Words and Phrases - "one of the main reasons"
The two taxpayers (“PLH” and “SCL”), which were each controlled by two unrelated individuals, would have been associated with each other but for the implementation of a stacked partnership structure for them and others to hold their interests in the business of a corporation (“MEL”) carrying on business as a farm implement dealer. PLH (and SCL) were able to claim the small business deduction (“SBD”) in their 2011 (or 2011 and 2012) taxation years.
In allowing the taxpayers’ appeals of the denial of such SBD claims through the application of s. 256(2.1), MacPhee J stated (at para. 66):
I also am satisfied that the main reasons for the second tier of corporations which were created as part of the restructuring were to:
· obtain tax deferrals of up to 25 months;
· be more flexible in moving partners in and out of the structure … .;
· be able to deal with their concerns about Mr. Moody [a now-inactive founder] continuing to be a partner.
The above finding was reinforced, in the case of PLH, by a finding that receipt of the SBD had not been anticipated at the time of implementing the structure, given that its taxable capital exceeded $15 million, and it had not been recognized that, because the determination of taxable capital looks to a prior year, and the attribution of such taxable capital only arose to the extent that income was allocated by the partnership to a particular corporation, in the first year of the corporate partnership, none of them had any income allocated to them by the partnership. MacPhee J further stated (at para. 36):
PLH would not have as a main reason for the creation of the new corporate structure access to the SBD for one year as the cost of creating the newly created structures, as well as the ongoing costs, far exceeded the SBD obtained in 2011.
Respecting SCL, MacPhee further stated (at para. 66):
I am satisfied that Mr. Streifel, as the operating mind of SCL, was neither informed nor aware of the potential access to the SBD.