John Loukidelis – Page 81

Limitation Periods

The following article appeared in the latest edition of the Hamilton Law Association Law Journal.

The Income Tax Act (Canada) (the “Act”) contains numerous limitation periods that affect when the Canada Revenue Agency (the “CRA”) can issue an assessment to a taxpayer and when a taxpayer can and cannot dispute such an assessment. Understanding these limitation periods is an important pre-requisite for advising clients about a wide variety of legal problems, including, for example, the expiry period for representations and warranties in a share purchase agreement.

Dividend Caps

Sometimes we receive instructions for incorporation that include a request to create shares with a fixed redemption amount and a right to receive unlimited dividends. We generally advise against creating such shares, especially if they are to be used in a freeze, because we are concerned that the fair market value of such a share will not be equal to its redemption amount, especially if the share will be held by a controlling shareholder.

$2.5 billion

The CRA continues to talk tough on donation tax shelter schemes. And why shouldn’t it? Its boast that “In 2008, Canadian courts have continued to confirm the CRA’s position with respect to these schemes” is accurate. What I find disturbing…

“Tax tip”

“Did you know… That you should notify the Canada Revenue Agency (CRA) when directors of your corporation change?”

Ways and Means ’08

“Government of Canada Moves Quickly on Seniors’ Tax Relief and Other Outstanding Measures“. But can the government act quickly enough?

EBay released

eBay Canada Ltd. v. Canada (National Revenue), 2008 FCA 348 is now available on CanLII. The Court held that information on servers in the U.S. is not foreign-based information.

Non-competes, again

Thursday last I tried, once again, to explain the restrictive covenant rules in proposed section 56.4 of the Income Tax Act (Canada) to a seminar hosted by the Hamilton Law Association (please send an email to me if you would like a copy of the PowerPoint presentation). I’m not sure how well I succeeded. I find the rules difficult to work with and impossible to explain because they are so full of apparently random tricks and traps.

Dividends and Section 160

Assume that Corp X owes tax to the CRA. Assume that, while it owes that tax, Corp X pays a dividend to Mr. X who deals not at arm’s length with the corporation. What can the CRA do about it…

Procedure

In Corsi v. The Queen, 2008 TCC 472, the CRA sent a 160 assessment to the taxpayer by registered mail in June, 2004, to her home address, which was not the address the CRA had on file for the taxpayer. For whatever reason, the taxpayer didn’t pick up the mail, and it was returned to the CRA. The CRA did nothing more with the assessment, but some time thereafter CRA Collections started calling the taxpayer. This was the first she heard about the assessment. The CRA then mailed a copy of the assessment to the taxpayer’s accountant in October, 2005, more than one year and 90 days after the first assessment was supposedly sent.

Mutual fund tax bomb?

Someone forwarded to me an email from a local accountant who was warning his clients who own mutual funds about large capital gains distributions that funds will be required to make at the end of this year because of record redemptions of units during the recent market slide.

Author: John Loukidelis (page 81)