https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/461486/index.do
Gentile Holdings Ltd. v. The Queen (February 12, 2020 – 2020 TCC 29, Campbell J.).
Précis: The taxpayer received a dividend in the amount of $600,000 in 2006 from its subsidiary corporation, 0699406 B.C. Ltd. (“0699”). The Minister assessed the taxpayer under subsection 160(1) in respect of the non-arm’s length transfer. The taxpayer resisted the assessment both on the basis that the relationship with 0699 was at arm’s length and that it gave consideration for the dividend in the form of a loan back to 0699. The Tax Court rejected both arguments and dismissed the appeal with costs.
Decision: In essence the Court rejected the arguments of arm’s length relationship and valuable consideration for the dividend:
[33] To conclude, the Appellant has not discharged the onus of establishing on a balance of probabilities that the Appellant and 0699 did, in fact, deal with each other at arm’s length and, in addition, did not establish that the Appellant gave fair market value consideration in respect to the payment of the dividend. Since the Appellant was the sole shareholder of 0699 and Cesare Gentile was the directing mind of both, it is unrealistic to assume that 0699 was in a position to act exclusively on the basis of its own best interests. Since the four criteria established in Livingston are satisfied, I conclude that the Appellant and 0699 are jointly and severally liable under subsection 160(1) of the Act to pay the Amount of $116,754 as assessed by the Minister in respect to the 2006 taxation year.
Thus the appeal was dismissed with costs.