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 »