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Posts tagged "Income Tax Act"

Friedman v. R. – FCA: Court declines to set aside compliance order – subsection 231.7(1)
Jun 01, 2021 By Bill Innes
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Précis: Mr. and Mrs. Friedman received requests for information which they did not provide to CRA. CRA then moved in the Federal Court for a compliance order under subsection 231.7(1) which was granted. The Friedmans argued in the Federal Court that the compliance order should not be granted on two bases: [11] The Friedmans initially challenged the request for information on the basis that the procedure under subsection 231.1(1) infringed their right to liberty, and their protection against self-incrimination pursuant to sections 7, 11(c), and 13 of the Canadian Charter of Rights and Freedoms (the Charter). Subsequently, they applied for and were granted leave to plead that the Federal Court should follow another Federal Court decision on the same issue, Canada (National Revenue) v. Lin, 2019 FC 646 [Lin], in which the Federal Court dismissed an application for a compliance order pursuant to subsection 232.7(1). In that case, the Court found that “the Letters are addressed to both the individuals and their connected entities. The entities are not specified, and it is not clear who is being audited - the individual Respondents or unnamed entities”: Lin at para. 31. Their arguments were unsuccessful in the Federal Court and they appealed to the Federal Court of Appeal. Pelletier J.A. writing for the Court rejected the argument based on a failure to follow the Lin decision because the Judge had correctly distinguished the Lin case. He also rejected the self-incrimination arguments at this stage of proceedings based in part on the Jarvis decision and in part on the absence of a sufficient factual record. Thus the appeal was dismissed with costs. While the Minister asked for additional costs based on the Friedmans having abandoned some of their constitutional arguments at the last minute Pelletier J.A. found that the mischief involved was not such as to merit an increased costs award.
Friedman v. R. – FCA: Court declines to set aside compliance order – subsection 231.7(1)READ MORE »
Logix Data Products Inc. v. R. – TCC: Taxpayer did not adduce evidence sufficient to establish SRED claims
May 26, 2021 By Bill Innes
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Précis: The taxpayer claimed SRED expenditures and related tax credits in respect of the development of a dual purpose solar shingle, i.e., one that could be used to product solar power and also act as a roof shingle. The Tax Court found that the evidence adduced was not sufficient to meet the evidentiary burden of demonstrating that the solar shingle project met the various requirements necessary to qualify as SRED.
Logix Data Products Inc. v. R. – TCC: Taxpayer did not adduce evidence sufficient to establish SRED claimsREAD MORE »
Leonard v. R. – TCC: Taxpayer partially successful in claiming loss on foreclosure proceeding was deductible – adventure in the nature of trade
May 21, 2021 By Bill Innes
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Précis: Mr. Leonard claimed a non-capital loss in the amount of $1,472,006 in 2011 arising out of foreclosure proceedings in a complex land deal. CRA denied the loss. That also had the result of increasing the family income which reduced the Canada Child Tax Benefit which his wife had claimed. They both appealed to the Tax Court. The issue in the main appeal was whether the loss incurred by Mr. Leonard was on income or capital account. The Tax Court found that there was another issue to be determined, i.e., the quantum of the loss. The Tax Court found that Mr. Leonard was engaged in an adventure in the nature of trade and that the loss was on income account. Nevertheless the Court concluded that Mr. Leonard’s loss claim was overstated and reduced his loss to $826,426. Thus both his appeal and that of his spouse were allowed.
Leonard v. R. – TCC: Taxpayer partially successful in claiming loss on foreclosure proceeding was deductible – adventure in the nature of tradeREAD MORE »
Krumm v. R. – FCA: Tax Court did not err in finding that computer software was a “tax shelter” and disallowing the deductions claimed.
May 20, 2021 By Bill Innes
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Précis: The taxpayer acquired computer software for a face price of $2.8 million with $700,000 payable up front and the balance my means of a promissory note. He sought to deduct the $2.8 million over a period of two years (1997 and 1998) and CRA denied his claim on the basis that the software was an unregistered “tax shelter”. The Tax Court dismissed his appeal. The case turned on whether a valuation report provided to the taxpayer by the vendors of the software prior to his purchase made the software a tax shelter Both the Tax Court and the Federal Court of Appeal concluded that the valuation was sufficient to make the software a tax shelter.
Krumm v. R. – FCA: Tax Court did not err in finding that computer software was a “tax shelter” and disallowing the deductions claimed.READ MORE »
Kam-Press Metal Products Ltd. v. R. – FCA: Appeal dismissed – appellant’s activities did not meet the Northwest Hydraulics test for SRED expenditures
May 18, 2021 By Bill Innes
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Précis: The Tax Court rejected the taxpayer’s appeal of the denial of its SRED claim and the taxpayer appealed that decision to the Federal Court of Appeal. The Court of Appeal found that the taxpayer had not met the “scientific method” test set out in the Northwest Hydraulics decision by Bowman J. (as he then was) and dismissed the appeal with costs fixed in the amount of $1,670.
Kam-Press Metal Products Ltd. v. R. – FCA: Appeal dismissed – appellant’s activities did not meet the Northwest Hydraulics test for SRED expendituresREAD MORE »
Nonis v. R. – TCC: Minister’s allocation of employment income earned in Canada by a non-resident was not reasonable – taxpayer’s appeal allowed
May 13, 2021 By Bill Innes
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Précis: Mr. Nonis was an American resident who worked a few days a year in Canada for a period of time. He filed his 2013 and 2014 returns prorated based on the number of days he spent in Canada in those years. This was accepted by the Minister. For 2015 and 2016 he followed the same proration method but the Minister rejected it and imposed the ratios used in 2013 and 2014 even though Mr. Nonis spent fewer days in Canada in 2015 and 2016: 37 days and zero days, respectively. Bocock J. allowed Mr. Nonis’ appeal holding that the Minister’s alleged discretion to use a notional proration was not a reasonable statutory construction under the circumstances.
Nonis v. R. – TCC: Minister’s allocation of employment income earned in Canada by a non-resident was not reasonable – taxpayer’s appeal allowedREAD MORE »
Sweetman v. R. – TCC: Taxpayer’s motion to have appeal held in abeyance until Minister corrects alleged “failures” denied – taxpayer part of Global Learning Gifting Initiative (“GLGI”)
May 12, 2021 By Bill Innes
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Précis: Mr. Sweetman was part of the Global Learning Gifting Initiative (“GLGI”). He chose not to be part of the test case litigation: Mariano v. The Queen and pursued his appeal as a self-represented litigant. He took a motion to have his appeal held in abeyance pending the Minister correcting what Mr. Sweetman alleged were a number of “failures” on the Minister’s part. Graham J. would have no part of Mr. Sweetman’s line of arguments and dismissed the motion with costs payable in the cause.
Sweetman v. R. – TCC: Taxpayer’s motion to have appeal held in abeyance until Minister corrects alleged “failures” denied – taxpayer part of Global Learning Gifting Initiative (“GLGI”)READ MORE »
Lilyfield Development Inc. v. R. – TCC: Appeal of a dissolved corporation quashed (after neglecting Court’s suggestion to apply for a corporate revival)
Apr 16, 2020 By Bill Innes
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Précis: The Crown brought a motion to quash this appeal on the ground that the taxpayer corporation had been dissolved and did not have the capacity to pursue an appeal. The Court essentially gave the taxpayer 30 days to seek a revival and when it failed to do so granted the Crown’s motion and quashed the appeal with costs to the Crown.
Lilyfield Development Inc. v. R. – TCC: Appeal of a dissolved corporation quashed (after neglecting Court’s suggestion to apply for a corporate revival)READ MORE »
Gentile Holdings Ltd. v. R. – TCC: Dividends paid to taxpayer subject to a valid non-arm’s length assessment under subsection 160(1) of the ITA
Apr 14, 2020 By Bill Innes
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Précis: The taxpayer received a dividend in the amount of $600,000 in 2006 from its subsidiary corporation, 0699406 B.C. Ltd. (“0699”). The Minister assessed the taxpayer under subsection 160(1) in respect of the non-arm’s length transfer. The taxpayer resisted the assessment both on the basis that the relationship with 0699 was at arm’s length and that it gave consideration for the dividend in the form of a loan back to 0699. The Tax Court rejected both arguments and dismissed the appeal with costs.
Gentile Holdings Ltd. v. R. – TCC: Dividends paid to taxpayer subject to a valid non-arm’s length assessment under subsection 160(1) of the ITAREAD MORE »
Peach v. R. – TCC: Taxpayer denied business losses on rental property, must include gain on transfer of property to son
Apr 09, 2020 By Bill Innes
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Précis: The taxpayer claimed business losses on real property owned by him in 2011. He also claimed losses from a financial services business carried on by him under the name Harold’s Financial Services (“HFS”) in 2011. (He had unsuccessfully appealed the same points in respect of his 2009 and 2010 taxation years in a prior appeal before both the Tax Court and the Federal Court of Appeal.) Finally he did not report a gain ($14,437) on a property disposed of by him to his son (for what CRA alleged was less than fair market value). The Tax Court accepted CRA’s position on both points and dismissed the appeal. There was no award of costs since this was an informal procedure appeal.
Peach v. R. – TCC: Taxpayer denied business losses on rental property, must include gain on transfer of property to sonREAD MORE »

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