Atlantic Packaging v. R. – TCC: Taxpayer did not dispose of all or substantially all of the assets used in an active business – gain on income account

Oct 22, 2018 By Bill Innes

Précis: The Appellant sold its tissue business (the Tissue Division) to a competitor, Cascades Canada Inc. in its taxation year ended May 31, 2010. It treated the resulting gain as being a capital gain in reliance upon section 54.2 of the Income Tax Act on the basis that it had disposed of property that consisted of all or substantially all of the assets used in an active business. CRA denied the application of section 54.2 and the Appellant appealed to the Tax Court. The Tax Court denied the appeal holding that the sale did not represent all or substantially all of the assets used by the Appellant’s Tissue Division. Costs were awarded to the Respondent.
Atlantic Packaging v. R. – TCC: Taxpayer did not dispose of all or substantially all of the assets used in an active business – gain on income accountREAD MORE »

R. v. 594710 British Columbia Ltd. – FCA: GAAR applies to partnership loss transaction, reversing TCC

Oct 19, 2018 By Bill Innes

Précis: The Appellant was part of a very sophisticated strategy whereby profits within a partnership were, in essence, absorbed, for a fee, by a new corporation brought into the partnership (the new corporation used its own losses to absorb those profits). The Tax Court held that GAAR did not apply to the transaction. The Federal Court of Appeal disagreed and allowed the Crown’s appeal, reserving on the question of costs pending submissions of the parties.
R. v. 594710 British Columbia Ltd. – FCA: GAAR applies to partnership loss transaction, reversing TCCREAD MORE »

Borealis Geopower Inc. v. R. – TCC: SRED grant paid to trust account in 2014 was taxable income in 2014

Oct 18, 2018 By Bill Innes

The factual basis for this case is somewhat complex technically ... Notwithstanding that complexity the question boiled down to whether the advance of $528,560.00 from SDTC was taxable in 2014, notwithstanding that it was paid in trust to the Appellant. Justice Campbell concluded that the degree of control exercised by the Appellant over the advance from SDTC was sufficient to bring the advance into income in 2014. As a result the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.
Borealis Geopower Inc. v. R. – TCC: SRED grant paid to trust account in 2014 was taxable income in 2014READ MORE »

LPIC v. R. – TCC: Ontario’s insurer of lawyers is not exempt from income tax, despite being owned by the Law Society of Ontario

Oct 17, 2018 By Bill Innes

Précis: Lawyers’ Professional Indemnity Company (LPIC) has apparently claimed an exemption from federal income tax pursuant to paragraph 149(1)(d.5) of the Income Tax Act (the Act), as a “public body performing a function of government in Canada” for some time. CRA reassessed its 2013 and 2014 taxation years denying it the exemption. D’Arcy J. agreed with CRA’s position, finding: The Law Society of Ontario (the Law Society) owns in excess of 90% of LPIC’s capital; The Law Society is a public body within the provision of paragraph 149(1)(d.5);but The Law Society did not at the material times perform a function of government in Canada; and dismissed LPIC’s appeal (apart, that is, from a few small concessions made by CRA) with costs to CRA.
LPIC v. R. – TCC: Ontario’s insurer of lawyers is not exempt from income tax, despite being owned by the Law Society of OntarioREAD 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 »

CBS Canada Holdings v. R. – TCC: Court orders CRA to comply with terms of Minutes of Settlement

Oct 12, 2018 By Bill Innes

Précis: CBC Canada Holdings Co. (CBS) and CRA entered Minutes of Settlement. CRA subsequently refused to complete the terms of the settlement on the basis that it was unenforceable: [1] CBS Canada Holdings Co., the appellant (“CBS”), brings an enforcement motion (the “Motion”) against the respondent requesting an order allowing the appeals and referring the reassessments back to the Minister of National Revenue for reconsideration and reassessment, pursuant to paragraph 171(1)(b) of the Income Tax Act, in accordance with the terms of the Minutes of Settlement, including Schedule A, concluded by the parties (the “Minutes”). Immediately after, the Court was notified a settlement had been reached pursuant to subsection 169(3) of the Income Tax Act. [2] CBS says the Minutes constitute a legally valid and binding settlement agreement after eight months of negotiations and the Minister is obligated to reassess CBS’ taxation years ended March 7, 2007 and December 31, 2007 (collectively the “2007 Years”), December 31, 2008, December 31, 2009 and December 31, 2010 (collectively the “subsequent years”) consistent with the Minutes. In part, to reallocate to CBS a non-capital loss in the amount of $24,366,301 (the “NCL”) in its taxation year ended March 7, 2007. CBS contends the NCL is available for carry-forward from its predecessors arising in years prior to the 2007 Years. Justice Lyons agreed with the Appellant and directed CRA to reassess in accordance with the terms of the Minutes of Settlement. Thus CBS’s motion to enforce the Minutes of Settlement was allowed with costs.
CBS Canada Holdings v. R. – TCC: Court orders CRA to comply with terms of Minutes of SettlementREAD 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.
Segura Mosquera v. R. – FCA: No appeal from Nil assessmentREAD MORE »

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 »

Dilalla v. R. – TCC: Taxpayer not entitled to fresh discovery with new representative of the Crown

Sep 17, 2018 By Bill Innes

Précis: Mr. Dilalla worked as a carpenter and received amounts in 2010, 2011 and 2012 from a contracting corporation of which he was sole director and shareholder. He did not report them as income arguing that “his activities were performed for the “sole purpose and intent of exercising his labour in providing a livelihood” for himself and his family. In short, he believes the amounts received were neither a source of taxable income nor dividends. [para. [1]].” He conducted a discovery of the officer appointed by the Crown and was dissatisfied with the answers. He moved to examine another officer of the Crown. Bocock J. dimissed his application with costs holding it was not supported by the facts, the jurisprudence or the Rules.
Dilalla v. R. – TCC: Taxpayer not entitled to fresh discovery with new representative of the CrownREAD MORE »

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