Personal Tax, Estate & Wealth Planning

Morrison v. R. – TCC: The last charitable tax shelter bites the dust (maybe?)

Nov 15, 2018 By Bill Innes

Précis: Since the Klotz decision (2004 TCC 147) the Tax Court has lived through a seemingly never-ending series of charitable gift cases. Morrison may well be the last. The plan involved an alleged donation in kind of pharmaceuticals to a registered charity. The unusual wrinkle was that the donors did not purchase the pharmaceuticals, rather they acquired them as beneficiaries of a discretionary trust thus circumventing the anti-avoidance rules put in place when these plans first surfaced. Unfortunately for Mr. Morrison the Tax Court found that, on the facts, he never acquired title to the pharmaceuticals and therefore never made a gift of them. He was however entitled to the cash donated to the charity since the Tax Court held that there was no obligation to make a cash donation in order to participate in the plan. No costs were awarded in the Morrison appeal since he was partially successful. In the companion Eisbrenner appeal the cash was not at issue and his appeal was dismissed with costs.
Morrison v. R. – TCC: The last charitable tax shelter bites the dust (maybe?)READ MORE »

Lavalee v. R. – TCC: Taxpayer not a “shared-custody” parent because she had custody 57.29% of the time as opposed to her former spouse who had custody 42.71% of the time

Nov 14, 2018 By Bill Innes

Précis: The taxpayer was denied full Canada Child Benefits on the basis that she and her former spouse were “shared-custody” parents. CRA made that determination on the basis that she had custody 57.29% of the time as opposed to her former spouse who had custody 42.71% of the time. The statutory test was whether custody was shared on “an equal or near equal basis”: paragraph 122.6(b) of the Act. Russell J. found that using a ratio of 57.29/42.71 the taxpayer had custody of the children 34% more than her former spouse. He found that such an overage failed to meet the “near equal” test and that CRA had applied the test incorrectly. Accordingly, he allowed Ms. Lavalee’s appeal, without costs.
Lavalee v. R. – TCC: Taxpayer not a “shared-custody” parent because she had custody 57.29% of the time as opposed to her former spouse who had custody 42.71% of the timeREAD MORE »

Dicks v. R. – TCC: Monthly payments to a former spouse for investment purposes were not deductible as “spousal support”.

Nov 12, 2018 By Bill Innes

Précis: Mr. Dicks paid $2,400 ($200 per month) to his former spouse in 2015 pursuant to a written separation agreement: [4] With respect to any $200 monthly payments, paragraph 8 of the agreement provides, under the heading “Mutual Fund”, that, The husband agrees that he will make a contribution to an investment of the wife’s choice in the wife’s name in the amount of $200 per month, commencing January 15, 2012 until such time as the husband reaches the age of 60. He sought to deduct the payments as spousal support and CRA denied the deduction on the basis that they were not “support” payments. Mr. Dicks appealed to the Tax Court which denied his appeal, holding that the payments were not to satisfy “alimentary needs”. There was no order as to costs since this was an informal procedure appeal.
Dicks v. R. – TCC: Monthly payments to a former spouse for investment purposes were not deductible as “spousal support”.READ MORE »

Ross v. R. – TCC: Five payments by lobster fisherman to former spouse were deductible as periodic spousal support payments

Nov 09, 2018 By Bill Innes

Précis: Mr. Ross, a lobster fisherman, agreed to make 5 payments to his former spouse: $20,000.00 upon signing a separation agreement on November 26, 2015, a transfer in kind of a 2011 Jeep worth $22,000.00 in December 2015 and 3 further payments by cheque: $4,000.00 on December 8, 2016, $3,000.00 on December 16, 2016 and $3,000.00 on December 31, 2016. [Para. [2]] CRA allowed the last three payments made in 2016 but denied the 2015 payments on the basis that they were not periodic payments for the maintenance of a former spouse. Bocock J. allowed the appeal on the basis that the payments were periodic and tailored to meet the taxpayer’s occupation as a lobster fisherman where the bulk of his income was earned in late fall and early winter with no income earned in the balance of the year. Mr. Ross was awarded costs of $150.00.
Ross v. R. – TCC: Five payments by lobster fisherman to former spouse were deductible as periodic spousal support paymentsREAD MORE »

Phénix v. R. – TCC: Taxpayer’s failure to report dividend income did not amount to gross negligence – penalty removed

Nov 06, 2018 By Bill Innes

Précis: The appellant operated a fair sized business (turnover of roughly $10,000,000 annually) through a corporation. He was normally remunerated by a combination of salary and dividends in amounts determined by his internal and external accountants. In 2013 he omitted to report a dividend he received. CRA assessed gross negligence penalties pursuant to subsection 163(2) of the Income Tax Act. Boyle J. found that the circumstances did not amount to gross negligence and directed that the penalty be removed.
Phénix v. R. – TCC: Taxpayer’s failure to report dividend income did not amount to gross negligence – penalty removedREAD MORE »

Laliberté v. R. – TCC: Cirque du Soleil sends its boss over the moon (almost) but CRA is not amused – a reassessment darkens his re-entry

Oct 23, 2018 By Bill Innes

Précis: M. Laliberté, the Appellant, is the founder of Cirque du Soleil and in 2009 (the relevant tax year) was its controlling shareholder. In 2009 Cirque paid for M. Laliberté spending 12 days on a trip to and from the International Space Station. While in space he participated in a fund-raising drive for One Drop Foundation/Fondation One Drop (“One Drop”), a charity in support of the availability of clean pure water that is closely allied with Cirque. M. Laliberté reported a $4,000,000 shareholder benefit. CRA was not amused and assessed M. Laliberté for a $41.8 million shareholder benefit representing the entire cost of the space trip. M. Laliberté appealed to the Tax Court arguing that none of the cost should be taxable in his hands. Justice Boyle held that on the very limited evidence before him the most he could allocate to a business portion of the cost of the trip (and therefore not taxable) was 10%. He held that the balance was taxable in the hands of M. Laliberté and awarded costs to the Crown.
Laliberté v. R. – TCC: Cirque du Soleil sends its boss over the moon (almost) but CRA is not amused – a reassessment darkens his re-entryREAD MORE »

McCartie v. R. – TCC: Rule 58(1) motion denied on issues arising from prior criminal prosecution in which the Appellant was acquitted

Oct 16, 2018 By Bill Innes

Précis: The Appellant had been prosecuted for tax evasion. He and his co-accused wife were both acquitted. During the course of the criminal trial certain evidence was ruled inadmissible on the basis of Charter violations. The Appellant moved for a determination of certain questions pursuant to Rule 58(1) of the Tax Court of Canada Rules (General Procedure) (the Rules). Bocock J. dismissed his motion on the basis that the sorts of questions raised were better left to the trier of fact during the course of an actual trial. He awarded costs to the Respondent.
McCartie v. R. – TCC: Rule 58(1) motion denied on issues arising from prior criminal prosecution in which the Appellant was acquittedREAD MORE »

Hunt v. R. – TCC: Constitutional challenge to Tax Free Savings Account rules fails

Oct 11, 2018 By Bill Innes

Précis: The Income Tax Act (Act) contains in section 207.05 (and related provisions) a somewhat complex set of rules governing the use of Tax Free Saving Accounts (TFSAs). Mr. Hunt was assessed taxes of $24,833, $14,973, $35,441 and $49,158 on the basis that he had infringed those rules in 2010, 2011, 2012 and 2013, respectively, and he appealed to the Tax Court. This is the report of a motion pursuant to subsection 58(1) of the Tax Court of Canada Rules (General Procedure) to determine two constitutional questions: (a) Is section 207.05 of the Income Tax Act (Canada) unconstitutional for impermissibly infringing on the right to make laws respecting “Property and Civil Rights” which is granted exclusively to the provinces under subsection 92(13) of the Constitution Act, 1867?; or (b) Is section 207.05 of the Income Tax Act (Canada) unconstitutional as a consequence of Parliament having improperly delegated the rate-setting element of the charge imposed thereunder to the Minister of National Revenue in contravention of section 53 of the Constitution Act, 1867? Pizzatelli J. held that section 207.5 was not unconstitutional under either argument and answered both questions No. The Appellant was ordered to pay the Repondent’s costs in any event of the cause.
Hunt v. R. – TCC: Constitutional challenge to Tax Free Savings Account rules failsREAD MORE »

Segura Mosquera v. R. – FCA: No appeal from Nil assessment

Oct 10, 2018 By Bill Innes

Précis: Ms. Mosquera received several Nil assessments from CRA in respect of her 2010 taxation year. She appealed to the Tax Court and Justice Owen dismissed her appeal on the basis that there is no jurisdiction to appeal a Nil assessment. Ms. Mosquera appealed to the Federal Court of Appeal which also dismissed her appeal. Although the Crown sought costs the Court of Appeal ordered that the parties each bear their own costs.
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Kwan v. R. – TCC: Parent allowed bulk of child care expenses claimed; Court criticized CRA’s attempt to cherry pick expenses and second guess choices of parents

Sep 19, 2018 By Bill Innes

Précis: This case is illustrative in demonstrating both the wide variety of possible child expense claims and the Court’s refusal to substitute CRA’s concept of reasonable child care expenses for that of the children’s parents. CRA disallowed $5,086 of expenses claimed. The Court allowed $4,621, disallowing only $465. There was no order as to costs since this was an informal procedure appeal.
Kwan v. R. – TCC: Parent allowed bulk of child care expenses claimed; Court criticized CRA’s attempt to cherry pick expenses and second guess choices of parentsREAD MORE »

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