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 »

Masa Sushi v. R. – TCC: Corporations not entitled to have directors/officers represent them in general procedure appeals

Jul 10, 2018 By Bill Innes

Précis: This was a motion by Masa Sushi Japanese Restaurant Inc. and 2075957 Ontario Inc. for an order to permit their respective president and director, Hai-Guang Liu and Ka Leung Lo, (both non-lawyers) to represent them in general procedure appeals. Boyle J. denied the motion, with costs.
Masa Sushi v. R. – TCC: Corporations not entitled to have directors/officers represent them in general procedure appealsREAD MORE »

Frobb v. R. – TCC: Taxpayer primary caregiver of her three children

Jul 09, 2018 By Bill Innes

Précis: The taxpayer was denied the Canada Child Tax Benefit and the Goods and Services Tax Credit in respect of her three children. She appealed to the Tax Court on the basis that she was the primary caregiver. The Court accepted her position and allowed the appeal. There was no order as to costs since this was an informal procedure appeal.
Frobb v. R. – TCC: Taxpayer primary caregiver of her three childrenREAD MORE »

Mottle v. R. – TCC: Transfer of spouse’s employment income to taxpayer’s account for use to defray household expenses nevertheless subject to subsection 160(1)

Jul 06, 2018 By Bill Innes

Précis: Ms. Mottle’s spouse caused his employment income to be transferred to Ms. Mottle’s account from which she used it to pay household expenses. There were 20 transfers from September 6, 2013 to July 18, 2014 totalling $10,849.92. At the date of each transfer the spouse’s outstanding tax debt exceeded the amount of the transfer, The debt totalled some $36,255.55. Ms. Mottle was assessed pursuant to subsection 160(1) of the Income Tax Act (the Act) in respect of the transfers. The Tax Court held that it was bound by the decision of the Federal Court of Appeal in Yates v. Her Majesty, 2009 FCA 50. The use of the transferred funds for family or living expenses did not preclude the operation of subsection 160(1) to tax the recipient of the funds. The appeal was dismissed without costs (it was an informal procedure appeal).
Mottle v. R. – TCC: Transfer of spouse’s employment income to taxpayer’s account for use to defray household expenses nevertheless subject to subsection 160(1)READ MORE »

Wild v. R. – FCA: GAAR assessment based on corporate reorganization set aside as premature

Jul 05, 2018 By Bill Innes

Précis: Mr. Wild and his wife originally owned all of the shares of P.W. Rentals Ltd. (“PWR”). Starting in 2003 they went through a complex corporate reorganization the had the effect of substantially increasing both the adjusted cost base (ACB) and paid-up capital (PUC) of Mr. Wild’s holdings beyond their original ACB/PUC of $110. Mr. Wild used his lifetime capital gains exemption and no tax was paid on any of the transactions. CRA reassessed Mr. Wild and 1245989 Alberta Ltd. (1245) using GAAR on the basis that “the transactions had been undertaken in a manner that defeated the object, spirit and purpose of section 84.1 and subsection 89(1) of the Act” [para. 3]. The GAAR assessment was sustained in the Tax Court and Mr. Wild appealed to the Federal Court of Appeal. The Court of Appeal allowed Mr. Wild’s appeal, holding that while the reorganization created the potential for a tax-free distribution of corporate retained earnings, there had been no such distribution so accordingly there had been no misuse or abuse of section 84.1. Thus the appeal was allowed and the reassessment of Mr. Wild was vacated. A similar result followed in the appeal of 1245. Each party was to bear their own costs. The Court of Appeal specifically provided that the decision was without prejudice to CRA’s right to assess any future attempt to distribute corporate surplus on a tax-free basis.
Wild v. R. – FCA: GAAR assessment based on corporate reorganization set aside as prematureREAD MORE »

Yu v. R. – TCC: Taxpayer simply did not offer credible evidence of disputed business and rental property expenses

Jul 04, 2018 By Bill Innes

Précis: The taxpayer had an odd assortment of expenses disallowed including fees defending a criminal charge. She showed up in Court without any substantial documentary evidence to support the disputed claims and the Court dismissed her appeal without costs (as this was an informal procedure appeal).
Yu v. R. – TCC: Taxpayer simply did not offer credible evidence of disputed business and rental property expensesREAD MORE »

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