Words and Phrases - "series of transactions or events"
454538 Ontario Ltd. v. MNR, 93 DTC 427, [1993] 1 CTC 2746 (TCC)
Two brothers (the "Mazzoccas"), who constituted two of the three equal shareholders of a corporation ("Tri-M"), transferred their shares of Tri-M on a partial rollover basis to two holding companies and caused the two holding companies to purchase the shareholding of the third shareholder ("Manley"). Immediately thereafter, an arm's length purchaser ("461") lent money to Tri-M sufficient for it to pay a dividend to the two holding companies equal to the estimated accounting retained earnings of Tri-M, following which 461 purchased the shares of Tri-M held by the two holding companies for a reduced purchase price.
In confirming reassessments by the Minister which included the amount of the dividends in the proceeds of disposition realized by the holding companies, Sarchuk J. rejected submissions inter alia:
- that the transactions were grandfathered on the basis that they occurred as part of a series of transactions or events which commenced prior to April 22, 1980 the evidence disclosed that "there was no serious intention on the part of the Mazzoccas to dispose of their interest in Tri-M prior to late summer and fall of 1980" (p. 431);
- that the reference to "income earned or realized" was ambiguous and therefore should be interpreted in the taxpayers' favour to refer to accounting retained earnings (it was clear in light of the wording of ss.55(5)(c) and in light of the decision in Mattabi Mines Ltd. v. MNR, [1988] 2 CTC 294, [1988] 2 S.C.R. 175 that "income" referred to income determined in accordance with the Part I of the Act); and
- that s. 55(2) was void for uncertainty (the problems in application of s. 55(2) were "not surprising given the complexity of the subject matter" and it could not be concluded that it was "couched in such vague or general language that it does not contain an intelligible standard" (p. 437)).
Toronto-Dominion Bank v. Canada, 2011 DTC 5125 [at at 6061], 2011 FCA 221, [2011] 6 CTC 19
A transitional provision in the Act provided that the old s. 55(1) would apply to a transaction if it were "part of a series of transactions, determined without reference to subsection 248(10) of said Act, commencing before the day on which this Act is assented to and completed before 1989... ." The Minister argued that the exclusion of s. 248(10) did not automatically restrict "series of transactions" to mean only series that were pre-ordained. The Court disagreed. Evans J.A. stated (at para. 46):
It would only make sense to exclude subsection 248(10) - which is designed to include transactions otherwise excluded from the common law meaning of "series of transactions" because not pre-ordained - if the series of transactions had to be pre-ordained.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Transitional Provisions and Policies | 163 | |
| Tax Topics - Income Tax Act - Section 112 - Subsection 112(3) | 174 | |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(9) | 117 | |
| Tax Topics - Statutory Interpretation - Ordinary Meaning | clear wording | 80 |
Meeuse v. The Queen, 94 DTC 1397 (TCC)
Each of the loans made to the taxpayer by her husband's company were for separate purposes, for example, financing her acquisition of an automobile, erection of a storage building, and acquisition of a coffee shop franchise. CRA assessed on the basis that the loan to finance the construction of the storage building should be included in her income under s. 15(2) and the subsequent repayment of that loan should be ignored. (The taxpayer received a new loan for the coffee shop franchise just weeks after such repayment.) Bowman TCJ held that the amount fell within the exception set out in paragraph 15(2)(b) (as it then read) for loans repaid within one year and did not form part of a "series of loans or other transactions and repayments." He stated (at pp. 1399-1400):
"I do not think that a mere succession of loans is sufficient to constitute them as series without more. This, I think, is a mechanical and simplistic interpretation of subsection 15(2)(b) of the Income Tax Act that ignores its purpose. It must be borne in mind that the purpose of subsection 15(2) is to prevent corporate funds to be paid out to shareholders or persons connected with them otherwise than by way of dividend under the guise of loans."