Words and Phrases - "receive"
Odette (Estate) v. The Queen, 2021 TCC 65
The appellant estate donated shares of a private company (Edmette), which were non-qualifying securities, to a private foundation with which it did not deal at arm’s length. Shortly thereafter, those shares were purchased for cancellation in exchange for a promissory note of Edmette for $17.7 million, which then was repaid in cash by Edmette between four and eight months later. The donation of the Edmette shares was deemed by s. 118.1(13)(a) to not be a gift except to the extent “of the fair market value of any consideration (other than a non-qualifying security of any person) received by the donee [i.e., the foundation] for the disposition” by it of the Edmette shares. The estate argued that for these purposes, the consideration received by the foundation for such shares should be considered to be the subsequent cash repayments of $17.7 million rather than the promissory note (which clearly was also a non-qualifying security), so that the estate’s previous donation was deemed by s. 118.1(13)(c) to be of $17.7 million rather than nil.
In rejecting this submission and finding that s. 118.1(13)(a) deemed there to be no gift, Rossiter CJ stated (at paras. 46, 59):
The consideration could not be both the Promissory Note and the corresponding cash payments. The cash payments were made approximately eight months after the disposition occurred, not at the time of the disposition. The only consideration received at the time of the disposition was the Promissory Note.
… Parliament does not want to grant a tax credit where the donor is not impoverished and the charity is not enriched. A non-arm’s length promissory note creates no real obligation to pay. Non-arm’s length parties can artificially enter into similar transactions, claim a donation tax credit and never actually make payments. For this reason, it is important to show that the charity is actually enriched and the donor is in fact impoverished. A promissory note between non‑arm’s length parties is not convincing enough.
CAE Inc. v. The Queen, 2021 CCI 57
CAE, which was engaged in manufacturing flight simulator systems, incurred over $700 million in R&D expenditures on further developing such systems, as to which it received “contributions” over a five-year period of $250 million from Industry Canada. Under the agreement with Industry Canada, CAE was required to repay 135% of the amounts advanced (or $337.5 million) beginning after the last advance was made and in escalating specified amounts over a 15-year period.
Were the amounts government assistance? Ouimet J agreed (at para. 123) with CAE that the arrangement was a loan. However, he then interpreted Immunovaccine as establishing that the relevant test was whether the agreement with Industry Canada was an “ordinary commercial agreement.” He found that this test was not satisfied given that the yield on the loan to Industry Canada of 2.5% was a third of the interest that CAE would have borne on an unsecured commercial loan and that the loan lacked normal commercial covenants. As the amounts were government assistance, the amounts received or receivable in each year were excluded from qualifying expenditures for investment tax credit purposes by s. 127(18), the amounts so received were not deductible in computing income by virtue of s. 37(1)(d) and (without duplication) the amounts so receivable were includible in income under s. 12(1)(x).
In rejecting a CAE submission that the amounts had not been received because they were repayable and CAE thus had not acquired a property interest in the amounts, Ouimet J noted that dictionary definitions referred to “received” as being “to come into possession, and stated (at para. 140, TaxInterpretations translation) that “this definition makes no reference to a transfer of property.”
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 127 - Subsection 127(9) - Government Assistance | an unconditionally repayable loan with a 2.5% yield was government assistance | 312 |
| Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Investment Contract | advance labelled by government as a "contribution" but unconditionally repayable was a loan | 97 |
Borealis Geopower Inc. v. The Queen, 2018 TCC 189 (Informal Procedure)
The taxpayer, a privately owned Canadian corporation involved in geothermal power exploration, development and utilization in Canada, was paid $528,560 in 2014 as a first advance, as assistance towards its SR&ED project, from Sustainable Development Technology Canada (“SDTC” – a government foundation) notwithstanding that one of the conditions for receipt of this payment under the Contribution Agreement between it and SDTC (the “first Milestone”) was never satisfied. In finding that the taxpayer had thereby “received” government assistance in 2014 as described in s. 37(1)(d), Campbell J stated (at paras 26, 28):
The Appellant had sole access to the funds in this trust account. It had the authority to deposit and withdraw. There was no trust agreement between SDTC and the Appellant. There may have been an informal agreement respecting those funds but there was no obligation for the Appellant to notify SDTC when it transferred amounts from the trust account to another account. …
In accordance with the ordinary dictionary meaning of “receive”, the Appellant physically acquired and accepted an advance of funds by way of a cheque from SDTC. The advance was given prior to the completion of the first Milestone and no conditions were superimposed on the transfer. … It was the Appellant’s decision to open a trust account and deposit those funds to that account. It exercised control over the funds in relation to expenditures in the work project, when to withdraw and how much to withdraw.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Payment & Receipt | taxpayer had "physically" received govenment assistance funds with freedom to transfer | 109 |
| Tax Topics - Income Tax Act - Section 162 - Subsection 162(11) | loss carryback did not reduce late-filing penalty or interest | 278 |
Blais v. MNR, 92 DTC 1497 (TCC)
A taxpayer was ordered in 1984 to retain arrears of alimentary allowance that had accumulated from March 1983 onward to be applied against an amount owing to him by his estranged wife. In finding that the alimentary allowance was not "paid" by him for purposes of s. 60(b), and was not "received" by her for purposes of s. 56(1)(b), Garon J. stated (p. 1499):
"... The verb 'pay' in the context of that paragraph means a transfer of money, a handing over of funds ... [and] the expression 'received' involves the idea of being put in possession of something."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Payment & Receipt | payment references funds transfer | 100 |
| Tax Topics - Income Tax Act - Section 60 - Paragraph 60(b) | 100 |
Mbarga v. The Queen, 2005 DTC 1447, 2005 TCC 595 (Informal Procedure)
An amount paid by Alberta Human Resources and Employment directly to the University of Calgary to enable the taxpayer to take a technology program constituted a "bursary" ("an endowment given to a student") and also was "received" by the taxpayer given that "the law is clear that 'receipt' includes constructive receipt" (p. 1448), i.e., the enjoyment of advantages without necessarily having them in one's hands.
The Queen v. British Columbia Forest Products Ltd., 85 DTC 5577, [1986] 1CTC 1 (FCA)
"Parliament has expressly contemplated that a taxpayer may 'receive' assistance from a government in the form of a 'deduction from tax.'" The taxpayer's capital cost of depreciable properly accordingly was reduced by investment tax credits. (Pre-1978 version of s. 13(7.1)).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Context | 87 |
Canada v. Innovative Installation Inc., 2010 DTC 5175 [at 7317], 2010 FCA 285
In order to ensure payment of a loan owing by the taxpayer ("Innovative") to a bank (RBC) on the death of Innovative's principal (Mr Peacock), Innovative purchased key man insurance from Sun Life with RBC as the policyholder and funded the payment of premiums on the policy. When Mr Peacock died, Sun Life paid the insurance proceeds to RBC, which was contractually obliged to apply them to discharge the loan.
Evans JA found (at para. 6) that, for the purposes of determining Innovative's capital dividend account, "Innovative 'received' 'proceeds of a life insurance policy' when RBC applied them, as the contract required, to discharge Innovative's debt," and stated (at para. 9):
Paragraph 89(1)(d) does not require that a corporation receive the proceeds directly from the insurer or that it be named as the beneficiary of the policy. It only had to have "received" them in consequence of Mr Peacock's death.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account | receipt of insurance proceeds through debt repayment | 156 |