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Leonard v. R. – TCC: Taxpayer partially successful in claiming loss on foreclosure proceeding was deductible – adventure in the nature of trade

May 21, 2021 By Bill Innes

Précis: Mr. Leonard claimed a non-capital loss in the amount of $1,472,006 in 2011 arising out of foreclosure proceedings in a complex land deal. CRA denied the loss. That also had the result of increasing the family income which reduced the Canada Child Tax Benefit which his wife had claimed. They both appealed to the Tax Court. The issue in the main appeal was whether the loss incurred by Mr. Leonard was on income or capital account. The Tax Court found that there was another issue to be determined, i.e., the quantum of the loss. The Tax Court found that Mr. Leonard was engaged in an adventure in the nature of trade and that the loss was on income account. Nevertheless the Court concluded that Mr. Leonard’s loss claim was overstated and reduced his loss to $826,426. Thus both his appeal and that of his spouse were allowed.
Leonard v. R. – TCC: Taxpayer partially successful in claiming loss on foreclosure proceeding was deductible – adventure in the nature of tradeREAD MORE »

Attorney General of Canada, et al. v. Collins Family Trust: Rectification in Tax Matters Revisited

Apr 09, 2021 By Bill Innes

Précis: For those who thought that the application of recission in tax matters was resolved by the Supreme Court of Canada in 2016 it’s time to think again. On March 25, 2021 the Supreme Court granted leave in another case where the British Columbia Court of Appeal ordered recission revoking dividends paid in 2008 and 2009 that became taxable as a result of a subsequent change in case law. We live in interesting times for tax planners.
Attorney General of Canada, et al. v. Collins Family Trust: Rectification in Tax Matters RevisitedREAD MORE »

R. v. BCS Group Business Services Inc. – FCA: A corporation cannot be represented by a non-lawyer agent in General Procedure appeals before the Tax Court – TCC decision reversed

Dec 08, 2020 By Bill Innes

Précis: The Respondent, BCS, argued successfully before the Tax Court that it should be able to conduct its general procedure using its sole shareholder, director and officer, Mr. Denis Gagnon (who is not a lawyer), as its agent. The Crown appealed. The Federal Court of Appeal in a detailed and scholarly opinion authored by Gauthier J.A. concluded that the Tax Court was in error and that the Tax Court of Canada Act, R.S.C., 1985, c. T-2, particularly section 17.1 of that statute, precluded the use of a non-lawyer agent in General Procedure appeals. It is highly unlikely that the Supreme Court would be willing to review this question so the BCS Group decision is likely to be the final word on the subject for the indefinite future unless Parliament chooses to amend the Tax Court of Canada Act (which also seems an unlikely prospect).
R. v. BCS Group Business Services Inc. – FCA: A corporation cannot be represented by a non-lawyer agent in General Procedure appeals before the Tax Court – TCC decision reversedREAD MORE »

Pangea One Acquisition Holdings XII S.A.R.L. v. R. – FCA: Tax Court decision upheld – letter agreement was a “restrictive covenant” subject to withholding under Part XIII

Mar 27, 2020 By Bill Innes

Précis: Pangea entered into a letter agreement concerning the sale of shares of Public Mobile Holdings Inc. and received $3,000,000 from Thomvest Seed Capital Inc. (another shareholder of Public Mobile Holdings Inc.): [3] In 2013, Telus Communications Inc. offered to purchase all the shares of Public Mobile Holdings Inc. At the time, the shares were owned by three shareholders, one of which was Pangaea. Pursuant to a unanimous shareholders’ agreement, Pangaea had a veto right such that the other shareholders could not sell their shares without Pangaea’s consent. [4] Pangaea made it clear that it was not willing to sell at the price offered. In order to induce Pangaea to accept the offer, another shareholder, Thomvest Seed Capital Inc., provided a payment to Pangaea pursuant to a letter agreement. Under the agreement, Thomvest paid $3,000,000 to Pangaea in return for Pangaea’s agreement to execute a proposed share purchase agreement with Telus. In the share purchase agreement, the three shareholders of Public Mobile would each agree to sell its shares to Telus. Shortly after the letter agreement with Thomvest was signed, the share purchase agreement was executed. [5] Thomvest withheld Part XIII tax on the $3,000,000 payment to Pangaea. Pangaea sought a refund of the tax from the Minister of National Revenue which was denied. The Minister also issued an assessment of the tax to Pangaea pursuant to subsection 227(7) of the Act. Pangaea appealed from this assessment to the Tax Court. Pangea lost in the Tax Court and appealed to the Federal Court of Appeal. The sole question for the Court of Appeal was whether the $3,000,000 was paid in respect of a restrictive covenant. The Court of Appeal concluded that it was and dismissed the appeal with costs fixed in the amount of $1,500 inclusive of disbursements.
Pangea One Acquisition Holdings XII S.A.R.L. v. R. – FCA: Tax Court decision upheld – letter agreement was a “restrictive covenant” subject to withholding under Part XIIIREAD MORE »

Canada Without Poverty – CRA to appeal decision of Ontario Superior Court of Justice while changing policy limiting non-partisan charitable activities

Aug 30, 2018 By Bill Innes

Précis: The Ministers of National Revenue and Finance jointly announced on August 15 that they will appeal the decision of the Ontario Superior Court of Justice which held that CRA’s policy with respect to non-partisan political activities by charities violated the Charter’s guarantee of freedom of expression. At the same time, they announced that they will act to allow greater non-partisan political expression by charities within their charitable objectives.
Canada Without Poverty – CRA to appeal decision of Ontario Superior Court of Justice while changing policy limiting non-partisan charitable activitiesREAD MORE »

Canada Without Poverty v. R. – OSCJ: CRA’s policy limiting non-partisan political activities of registered charities violates the Charter’s guarantee of freedom of expression

Aug 07, 2018 By Bill Innes

Précis: CRA takes the position that a registered charity must confine its non-partisan political activities to not more than 10% of its resources. While it is not entirely clear from the reported decision it seems that the Applicant applied for a declaration invalidating this policy. Justice Morgan granted an immediate Declaration that the interpretation and enforcement by CRA of the “substantially all” requirement in s. 149.1(6.2) of the ITA by limiting to 10% a charitable organization’s use of its resources for political activities, as set out in the CRA Policy Statement, violates s. 2(b) of the Charter and is not saved by s. 1. He also ordered that CRA immediately cease interpreting and enforcing s. 149.1(6.2) in that way.
Canada Without Poverty v. R. – OSCJ: CRA’s policy limiting non-partisan political activities of registered charities violates the Charter’s guarantee of freedom of expressionREAD MORE »

Kassawat v. R. – TCC: Engineer employed by wife’s corporation not engaged in insurable employment – not required to do any work at all

May 29, 2018 By Bill Innes

Précis: Mr. Kassawat was a civil engineer and had a job with Qualité 2K Plus K Ltée (the “Payor”) for the period from June 13, 2016 to March 31, 2017. The payor was 100% controlled by his wife. The Payor entered into a contract with Telus to provide engineering services. Telus honoured the contract and paid the agree contractual consideration but for some reason did not require Mr. Kassawat’s services during the period in question. As a consequence he was paid to do nothing during the period. The Minister held that he was not engaged in insurable employment since Mr. Kassawat and the Payor would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm’s length. The Tax Court agreed with the Minister’s position and dismissed the appeal.
Kassawat v. R. – TCC: Engineer employed by wife’s corporation not engaged in insurable employment – not required to do any work at allREAD MORE »

Le v. R. – TCC: Taxpayer neither a de jure nor de facto director – director’s liability assessment lifted

May 07, 2018 By Bill Innes

Précis: The taxpayer was assessed for both GST and source deductions for several years in connection with 0780221 B.C. Ltd. (the “Corporation”) on the basis that she had been either a de jure or de facto director of the Corporation during the periods at issue. The Tax Court examined the evidence and was satisfied that the taxpayer had been neither a de jure nor a de facto director of the Corporation at any material time. Thus her two appeals were allowed with costs totaling $1,000 even though these were informal procedure appeals.
Le v. R. – TCC: Taxpayer neither a de jure nor de facto director – director’s liability assessment liftedREAD MORE »

Sharp v. R. - FC: “Fabricated” evidence allowed to remain on record with appropriate notation

Aug 04, 2017 By Bill Innes

Précis: The applicants moved to set aside a ministerial requirement for information under subsection 231.1(2) of the Income Tax Act on the basis that it was being used to further a criminal investigation of their affairs. In support of the application the applicants tendered an affidavit of a Ms. Kaiser which purported to attach correspondence involving an employee of CRA. That correspondence was found to have been fabricated. The sole question before the Court not already agreed upon by the parties was whether the fabricated correspondence should continue to form part of the record with an appropriate notation that it was fabricated (the position of the Crown) or whether it should be removed and replaced by a fresh affidavit provided by the applicants (the position of the applicants).
Sharp v. R. - FC: “Fabricated” evidence allowed to remain on record with appropriate notationREAD MORE »

The Mark Anthony Group v. R. - TCC: Product added after fermentation of cider does not vitiate duty exemption

Jul 31, 2017 By Bill Innes

Précis: The taxpayer manufactured fermented cider. It claimed an exemption (roughly $2 million) under the Excise Act, 2001 (the “EA”) on the basis that all of the products used in the fermentation process were of Canadian origin. CRA denied the...
The Mark Anthony Group v. R. - TCC: Product added after fermentation of cider does not vitiate duty exemptionREAD MORE »

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