Blogue

CIBC World Markets v. R. – TCC: Section 150 election under the Excise Tax Act precludes claiming ITCs on exported services

7 juin 2018 By Bill Innes

Précis: This is a somewhat unusual case in which the taxpayer seems to have been hoist with its own petard. Despite extensive and clever arguments to circumvent the section 150 election the Court held that the taxpayer was bound by it and dismissed the appeal with costs.
CIBC World Markets v. R. – TCC: Section 150 election under the Excise Tax Act precludes claiming ITCs on exported servicesPlus >

Metrogate v. R. – TCC: Cost of land included in calculation of Ontario transitional new housing rebate

6 juin 2018 By Bill Innes

Précis: This was an application under section 58 of the Tax Court of Canada Rules, General Procedure. The Ontario transitional new housing rebate is based on a percentage of completion calculation. The taxpayer was constructing a condominium complex. In its calculation it added the cost of the underlying land to both the numerator and denominator and arrive at 25.64% percentage of completion. CRA excluded the cost of the land from the calculation and arrived at 17.56% percentage of completion which meant that the taxpayer was entitled to a smaller rebate. CRA’s argument, in a nutshell, was that there was no retail sales tax (“RST”) payable on land and since the rebate was designed to compensate for the underlying RST it was illogical to include the cost of the land in the calculation. The Tax Court rejected CRA’s argument holding that on a proper construction of the Excise Tax Act and the Regulations the cost of land should be included in the rebate calculation. Thus the application of the taxpayer under section 58 was allowed with costs in any event of the cause.
Metrogate v. R. – TCC: Cost of land included in calculation of Ontario transitional new housing rebatePlus >

Emjo Holdings Ltd. v. R. – TCC: Deductions of life insurance expenses denied – taxpayer failed to establish an evidentiary basis for the deductions

6 juin 2018 By Bill Innes

Précis: The taxpayer corporation sought to deduct life insurance expenses of $8,612, $8,556 and $8,556 for each of the 2013, 2014 and 2015 taxation years. Two separate life insurance policies were involved, each on the life of the corporation’s president, Lee Rusnak. One universal policy in the amount of $1,000,000 (later increased to $2,000,000) was acquired in 2002 and the other, a term policy in the amount of $3,000,000, was acquired in 2011. In both cases the Tax Court held that the evidence adduced did not support the deductions claimed. As a result the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.
Emjo Holdings Ltd. v. R. – TCC: Deductions of life insurance expenses denied – taxpayer failed to establish an evidentiary basis for the deductionsPlus >

Chao v. R. – TCC: Employment expenses of $1,149 denied, Crown to pay $200 in costs for Reply amended shortly before trial

5 juin 2018 By Bill Innes

Précis: The taxpayer claimed $1,149 in employment expenses in 2010. The Court disallowed them because they did not qualify for deduction and no forms T2200 had been submitted by the taxpayer showing that the expenses were conditions of employment (nor had she taken steps to obtain such forms). Nevertheless the Court awarded $200 in costs to the taxpayer since the Crown had amended its Reply only a week before trial. The taxpayer was allowed a GST rebate of $277.46 based on an admission by the Crown.
Chao v. R. – TCC: Employment expenses of $1,149 denied, Crown to pay $200 in costs for Reply amended shortly before trialPlus >

Bell v. R. – FCA: Bonuses not exempt under Section 87 of Indian Act – not effectively connected with a reserve. Reasonableness of bonuses not a factor.

5 juin 2018 By Bill Innes

Précis: Ms. Bell was a status Indian but did not live on a reserve. She owned 51% of the shares of Reed Steel Ltd.; her husband, Mike Bell, owned the other 49% of the shares. Mr. Bell was not a status Indian. Reed Steel’s office was located on the Capilano Indian Reservation #5, a reserve as defined by the Indian Act. Reed Steel carried on most of its business activities outside of the reserve. During the taxation years under appeal, 2005 to 2008, Reed Steel paid its net profits (after salaries and other operating expenses) to Ms. Bell by way of bonuses. Ms. Bell claimed that the bonuses were exempt under section 87 of the Indian Act. CRA denied the exemption and she appealed unsuccessfully to the Tax Court which found that the bonuses were unreasonable and not effectively connected with the reserve. Ms. Bell appealed to the Federal Court of Appeal which dismissed her appeal, with costs. The Court of Appeal found that the reasonableness of the bonuses was not an appropriate factor for determining their connection with the reserve but concluded that the other salient factors led to the conclusion that the bonuses were not effectively connected with the reserve.
Bell v. R. – FCA: Bonuses not exempt under Section 87 of Indian Act – not effectively connected with a reserve. Reasonableness of bonuses not a factor.Plus >

Suchocki Accounting Ltd. v. R. – TCC: A corporation must be represented by counsel in a general procedure matter, not by a non-lawyer agent, in the Tax Court

4 juin 2018 By Bill Innes

Précis: The owner and director of the appellant corporation, Michael Suchocki, moved to act as agent for the corporation. In this decision Justice Boyle affirms the well-understood rule that in the Tax Court a corporation must be represented by counsel in a general procedure matter, not by a non-lawyer agent. He also found that even if he had discretion to permit the appointment of an agent he would not exercise that discretion on the facts in front of him. Thus Mr. Suchocki’s motion was denied with costs in any event of the cause.
Suchocki Accounting Ltd. v. R. – TCC: A corporation must be represented by counsel in a general procedure matter, not by a non-lawyer agent, in the Tax CourtPlus >

Owen v. R. – TCC: Funds received from taxpayer’s deceased father’s American IRA taxable.

4 juin 2018 By Bill Innes

Précis: The taxpayer’s father, since deceased, was an American citizen. He had an individual retirement account (“IRA”). On his death a share of that IRA was transferred to a new IRA for the benefit of the taxpayer. CRA added that share to the taxpayer’s income, and allowed him tax credit for the American tax he had paid on the transfer. The taxpayer took the position that the amount was a non-taxable inheritance and appealed to the Tax Court. The Tax Court dismissed his appeal holding that the amount was specifically taxed under clause 56(1)(a)(i)(C.1) of the Income Tax Act (the “Act”). There was no order as to costs since this was an informal procedure appeal as a “foreign retirement arrangement”.
Owen v. R. – TCC: Funds received from taxpayer’s deceased father’s American IRA taxable.Plus >

HLB Smith Holdings v. R. – TCC: Operating company under control of two unrelated directors acting in concert – subsection 160(1) assessments upheld

31 mai 2018 By Bill Innes

Précis: The subsection 160(1) reassessments under appeal all resulted from dividends paid by an operating company in which the Smith Family had a 50% interest: [1] Each of the four appellants has appealed an assessment under section 160 of the Income Tax Act. The assessments of HLB Smith Holdings Limited (the “Holding Company”) and the Smith Family Trust (2001) relate to the payment of dividends in 2007 and 2008 by Power Electric Systems Limited (the “Operating Company”) to the Holding Company and, in the case of the Smith Family Trust (2001), the subsequent payment of dividends by the Holding Company to that trust. The assessments of Wayne Smith and Brenda Lee Brunelle relate to subsequent distributions by the Smith Family Trust (2001) to each of Mr. Smith and Ms. Brunelle. The other 50% was owned by the Scott Family. The taxpayer argued that they were not dealing at less than arm’s length with the Operating Company since Mr. Smith was a passive director who accepted the decisions of Mr. Scott in terms of dividends and other corporate matters. The Tax Court rejected this argument holding that Mr. Smith and Mr. Scott acted in concert to control the Operating Company and therefore each of the appellants dealt at less than arm’s length with the Operating Company for the purposes of subsection 160(1). As a result all of the appeals were dismissed with costs.
HLB Smith Holdings v. R. – TCC: Operating company under control of two unrelated directors acting in concert – subsection 160(1) assessments upheldPlus >

Barr v. R. – TCC: Payments to brokers to arrange for the sale of a business not exempt from GST/HST as “financial services”

31 mai 2018 By Bill Innes

Précis: The taxpayer was the sole shareholder of Garibaldi Springs Water Company Ltd (“Garibaldi”) and retained the services of two brokers (0922763 B.C. Ltd and P.V. Gordon Holdings Ltd) to arrange a sale of the business. He paid $281,584 in HST on the brokers’ commissions when the sale was completed (as a share sale) and in this appeal sought to recover that amount on the basis that their fees were exempt “financial services” in connection with the transfer of the shares of Garibaldi. The Crown took the position that the brokers were engaged to sell the business in general, not specifically to sell the shares. The Tax Court found that the services of the brokers were not confined to arranging for the transfer of the shares and therefore did not amount to the provision of exempt “financial services”. The appeal was dismissed with costs.
Barr v. R. – TCC: Payments to brokers to arrange for the sale of a business not exempt from GST/HST as “financial services”Plus >

DaSilva v. R. – TCC: Tax Court accepts the taxpayer’s evidence that a notice of assessment was not provided to her until August 22, 2016, not sent on January 11, 2013 as alleged by Minister

30 mai 2018 By Bill Innes

Précis: The taxpayer appealed to the Tax Court in respect of a denial of a claim for a GST/HST new housing rebate. The Minister moved to quash the appeal on the basis that the taxpayer’s notice of objection was not filed on a timely basis. The Minister alleged that the notice of assessment was mailed on January 11, 2013. The taxpayer alleged that she did not receive the notice of assessment until it was provided to her on August 22, 2016. The Court accepted the taxpayer’s evidence and allowed the appeal (the Minister conceded that the appeal should be allowed if the appeal was not quashed for late filing).
DaSilva v. R. – TCC: Tax Court accepts the taxpayer’s evidence that a notice of assessment was not provided to her until August 22, 2016, not sent on January 11, 2013 as alleged by MinisterPlus >

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