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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 >

Aeronautic Development v. R. – FCA: Federal Court of Appeal upholds finding of de facto control, denying CCPC status for SRED tax credits

30 mai 2018 By Bill Innes

Précis: The appellant, ADC, was originally wholly owned by an American corporation, Seawind Corp., which was in turn owned by Mr. Silva, an American resident. A few months later the shareholdings of ADC were restructured such that Seawind Corp. had only 46% of the shares and employess of ADC, directly or indirectly, owned the balance. ADC operated rent free out of a premises in Canada owned by Seawind Corp., which was also the sole client of ADC. ADC claimed SRED credits after the date of change of de jure control (August 2009) which CRA rejected on the basis that ADC was not a Canadian-controlled private corporation. ADC appealed unsuccessfully to the Tax Court which held that ADC was under the de facto control of Seawind Corp. ADC then appealed to the Federal Court of Appeal which dismissed the appeal, with costs, also on the basis of de facto control but without fully endorsing the reasoning of the Tax Court.
Aeronautic Development v. R. – FCA: Federal Court of Appeal upholds finding of de facto control, denying CCPC status for SRED tax creditsPlus >

Kassawat v. R. – TCC: Engineer employed by wife’s corporation not engaged in insurable employment – not required to do any work at all

29 mai 2018 By Bill Innes

Précis: Mr. Kassawat was a civil engineer and had a job with Qualité 2K Plus K Ltée (the “Payor”) for the period from June 13, 2016 to March 31, 2017. The payor was 100% controlled by his wife. The Payor entered into a contract with Telus to provide engineering services. Telus honoured the contract and paid the agree contractual consideration but for some reason did not require Mr. Kassawat’s services during the period in question. As a consequence he was paid to do nothing during the period. The Minister held that he was not engaged in insurable employment since Mr. Kassawat and the Payor would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm’s length. The Tax Court agreed with the Minister’s position and dismissed the appeal.
Kassawat v. R. – TCC: Engineer employed by wife’s corporation not engaged in insurable employment – not required to do any work at allPlus >

Stewart v. R. – TCC: Partners not allowed to proceed with their individual appeals where the Partnership had previously discontinued its appeal – abuse of process

29 mai 2018 By Bill Innes

Précis: The taxpayers were all partners of TSI I Limited Partnership (“TSI”). TSI had an appeal in the Tax Court arising out of the same issues raised in the appeals of the taxpayers but filed a Notice of Discontinuance with the Tax Court on May 2, 2016 and the appeal was deemed to be dismissed on June 24, 2016 pursuant to subsection 16.2(2) of the Tax Court of Canada Act (the “TCC Act”). As a consequence the Crown moved to strike the appeals of the individual partners on the basis that it would amount to an abuse of process to allow them to continue with their appeals. The Tax Court agreed and struck the appeals with one set of costs to the Crown.
Stewart v. R. – TCC: Partners not allowed to proceed with their individual appeals where the Partnership had previously discontinued its appeal – abuse of processPlus >

Ashworth v. R. – TCC: Taxpayer paid down husband’s corporate line of credit thus providing consideration for transfer of husband’s share of home to her – Subsection 160(1)

11 mai 2018 By Bill Innes

Précis: Ms. Ashworth’s husband transferred his half of the family home to her at a time when he had outstanding tax liability. The Crown agreed that Ms. Ashworth had provided consideration in the form of assuming 50% of the mortgage on the property. The issue was whether paying down the line of credit of her husband’s corporation was also consideration. The Crown argued that since she was a signatory on that line of credit only 50% (i.e., her husband’s share) was consideration for the transfer of the home. The Tax Court rejected the Crown’s position and allowed the appeal except to the extent of $6,730 (relating to some credit card transactions). There was no order as to costs.
Ashworth v. R. – TCC: Taxpayer paid down husband’s corporate line of credit thus providing consideration for transfer of husband’s share of home to her – Subsection 160(1)Plus >

Barbour v. R. – TCC: Tenured professor denied claim for business expenses while on sabbatical

10 mai 2018 By Bill Innes

Précis: The taxpayer was a tenured professor at Ontario College of Art and Design University (OCADU) in Toronto. She claimed deductions for business expenses and losses in 2012 and 2013. During that period she was on sabbatical from July 2012 to June 2013. The Court found that the taxpayer was not carrying on any business during the years in question. While some of the disputed expenses might have qualified as expenses from employment, that was not pleaded or proven and there was no form T2200 from OCADU verifying that such expenses were conditions of employment. As a result the appeal was dismissed, without costs.
Barbour v. R. – TCC: Tenured professor denied claim for business expenses while on sabbaticalPlus >

Manhue v. R. – TCC: Gross negligence penalty upheld in another Fiscal Arbitrators Case

9 mai 2018 By Bill Innes

Précis: Mr. Manhue was another victim of Fiscal Arbitrators. He claimed a business loss of $263,351.82 in 2009. The loss was denied and CRA imposed a gross negligence penalty of $32,633.91 under subsection 163(2) of the Income Tax Act. He appealed the imposition of the penalty unsuccessfully. However the Tax Court did exercise its discretion and did not award costs against him.
Manhue v. R. – TCC: Gross negligence penalty upheld in another Fiscal Arbitrators CasePlus >

Duyo v. R. – TCC: Tax Court applies the FCA’s new “accommodation party” rule (Cheema v. Canada) to deny New Housing Rebate

8 mai 2018 By Bill Innes

Précis: This was a classic case of an accommodation party agreeing to facilitate the purchase of a house without intending to reside in it with the actual purchasers. The case was held in abeyance pending the decision of the Federal Court of Appeal in Cheema which was blogged earlier on this site. Since a majority in Cheema denied the New Housing Rebate in such a circumstance the Tax Court’s hands were tied and the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.
Duyo v. R. – TCC: Tax Court applies the FCA’s new “accommodation party” rule (Cheema v. Canada) to deny New Housing RebatePlus >

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