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 »

Akanda Innovation Inc. v. R. – FCA: Interests of justice favoured extending time to apply to set aside default Judgments – decision of Tax Court set aside

Nov 13, 2018 By Bill Innes

Précis: The amounts at issue in this appeal were large: [3] Akanda was reassessed to deny scientific research and experimental development expenditures in excess of $6 million and related investment tax credits in excess of $1.5 million collectively for its 2007, 2008, 2009 and 2010 taxation years. After a rather convoluted history the appeals were dismissed by the Tax Court for failure to appear at a status hearing. The taxpayer retained new counsel who moved for an extension of time to bring an application to set aside the default judgments as well as moving to set aside the default judgements. The Tax Court denied the motion for an extension of time on the dual bases that the respondent would be prejudiced and that there was no reasonable explanation of the delay in bringing the application. The Court of Appeal found that there was no evidence of prejudice to the respondent and that the interests of justice favoured granting the extension of time. The matter was referred back to the Tax Court for a determination whether the default judgments should be set aside. Upon agreement of the parties Akanda was ordered to pay $5,000 in costs to the Crown.
Akanda Innovation Inc. v. R. – FCA: Interests of justice favoured extending time to apply to set aside default Judgments – decision of Tax Court set asideREAD 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 »

R. v. Gerbro Holdings Company - FCA: CRA’s appeal dismissed from the bench – Income from offshore funds not attributable under section 94.1 of the Income Tax Act (the Act)

Nov 08, 2018 By Bill Innes

Précis: In 2016 Associate Chief Justice Lamarre of the Tax Court of Canada (2016 TCC 173) allowed the taxpayer’s appeal from reassessments including in its income for 2005 and 2006, pursuant to section 94.1 of the Act, income from offshore funds in which it had invested. The Crown appealed to the Federal Court of Appeal which dismissed its appeal from the Bench with costs.
R. v. Gerbro Holdings Company - FCA: CRA’s appeal dismissed from the bench – Income from offshore funds not attributable under section 94.1 of the Income Tax Act (the Act)READ MORE »

MNR v. Iggillis Holdings – SCC: Leave to appeal denied on issue of Advisory Common Interest Privilege

Nov 07, 2018 By Bill Innes

Précis: The Supreme Court of Canada has declined to grant leave to appeal the decision of the Federal Court of Appeal in Iggillis Holdinds Inc. v. Canada (National Revenue), 2018 FCA 51, which upheld a claim of Advisory Common Interest Privilege, reversing a decision of the Federal Court.
MNR v. Iggillis Holdings – SCC: Leave to appeal denied on issue of Advisory Common Interest PrivilegeREAD 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 »

Barejo Holdings v. R. – TCC: Notes are “debt” for the purposes of paragraph 94.1(1)(a) of the Act – Barejo, the Neverending Story - Perhaps

Oct 24, 2018 By Bill Innes

Précis: This is the third in a series of Barejo cases. In the first decision, issued on November 4, 2015, Boyle J. was asked on a Rule 58 application whether certain instruments were “debt” for the general purposes of the Income Tax Act (the Act). He answered yes. The Appellant was dissatisfied and appealed to the Federal Court of Appeal which dismissed the two consolidated appeals from the Bench on November 29, 2016 on the basis that hearing the appeals: “would serve no useful purpose and give rise to an improper use of judicial resources” [para. [15]]. Both of these decisions were previously blogged on this site. Barejo applied for leave to appeal to the Supreme Court of Canada. That application was dismissed on June 22, 2017 without reasons, and with costs, by a full 9 person panel of the Supreme Court. In this decision Barejo and the Crown asked Boyle J. to rule on whether the same Notes that were at issue in Barejo No. 1 were “debt” for the purposes of paragraph 94.1(1)(a) of the Act. Justice Boyle held that they were “debt” for such purposes. Costs were reserved to the trial judge.
Barejo Holdings v. R. – TCC: Notes are “debt” for the purposes of paragraph 94.1(1)(a) of the Act – Barejo, the Neverending Story - PerhapsREAD 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 »

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