From David Nathanson, “Tax Liens and Constructive Trusts” 26:8 Canadian Tax Highlights (Aug 2018): Thus, if a constructive trust is recognized, for income tax purposes the legal owner of the property in dispute is generally regarded by the CRA as…
Safe income accrual
From Henry Shew, “Safe Income May Vary Within Shares of the Same Class” 8:3 Cdn Tax Focus (August 2018): Assume that Holdco purchases 100 shares of Opco for $10 (“the old shares”). These shares earn $1 per share of safe…
Informal procedure appeals
Craig Burley has written a helpful article about a technicality relating to the $25,000 limit for informal procedure appeals to the Tax Court of Canada. He refers to Maier v R, 1994 CarswellNat 3242, T.C.J. No. 1260 (TCC), in…
Partnership reorganizations
The general rule on the dissolution of a partnership is that all partnership property is disposed of at fair market value (s 98(2)). The Income Tax Act (Canada), however, contains a number of rules providing for a rollover. 85(3)—No bump…
Settlement and HST
A payment of an amount pursuant to a settlement can be subject to HST. What happens where the settlement agreement is silent on whether the amounts payable under it include HST? In Automodular Corporation v. General Motors of Canada Limited,…
Corporate attribution
Manu Kakkar, Alex Ghani and Boris Volvofsky, in “Corporate Attribution: Refreeze May Cause Unsolvable Corporate Attribution Problem” 18:3 Tax for the Owner-Manager (July, 2018), argue that a refreeze at a lower value does not reduce the outstanding amount for the…
Penalties and deeming rules
In Semenov v R, 2018 TCC 58, the CRA found unexplained deposits in the individual taxpayer’s personal bank account. The CRA applied a “deeming” rule to treat the amounts as unreported income subject to gross negligence penalties. The CRA applied…
Taxation of a ‘signing bonus’
In Ritchie v R, 2018 TCC 113, the taxpayer owned land that he rented to a corporation he owned. The corporation carried on a farming business. Enbridge paid amounts to the taxpayer for easements across his land, including $255,790 as an “early signing bonus” (a bonus for signing the easement agreement before a certain date). The taxpayer reported the bonus as a capital gain. The CRA reassessed to include the full amount of the bonus in the taxpayer’s income. Was the bonus on capital account?
A valuable envelope
S 244(15) of the Income Tax Act (Canada) provides that an assessment is deemed to have been made on the date that it is sent, and the date on which an assessment is sent by first class mail “or its…
Acting in concert
In HLB Smith Holdings Limited v R, 2018 TCC 83, each of Holdco and a family trust (“Trust1”) held 50% of the shares in the capital of Opco. Another family trust (“Trust2”) held all of the issued shares in the capital of Holdco. Trust1 was for the benefit of W’s family; it appears Trust2 was for the benefit of M’s family. W and M were unrelated. They were the directors of Opco at all times. Opco paid dividends to its shareholders at a time when it owed income tax. Holdco paid dividends to Trust2, which allocated the dividends to M and his wife. Were the recipients of the dividends liable under section 160? Put another way, did Opco deal at arm’s length with its shareholders, who were unrelated to it?