Blogue

Davis v. R. – TCC: Taxpayer deemed to be a resident of the United States (and not Canada) on date of receipt of distribution from his U.S. 401(k) retirement fund

25 juillet 2018 By Bill Innes

Précis: The taxpayer was a long term resident of the United States. In 2013 he decided to move back to Canada and liquidated his U.S. 401(k) and received net proceeds (after U.S. withholding tax) of $495,325.03 (the “401(k) proceeds”) sometime immediately following May 6, 2013 and before leaving for Canada on May 9, 2013. CRA taxed the 401(k) proceeds on the basis that he had been a resident of Canada on the date of receipt of the funds. The Tax Court applied the tie breaker rules under the Canada U.S. Tax Treaty and concluded that under those rules Mr. Davis was a resident of the United States at the date the funds were received. Thus the appeal was allowed with costs.
Davis v. R. – TCC: Taxpayer deemed to be a resident of the United States (and not Canada) on date of receipt of distribution from his U.S. 401(k) retirement fundPlus >

Heath v. R. – TCC: Court refused to set aside a Notice of Discontinuance filed by the taxpayer.

24 juillet 2018 By Bill Innes

Précis: The taxpayer filed a Notice of Discontinuance only to find the next day that the Crown was prepared to accept a settlement. Nevertheless both the taxpayer and the Crown signed a consent to judgment to implement the proposed settlement. This was rejected by the Tax Court Registry which advised the parties that they would have to take a motion to set aside the Notice of Discontinuance. Smith J. dismissed the motion holding that he did not have jurisdiction to set aside the Notice of Discontinuance.
Heath v. R. – TCC: Court refused to set aside a Notice of Discontinuance filed by the taxpayer.Plus >

Sheck v. R. – TCC: Assessment for GST/HST on transfer from husband at a date he was a tax debtor upheld by Tax Court

23 juillet 2018 By Bill Innes

Précis: Mrs. Sheck appealed an assessment in respect of a transfer of $17,500 made to her in 2008 in respect of outstanding GST/HST owing by her husband and a dry-cleaning corporation of which he was the sole director. She argued that her husband was not liable for the corporate tax until the date in 2016 when a Federal Court certificate for the corporate tax was returned unsatisfied. The Court rejected this argument as a matter of statutory interpretation. The Court rejected a second argument that $12,000 of the funds transferred to her in 2008 represented repayment of a loan she had made to her husband. As a result the appeal was dismissed without costs.
Sheck v. R. – TCC: Assessment for GST/HST on transfer from husband at a date he was a tax debtor upheld by Tax CourtPlus >

Aitchison Professional Corporation v. R. – TCC: Provision of legal services free to a related professional corporation not a transfer of “property” for the purposes of section 160

20 juillet 2018 By Bill Innes

Précis: James Aitchison is a lawyer who owed at the time of trial in excess of $2,000,000 in federal income tax plus interest. He has not paid any federal income tax since 1992. In December of 2003 he and his two daughters, both lawyers, incorporated Aitchison Professional Corporation (APC). It appears that since that date all fees for his legal advice have been billed by APC which has provided him little or no compensation for his work. [2] In 2012, the Minister of National Revenue assessed APC for almost $2.1 million pursuant to section 160 of the Income Tax Act. The assessment was premised on the assumption that James had transferred property worth more than $3 million to APC for little or no consideration between January 1, 2007 and September 30, 2010. The Respondent alleges that the property transferred was what the Respondent describes as James’ “right to invoice for legal services”. In short Justice Graham found that Mr. Aitchison had transferred “services” to APC, not property and that accordingly section 160 of the Act did not apply. Thus the appeal of APC was allowed, with costs.
Aitchison Professional Corporation v. R. – TCC: Provision of legal services free to a related professional corporation not a transfer of “property” for the purposes of section 160Plus >

Tilahun v. R. – TCC: Additional automobile expenses disallowed – a portion (50%) of cell phone expenses allowed

11 juillet 2018 By Bill Innes

Précis: The taxpayer worked in construction and was required to report to various work sites. He received a fixed automobile allowance from his employer which filed a Form 2200 stating that the employee was required to pay any other expenses. The taxpayer claimed additional automobile expenses in excess of the allowance and cell phone expense (which his employer did not reimburse). The Tax Court disallowed the additional automobile expense claim but allowed 50% of the cell phone expenses (which the Crown conceded). There was no order as to costs since this was an informal procedure appeal.
Tilahun v. R. – TCC: Additional automobile expenses disallowed – a portion (50%) of cell phone expenses allowedPlus >

Masa Sushi v. R. – TCC: Corporations not entitled to have directors/officers represent them in general procedure appeals

10 juillet 2018 By Bill Innes

Précis: This was a motion by Masa Sushi Japanese Restaurant Inc. and 2075957 Ontario Inc. for an order to permit their respective president and director, Hai-Guang Liu and Ka Leung Lo, (both non-lawyers) to represent them in general procedure appeals. Boyle J. denied the motion, with costs.
Masa Sushi v. R. – TCC: Corporations not entitled to have directors/officers represent them in general procedure appealsPlus >

Frobb v. R. – TCC: Taxpayer primary caregiver of her three children

9 juillet 2018 By Bill Innes

Précis: The taxpayer was denied the Canada Child Tax Benefit and the Goods and Services Tax Credit in respect of her three children. She appealed to the Tax Court on the basis that she was the primary caregiver. The Court accepted her position and allowed the appeal. There was no order as to costs since this was an informal procedure appeal.
Frobb v. R. – TCC: Taxpayer primary caregiver of her three childrenPlus >

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 >

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