Blogue

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)

6 juillet 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)Plus >

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

5 juillet 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 prematurePlus >

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

4 juillet 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 expensesPlus >

Mont-Bruno C.C. Inc. v. R. – TCC: Taxpayer’s attempt to attack Minister’s assumptions failed – the impugned provisions were not simply a paraphrase of the statute

19 juin 2018 By Bill Innes

Précis: The taxpayer was a non-profit corporation which operated a golf course. In 2006 it disposed of a vacant wooded area (the Parcel of Land) at a gain of some $1.7 million. It did not report the gain on its T3 Trust Income Tax return and in 2015 the Minister reassessed the taxpayer for not reporting the disposition and gain on its T3. The taxpayer’s position was that the gain was exempt since the Parcel of Land “was used exclusively and directly for providing dining, recreational or sporting facilities to its members, as required to fit the exemption under subparagraph 149(5)(e)(ii) of the Income Tax Act, RSC 1985 c. 1 (5th Supp) as amended, (the “ITA”).” [para. [3]]. While the Minister’s Amended Reply had been struck (with leave to further amend) by Paris J. in a prior hearing on the basis that it simply paraphrased the statute, the new Further Amended Reply was held by Favreau J. to be an appropriate statement of the facts behind the Minister’s position, not a paraphrase of the language of the ITA. The taxpayer’s motion to strike was dismissed with costs to the Minister on a party and party basis.
Mont-Bruno C.C. Inc. v. R. – TCC: Taxpayer’s attempt to attack Minister’s assumptions failed – the impugned provisions were not simply a paraphrase of the statutePlus >

International Hi Tech Industries v. R. – TCC: Claim for ITCs statute-barred despite alleged misleading advice from CRA officer

15 juin 2018 By Bill Innes

Précis: This decision concerned a claim by the taxpayer for ITCs on expenses incurred in 2008 and 2009 (and a small claim based on a reconciliation error). The taxpayer’s parent corporation, Garmeco Canada International Consulting Engineers Ltd. (Garmeco) had advanced funds to it to pay the expenses in question. Garmeco had then filed a claim for the same ITCs. Garmeco filed an appeal in the Tax Court when its ITC claim was rejected by the Minister. That appeal was dismissed by the Tax Court in 2015. It was only then that the taxpayer made its claim for the same ITCs. The Tax Court dismissed the appeal on the basis that subsection 225(4) of the Excise Tax Act (ETA) barred the claim as statute-barred after 4 years. The taxpayer’s claim that a CRA officer had advised that Garmeco should make the claim for ITCs did not entitle the taxpayer to an extension of the statutory 4 year limitation period. There was no order as to costs.
International Hi Tech Industries v. R. – TCC: Claim for ITCs statute-barred despite alleged misleading advice from CRA officerPlus >

Iberville Developments Limited v. R. – TCC: Tax Court rejects odd interpretation of subsection 97(2) rollover provision which would have given rise to a claimed $122M capital loss (rather than a capital gain of $140K)

13 juin 2018 By Bill Innes

Précis: In this case the taxpayer urged upon the Court an unusual interpretation of the partnership rollover rule contained in subsection 97(2) of the Income Tax Act (the Act). Justice Boyle held that the taxpayer’s interpretation led to an absurd and unintended result not in keeping with a purposive analysis of the underlying provisions and possibly the result of a latent ambiguity in the legislation. As a result the appeal was dismissed with costs.
Iberville Developments Limited v. R. – TCC: Tax Court rejects odd interpretation of subsection 97(2) rollover provision which would have given rise to a claimed $122M capital loss (rather than a capital gain of $140K)Plus >

Almadhoun v. R. – FCA: Cross-appeal allowed striking Tax Court Judge’s obiter comments from actual Judgment

12 juin 2018 By Bill Innes

Précis: This case dealt with Ms. Almadhoun’s claim for the Canada Child Tax Benefit (CCTB). She was unsuccessful before the Tax Court and appealed to the Federal Court of Appeal. The Crown filed a cross-appeal seeking to strike a portion of the Tax Court judgment that referred the matter back to the Minister so that “taxpayer relief in the form of a waiver of any applicable interest and penalties under the Act and also a remission of taxes pursuant to the Financial Administration Act” may be “seriously consider[ed]”. The Court of Appeal dismissed the appeal but allowed the cross-appeal on the basis that such obiter comments should not form part of the Tax Court’s actual judgment. There was no order as to costs.
Almadhoun v. R. – FCA: Cross-appeal allowed striking Tax Court Judge’s obiter comments from actual JudgmentPlus >

Freitas v. R. – FCA: Payments to retired partner not income from business for the purposes of the Canada Pension Plan – Appeal allowed.

11 juin 2018 By Bill Innes

Précis: The appellant was a retired accountant who appealed to the Tax Court unsuccessfully arguing that amounts received from his former partnership after the date of his retirement were not subject to mandatory Canada Pension Plan (CPP) contributions. His appeal to the Federal Court of Appeal was successful. The Court of Appeal ruled that the deeming provision of the Income Tax Act (the Act), subsection 96(1.1), relied upon by CRA deemed payments to retired partners to be income from business for certain purposes of the Act but did not apply to deem such payments to be business income for the purposes of the CPP. Mr. Freitas was awarded $3,500 in costs.
Freitas v. R. – FCA: Payments to retired partner not income from business for the purposes of the Canada Pension Plan – Appeal allowed.Plus >

Lyon v. R. – TCC: Part-time receptionist and Pilates Instructor was engaged in insurable and pensionable employment

8 juin 2018 By Bill Innes

Précis: Ms. Lyons started as a part-time receptionist and clerical worker at the Kinetica Health Group. Subsequently she also became a part-time Pilates Instructor and rehabilitation aide. The Court found that while the parties might have intended to have an independent contractor relationship the facts did not support that conclusion. The Court found that applying the well-known tests for employment relationships Ms. Lyon was clearly an employee for the purposes of the Employment Insurance Act and the Canada Pension Plan.
Lyon v. R. – TCC: Part-time receptionist and Pilates Instructor was engaged in insurable and pensionable employmentPlus >

626468 New Brunswick Inc. v. R. – TCC: “Safe Income” calculated after, not before, tax and computed at the date the dividends in question were paid

7 juin 2018 By Bill Innes

Précis: The corporate taxpayer claimed that when its subsidiary sold a piece of real estate, the full taxable capital gain and recaptured CCA totaling $3,079,184 entered into its “safe income” computation for the purposes of subsection 55(2) of the Act. That safe income was calculated when it increased its paid-up capital giving rise to a deemed dividend to the corporate taxpayer (December 13, 2006). CRA reassessed on the basis that the safe income was only $1,998,098 since it was reduced by the subsidiary’s tax liability of $1,081,586 on the sale of the real estate (computed as at December 13, 2006). The taxpayer argued that the tax should be computed at the end of the 2006 taxation year, i.e., December 31, 2006, and that it had no tax to pay on that date since it had acquired software giving rise to sufficient CCA to shelter the income in question. (The software deduction was under objection at the time of this trial.) The Tax Court agreed with CRA and dismissed the appeal with costs.
626468 New Brunswick Inc. v. R. – TCC: “Safe Income” calculated after, not before, tax and computed at the date the dividends in question were paidPlus >

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