Words and Phrases - "because of"


Ellison v Sandini Pty Ltd, [2018] FCAFC 44

subjective belief of parties that family court orders were efficacious did establish that a share transfer to a spouse occurred “because of” them

Australian Family Court orders, that were made by consent between Mr and Ms Ellison, required a corporation (“Sandini” - that was controlled by Mr Ellison) in its capacity of the Ellison family trust to forthwith transfer 2.1M shares of a public company to Ms Ellison. However, Ms Ellison instead got Sandini to transfer those shares to a company controlled by her (“Wavefront”). This precluded rollover relief to Mr Ellison (under s. 126-15 of the Income Tax Assessment Act 1997 (Australia)) unless, among other mooted requirements, it could be considered that the beneficial ownership of those shares had already been transferred to her by Sandini “because of” the consent orders.

In fact, the trustee of the Ellison family trust was another company and, conversely, Sandini held its shares of the public company in its capacity of the sole trustee of a unit trust (“KRUT”) of which that other company, in its capacity of sole trustee of the Ellison family trust, was the sole beneficiary. In finding that the “because of” requirement in s. 126-15 was not satisfied, Jagot J stated (at paras. 192, 194):

Trigger events which occur not because the orders require it, but for some other reason (and even if the reason is a shared incorrect belief that the orders are being satisfied or that the parties agree the action means that they will treat the orders as satisfied), do not occur “because of” the orders within the meaning of the section; they occur “because of” some state of mind of the parties which may or may not be influenced by the orders. …

[T]he 21 September 2010 orders are inefficacious in all relevant respects. They purport to join Sandini in a capacity which it did not have (order 1). They purport to require Sandini in that non-existent capacity to do things (order 3). … The fact that Sandini did things in another capacity (as trustee of the KRUT Sandini transferred shares to Wavefront) does not mean that the orders were efficacious. It may mean that Mr Ellison and Ms Ellison agreed that Sandini should do these things and that they would treat this as satisfaction of the orders, but that agreement does not give the orders efficacy. The relevant point for present purposes is not the existence of an agreement between Mr Ellison and Ms Ellison subsequent to the making of the orders. It is whether it can be said that anything occurred “because of” the orders within the meaning of s 126-15.

Words and Phrases
because of
Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership 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 973
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 - General Concepts - Evidence a court order could not be interpreted in light of extrinsic evidence 100

Jason Boland, Christopher Montes, "A Detailed Review of the Back-to-Back Loan Rules", 2016 Conference Report (Canadian Tax Foundation), 26:1-32

Meaning of “because of” in s. 18(6)(c)(i) (p. 26:8)

While the Supreme Court's comments in Copthorne appear to soften the "strong causal connection" language from Krull [a.k.a. Hoefele] both cases suggest that there needs to be some level of connection. ...

Words and Phrases
because of

Attorney General of Canada v. Hoefele, 95 DTC 5602 (FCA)

new mortgage debt of relocated employees

Employees of Petro-Canada who were required to relocate from Calgary to Toronto had a declining percentage of their increased interest costs (resulting from an increase in their outstanding mortgages of no more that 55%) subsidized by Petro-Canada provided they took out their new mortgage with Confederation Life.

Linden J.A. noted (at p. 5608) that the phrases "because of" or "as a consequence of" in s. 80.4(1) required "a strong causal connection" and went on to find that because the employees (who already had Calgary homes) obtained their new form of mortgage financing largely independently of employer involvement, it was reasonable to consider that the new mortgage debt was incurred "in order to obtain ownership of a house, not ... 'as a consequence of'... employment".

Locations of other summaries Wordcount
Tax Topics - General Concepts - Tax Avoidance form matters 76
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) interest rate subsidy did not increase net worth 98

Williams v. The Queen, 2011 DTC 1087 [at 480], 2011 TCC 66 (Informal Procedure)

no strong causal connection between the employment and occupation of accommodation

The taxpayer and her husband were both members of the clergy who ministered to a congregation. The taxpayer's husband's housing allowance covered nearly all of their rent and utilities, and the taxpayer had over $19,000 of housing allowance that did not go towards those expenses. Webb J. found that the taxpayer was eligible for a deduction under s. 8(1)(c)(iv) with respect to the relatively nominal portion of the rent and utilities which was not paid by her husband, but not under s. 8(1)(c)(iii). Subparagraph (iii) requires that the living accommodation be occupied "in the course of, or because of, the taxpayer's office or employment." The taxpayer was not occupying her house "in the course of" employment because occupying the house was not a part of condition of her employment. She did not occupy the house "because of" employment either (para. 20):

[T]he phrase "because of" as used in subparagraph 8(1)(c)(iii) of the Act "implies a need for a strong causal relation between" the occupation of the residence and the employment of the Appellant. ... There is no strong causal connection in this case ... as the house was not provided by her employer but was simply a house in which the Appellant and her spouse chose to reside.