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Nouvelles récentes

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
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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
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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
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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 >
Almadhoun v. R. – FCA: Cross-appeal allowed striking Tax Court Judge’s obiter comments from actual Judgment
12 juin 2018 By Bill Innes
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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 >
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
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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
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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 >
Owen v. R. – TCC: Funds received from taxpayer’s deceased father’s American IRA taxable.
4 juin 2018 By Bill Innes
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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
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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 >
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
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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
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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 >

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