Ferlaino v. R. - FCA: Stock option benefits denominated in US Dollars computed at exchange rate when exercised

May 25, 2017 By Bill Innes

Précis: The taxpayer was granted employee stock options denominated in US dollars. When he exercised the options he reported the benefit based on the exchange rate prevailing at the date of the grant of the options. CRA assessed him with an employment benefit based on the exchange rate prevailing at the date of the exercise of the options. He appealed unsuccessfully to the Tax Court and then appealed to the Federal Court of Appeal. The Court of Appeal dismissed the appeal from the bench, with costs, holding that the Tax Court had made no reviewable error.
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Groves v. R. - TCC: Mother, sole payer of support, cannot claim tax credits for one of two children

May 24, 2017 By Bill Innes

Précis: Ms. Groves and her former spouse had joint custody of the two children of the marriage. They separated in 2011 and under the original Separation Agreement she was to pay child support to her former spouse. Under an amended Separation Agreement executed in 2015 they were each to pay child support. Ms. Groves claimed the Canada Child Tax Benefit in 2014 in respect of one child. CRA denied the claim and Ms. Groves appealed to the Tax Court. The Court held that the case law was clear that where only one parent pays child support the parent paying support is not entitled to the Tax Benefit. Thus the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.
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The Armour Group v. R. - TCC: Lease cancellation fee of $2.24 million not deductible

May 12, 2017 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.
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Heron v. R. - TCC: Limited portions of the Crown’s Reply struck

May 12, 2017 By Bill Innes

Précis: In its Reply the Crown pleaded that the taxpayer had been involved in criminal activity for which he was charged and convicted. The taxpayer moved to strike the impugned portions of the Reply. The taxpayer was modestly successful in that two paragraphs were struck that were pleadings of argument, and not fact. In addition one paragraph detailing the sentence the taxpayer received in the criminal proceeding was struck. The balance of the impugned pleading was not struck. There was no order as to costs.
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AG Shield Ltd. v. R. - TCC: Salary paid to main shareholders was SRED expense

May 11, 2017 By Bill Innes

Précis: Tom and Gary McCrae each owned 50% of the shares of the taxpayer. The taxpayer paid each of them salary of $30 per hour based on the number of hours they spend in SRED activities. They did not receive salary for the time they spent in other corporate activities but did receive equal amounts of dividends each year. CRA pro-rated the SRED treatment based on total hours spend by each of them and the taxpayer appealed to the Tax Court. The Tax Court found that the amounts of salary claimed by the taxpayer fell within the definition of SRED and did not have to be pro-rated between SRED and non-SRED activities. The appeal was therefore allowed with costs.
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Huneault v. R. - TCC: Shared custody - father cannot claim one dependant if mother does not also pay support

May 11, 2017 By Bill Innes

Précis: This is yet another case where in a joint custody arrangement only one parent pays support. The Courts have established clear precedent that in such cases the payor parent is not entitled to treat one of the children as a dependant for tax purposes. Justice Boyle simply applied that precedent and dismissed the taxpayer’s appeal. There was no order as to costs as this was an informal procedure appeal.
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Thangarajah v. R. - TCC: Letter from taxpayers’ agent not a request for extension of time

May 10, 2017 By Bill Innes

Précis: The taxpayers sought an extension of the time to file Notices of Objection for the 2011 and 2012 taxation years in respect of Notices of Reassessment issued in November of 2014. The sole question before the Court was whether a letter dated September 10, 2015 from the taxpayers’ agent could be construed as an application to extend the time to file a notice of objection. The Minister did not accept the letter as such an application and the Court agreed that it could not be so construed. Since no application had been made to the Minister within the statutory limitation period the extension application was dismissed. There was no order as to costs.
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Beima v. R. - FCA: Appellant failed to adduce grounds for setting aside a compliance order

May 09, 2017 By Bill Innes

Précis: CRA sought and obtained a compliance order in the Federal Court after Mr. Beima interfered with the conduct of an audit in various ways, e.g., attempting to limit the number of persons working on the audit, refusing to allow the making of copies, etc. Mr. Beima appealed to the Federal Court of Appeal and the appeal was dismissed from the bench, with costs, on the basis that Mr. Beima had failed to demonstrate any reversible error on the part of the Federal Court Judge.
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Costanzo v. R. - TCC: Fees paid to “associate musicians” not deductible

May 09, 2017 By Bill Innes

Précis: Mr. Costanzo was a musician. After a number of smaller items were settled, the only remaining issue in this appeal was the deduction of amounts paid to “associate musicians” who were very close friends of Mr. Costanzo. The Court found that Mr. Costanzo had not proven the payment of the amounts in question and dismissed the appeal. There was no order as to costs since this was an informal procedure appeal.
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Smith v. R. - TCC: Jazz flight attendant - airport parking pass was a taxable benefit

May 02, 2017 By Bill Innes

Précis: The taxpayer was a flight attendant with Jazz. CRA included in his income for 2011 $504 in respect of a benefit from a parking pass at Calgary airport. Mr. Smith appealed to the Tax Court which dismissed his appeal, finding that the parking pass was a benefit from employment. There was no order as to costs as this was an informal procedure appeal.
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