Words and Phrases - "transaction"
Canada v. Canadian Pacific Ltd., 2002 DTC 6742, [2002] 3 F.C. 170, 2002 FCA 98
The Crown argued that CP's act of denominating the debentures in Australian dollars was in and of itself a transaction and that it amounted to an “arrangement” under the s. 245(1) definition of "transaction" - and then argued that such "separate transaction", namely the designation of borrowing in Australian dollars, was entered into solely for tax purposes. In rejecting this submission, Sexton JA stated (at paras. 24-26):
…[T]hat extended definition [of transaction] cannot be interpreted to justify taking apart a transaction in order to isolate its business and tax purposes. The necessity to determine primary purpose implies that there is more than one purpose and that the transaction is to be considered as a whole.
…If this argument was correct, the Crown could allege that the tax planning component of any transaction amounted to an event or arrangement constituting a "separate transaction". … In other words, any action taken to obtain a tax benefit would be an avoidance transaction and there would never be an occasion to determine the primary purpose of a transaction. …
The words of the Act require consideration of a transaction in its entirety and it is not open to the Crown artificially to split off various aspects of it in order to create an avoidance transaction. In the present case, the Australian dollar borrowing was one complete transaction and cannot be separated into two transactions by labelling the designation in Australian dollars as a separate transaction.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) | primary purpose of a borrowing in a tax-advantageous currency was to raise money | 290 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | transaction not to be recharacterized until after a determination of abuse | 283 |
Vocalspruce Ltd. v. Revenue and Customs Commissioners, [2014] BTC 50, [2014] EWCA Civ 1302 (English CA)
The parent company (Brixton plc) of the taxpayer (Vocalspruce) subscribed for zero coupon notes of group companies, and transferred the notes to Vocalspruce in consideration for the issuance by Vocalspruce of shares whose nominal value was equal to the notes' discounted value, but with the shares being issued at a premium which would be paid up by capitalizing the profit to be realized by Vocalspruce on the notes, with such sums to be appropriated to Vocalspruce's share premium account.
After finding that such profits (i.e., realized discounts on the notes) were otherwise exempted from income tax under a provision which excluded "any amounts required to be transferred to the company's share premium account," Lewison LJ went on to find that this exemption did not apply by virtue of a further provision (para. 12 of Sched. 12 of the Finance Act 1996) which (in s. 12(1)) referenced transactions in which one group company "directly or indirectly replaces the other…as a party to a loan relationship," and provided (in s. 12(2)) that "the transaction , or series of transactions, by virtue of which the replacement takes place shall be disregarded." He stated:
Mr Peacock [for Vocalspruce] said that because paragraph 12 (1) refers to a "related transaction" and a related transaction is narrowly defined as the acquisition of rights under the loan relationship, all that is required to be disregarded is the fact of Vocalspruce's replacement of Brixton plc. …
I cannot accept this argument. The term defined is a related transaction; and the defined term may itself colour the meaning of the definition. A transaction is (at least) a bilateral arrangement. It makes no sense to disregard part of the transaction, when the statute clearly requires the whole transaction to be disregarded, except for very limited purposes. … In addition it is a well-known method of interpreting deeming provisions that one must treat as real the inevitable consequences flowing from the deemed state of affairs: DCC Holdings Ltd v HMRC [2010] UKSC 58, [2011] 1 WLR 44 at [38]. If the acquisition by Vocalspruce had not taken place, the inevitable consequence would have been that the shares would not have been issued for a premium, and there would have been no requirement to transfer anything to the share premium account. The rights under the loan relationship would have remained with Brixton plc, which was under no obligation to transfer any amount to a share premium account, and that company would have been liable to pay tax on the gain.
R. v. Goldstein (1988), 42 C.C.C. (3d) 548 (Ont CA)
With respect to the interpretation of s. 548(1) of the Criminal Code, Houlden J.A. stated (p. 557) "the words 'the same transaction', in my opinion, mean the series of connected acts extending over a period of time which, the Crown alleges, proved the commission of the offence charged in the information." [Followed in R. v. Cancor Software Corp., 90 DTC 6457 at 6459 (Ont CA)]
MNR v. Granite Bay Timber Co. Ltd., 58 DTC 1066, [1958] CTC 117 (Ex Ct), briefly aff'd 59 DTC 1262 (SCC)
In finding that a resolution of the shareholders to wind-up a company was a "transaction" for purposes of s. 8(3) of the 1948 Act, Thurlow J. stated (p. 1071) that the word "transactions" is not:
"limited to sales of property nor to contractual transactions between parties ... [and] is wide enough to embrace all types of voluntary processes or acts by which a property of one person may become vested in another without regard for the reason or occasion for such processes or acts and regardless also of whether the processes undertaken or the act is done for consideration in whole or in part or for no consideration at all."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | the shareholders had a common purpose in determining to wind-up the company | 223 |
Shaw-Almex Industries Limited v. The Queen, 2009 DTC 1377 [at at 2080], 2009 TCC 538
The taxpayer obtained a guarantee of the obligations of a US-resident sister corporation ("Fusion") to a US bank for the purpose for the purpose of capitalizing Fusion's operations. Accordingly, when it agreed to repay the loan to Fusion when Fusion became insolvent and the guarantee otherwise would have been called (which would have adversely affected the taxpayer's with the guarantor), the resulting loss to it was a capital loss. The principle (at para. 36) that "if payment under the guarantee is made for income-producing purposes related to the taxpayer's own business and not that of the corporation for which it repays the loan, then the expense may be treated as being on income account" did not apply.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(b) - Subparagraph 152(4)(b)(iii) | 138 |
Ho v. The Queen, 2010 DTC 1214, 2010 TCC 325
Webb, J. found that the Minister was not entitled to reassess the taxpayer on the basis that s. 75(2) imputed income of a family trust to the taxpayer with such income of the family trust, in turn, arising under the "fapi" provisions of the Act, given that there was no transaction involving the taxpayer and the non-resident corporation that gave rise to the alleged fapi. Webb, J. quoted, with approval a statement in MNR v. Dufresne, 67 DTC 5105 (Ex. Ct.) that "transaction" meant "any act having operative effect in relation to a business or property" and stated (at para. 23) that "'transaction' would not include the operation of certain provisions of the Act that deem income of one person to be the income of the other person".