducted from income earned while the corporation was resident in Canada.

It was found respecting some losses from a partnership engaged in the breeding and racing of horses that s. 31(1) applies at the level of the individual partners to whom the farming losses have been flowed through rather than at the partnership level, i.e.,a partnership is not the "taxpayer" for the purposes of s. 31(1).

A Canadian subsidiary ("Nassau") of a Bermudan company that did not carry on business in Canada was leasing an aircraft to the appellant, which was another Canadian subsidiary of the Bermudan company. Nassau sold the aircraft to the Bermudan company for a sale price that was lower than the aircraft's fair market value and took the position that s. 17(2) of the pre-1972 Act which applied to a taxpayer carrying on business in Canada who sold anything to a person with whom he was not dealing at arm's length) did not apply to deem Nassau to have received fair market value proceeds on the basis that s. 17(2) was deemed by s. 17(7) not to apply where s. 20(4) was applicable. The latter provision maintained historical capital cost and undepreciated capital cost where a depreciable property "has, by one or more transactions between persons not dealing at arm's length, become vested in a taxpayer".

In rejecting this position Hall J. stated (at p. 6274):

"It is clear that s. 20(4) is concerned with taxpayers entitled to a deduction, not with persons who are not subject to assessment under Part I. A non-resident not carrying on business in Canada is not a person entitled to such a deduction and therefore s. 20(4) cannot be properly be said to be 'applicable' to him."

Furthermore, the exigibility of withholding tax on rents paid to the Bermudan company did not make the Bermudan company a taxpayer as such withholding tax was "a tax on gross receipts in Canada by a resident for a non-resident."