In general, the CRA cannot collect a debt under the Income Tax Act (Canada) where the tax debtor has objected to, or appealed from, the reassessment underlying the debt (section 225.1). In Canada (National Revenue) v Zhao, 2022 FC 1108,…
Stock options issued to a corporation
Section 7 of the Income Tax Act (Canada) does not apply to stock options granted to a CCPC for consulting services rendered. Instead, “general tax principles” apply to determine when the CCPC must include an amount in income in respect…
EIFEL rules
The new excess interest and financing expense rules (“EIFEL” for short) are set out in draft legislation released by Finance on February 4, 2022. The EIFEL rules do not apply to an “excluded entity”, which includes: (1) Canadian-controlled private corporations…
It’s a tax, not a penalty
I have a great deal of sympathy for the notion that the “taxes” imposed in respect of TFSAs by sections 207.05 and 207.06 of the Income Tax Act (Canada) are in fact penalties and not “taxes”. It’s unfortunate that Parliament…
Inventory vs capital property
Procon Mining & Tunnelling Ltd. v R, 2022 TCC 71, includes a useful discussion of the distinction between capital property and inventory. The appellant acquired shares of other corporations in the hope that joint ventures with the other corporations would…
First director resignation ineffective
In Soulliere v R, 2022 FCA 126, the appellant taxpayer had been assessed as a director of a corporation. The appellant was the incorporating director of the corporation, but he purported to resign a few weeks after its incorporation and…
Phantom income of a trust
A trust receives a deemed dividend under 84(2) or 84(3) of the Income Tax Act as on account of capital for trust law purposes. The trust pays the cash received for the “dividend” to a capital beneficiary. The CRA agrees…
Rental operation as a business
A trust owned and leased commercial buildings and offered certain services to tenants of the buildings, namely electricity, heating, water, maintenance, cleaning and security services. The CRA stated that the trust could be considered to be carrying on a business…
Dividend ordering
Holdco owns all of the shares of Opco, which are worth $5 million. The Opco shares have safe income of $1 million. Opco has GRIP of $1 million and NERDTOH of $70,000. Opco can pay a $1 million eligible dividend…
Economic dependence
In Keybrand Foods Inc. v R, 2020 FCA 201, the Court held that economic dependence was a factor to consider in determining whether parties dealt not at arm’s length as a matter of fact. The CRA gave the following as…