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.
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Armour Group Limited v. R. – FCA: Alleged lease cancellation payment not deductible

Aug 10, 2018 By Bill Innes

Précis: In a complex land transaction with the Province of Nova Scotia the taxpayer claimed to have paid $2.24 million by way of set off to cancel a ground lease with the Province under which its wholly-owned subsidiary, Founders Square Limited (“FSL”), was the tenant. FSL acted as a bare trustee for the taxpayer and the taxpayer claimed to deduct the payment made by FSL as a business expense. CRA denied the deduction as being on account of capital, or alternatively, a non-deductible pre-payment of rent. The Tax Court held that the payment was on account of capital and dismissed the appeal with costs to CRA. The taxpayer appealed to the Federal Court of Appeal which affirmed the decision of the Tax Court with costs to the Crown.
Armour Group Limited v. R. – FCA: Alleged lease cancellation payment not deductibleREAD MORE »

Hillman v. R. – TCC: Court declines CRA’s application in RRSP strip cases to have Rule 58(1) determinations in respect of prior prosecutions of the promoters of the RRSP strips

Aug 09, 2018 By Bill Innes

Précis: The taxpayers were all reassessed in respect of what CRA alleged were RRSP strips. The promoters of those strips were convicted in two separate criminal proceedings. CRA sought to have the Court make a determination under Rule 58 either that the taxpayers could not dispute the factual findings in one of the two criminal cases (the Kendall decision) on the basis of the abuse of process doctrine or, in the alternative, that the factual findings in the Kendall decision were prima facie evidence of the facts and conclusions listed in the Crown’s Reply. Justice Russell held that neither of the Crown’s proposed remedies were appropriate uses of Rule 58(1) and dismissed the application with one set of costs to the Appellants in accordance with the Tariff.
Hillman v. R. – TCC: Court declines CRA’s application in RRSP strip cases to have Rule 58(1) determinations in respect of prior prosecutions of the promoters of the RRSP stripsREAD 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 »

MacDonald v. R. – FCA: An intention to hedge is not a condition for hedging

Aug 03, 2018 By Bill Innes

Précis: This case turned on the treatment of cash settlement payments of $9,936,149 made by Mr. MacDonald on a derivative contract in his 2004-2007 taxation years. Mr. MacDonald treated them as business losses, CRA assessed them as capital losses on a hedge of Bank of Nova Scotia shares owned by him. The Tax Court allowed Mr. MacDonald’s appeal and CRA appealed to the Federal Court of Appeal. The Court of Appeal allowed CRA’s appeal, with costs, holding that the Tax Court had erred in failing to follow the recent Tax Court decision in George Weston Limited v. The Queen, 2015 TCC 42 [George Weston].
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Quinco Financial Inc. v. R. – FCA: Interest on a GAAR assessment commences to run on the balance-due date for taxation year involved, not the date the GAAR assessment is issued

Aug 02, 2018 By Bill Innes

Précis: The taxpayer argued unsuccessfully in the Tax Court that interest on a GAAR assessment should not commence to run until the date of the issuance of the assessment. The taxpayer appealed to the Federal Court of Appeal which dismissed the appeal with costs.
Quinco Financial Inc. v. R. – FCA: Interest on a GAAR assessment commences to run on the balance-due date for taxation year involved, not the date the GAAR assessment is issuedREAD MORE »

Fortnum v. R. – TCC: Taxpayer entitled to tax credit on tuition paid for 10 compulsory courses as part of a summer semester foreign MBA program

Aug 01, 2018 By Bill Innes

Précis: The taxpayer pursued a one year MBA program at Notre Dame University in Indiana. At issue was the tuition of $21,577 CAD she paid for the summer semester in 2014. CRA denied the tuition tax credit on the basis that she paid for 10 separate courses in the summer semester and that the foreign tuition tax credit only applied to tuition for “a course”. Smith J. rejected the Crown’s arguments and allowed the taxpayer’s appeal. There was no order as to costs since this was an informal procedure appeal.
Fortnum v. R. – TCC: Taxpayer entitled to tax credit on tuition paid for 10 compulsory courses as part of a summer semester foreign MBA programREAD MORE »

Davis v. R. – TCC: Taxpayer deemed to be a resident of the United States (and not Canada) on date of receipt of distribution from his U.S. 401(k) retirement fund

Jul 25, 2018 By Bill Innes

Précis: The taxpayer was a long term resident of the United States. In 2013 he decided to move back to Canada and liquidated his U.S. 401(k) and received net proceeds (after U.S. withholding tax) of $495,325.03 (the “401(k) proceeds”) sometime immediately following May 6, 2013 and before leaving for Canada on May 9, 2013. CRA taxed the 401(k) proceeds on the basis that he had been a resident of Canada on the date of receipt of the funds. The Tax Court applied the tie breaker rules under the Canada U.S. Tax Treaty and concluded that under those rules Mr. Davis was a resident of the United States at the date the funds were received. Thus the appeal was allowed with costs.
Davis v. R. – TCC: Taxpayer deemed to be a resident of the United States (and not Canada) on date of receipt of distribution from his U.S. 401(k) retirement fundREAD MORE »

Aitchison Professional Corporation v. R. – TCC: Provision of legal services free to a related professional corporation not a transfer of “property” for the purposes of section 160

Jul 20, 2018 By Bill Innes

Précis: James Aitchison is a lawyer who owed at the time of trial in excess of $2,000,000 in federal income tax plus interest. He has not paid any federal income tax since 1992. In December of 2003 he and his two daughters, both lawyers, incorporated Aitchison Professional Corporation (APC). It appears that since that date all fees for his legal advice have been billed by APC which has provided him little or no compensation for his work. [2] In 2012, the Minister of National Revenue assessed APC for almost $2.1 million pursuant to section 160 of the Income Tax Act. The assessment was premised on the assumption that James had transferred property worth more than $3 million to APC for little or no consideration between January 1, 2007 and September 30, 2010. The Respondent alleges that the property transferred was what the Respondent describes as James’ “right to invoice for legal services”. In short Justice Graham found that Mr. Aitchison had transferred “services” to APC, not property and that accordingly section 160 of the Act did not apply. Thus the appeal of APC was allowed, with costs.
Aitchison Professional Corporation v. R. – TCC: Provision of legal services free to a related professional corporation not a transfer of “property” for the purposes of section 160READ MORE »

Tilahun v. R. – TCC: Additional automobile expenses disallowed – a portion (50%) of cell phone expenses allowed

Jul 11, 2018 By Bill Innes

Précis: The taxpayer worked in construction and was required to report to various work sites. He received a fixed automobile allowance from his employer which filed a Form 2200 stating that the employee was required to pay any other expenses. The taxpayer claimed additional automobile expenses in excess of the allowance and cell phone expense (which his employer did not reimburse). The Tax Court disallowed the additional automobile expense claim but allowed 50% of the cell phone expenses (which the Crown conceded). There was no order as to costs since this was an informal procedure appeal.
Tilahun v. R. – TCC: Additional automobile expenses disallowed – a portion (50%) of cell phone expenses allowedREAD MORE »

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