Archives - juin 2018

Posts tagged "Income Tax Act"

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
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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 >
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
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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
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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 >
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
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- Bill Innes on Current Tax Cases
- Employment Insurance/CPP
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 >
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
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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 >
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
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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
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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 >
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
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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
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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 >

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