LPC Notes – Page 85 – Loukidelis PC

Rectification

Tax practitioners will be familiar with the Juliar case, which allowed the parties to a transaction to amend it with retroactive effect in order to avoid adverse income tax consequences. According to the Ontario Court of Appeal decision in the case, it didn’t matter that the only purpose for the amendment was to avoid or postpone income taxes. What mattered was that the parties had a continuing, common intention to effect the transactions in a tax-deferred manner, which intention was thwarted by the form of the transaction.

The Ontario Superior Court came to a different conclusion in Binder v. Saffron Rouge Inc., 2008 CanLII 1662 because the parties did not have the requisite common intention.

Redeemer Unredeemed

The Supreme Court of Canada today issued its decision in Redeemer Foundation v. Canada (National Revenue), 2008 SCC 46. Four members of a seven-person panel rejected the charity’s appeal from the decision of the Federal Court of Appeal.

New Associate Chief Justice

Most tax practitioners will have heard that a 25-year veteran of the Tax Court was appointed as its new Chief Justice earlier this month. Gerald Rip takes over from Donald Bowman, who turned 75 this month. The Prime Minister also appointed Eugene Rossiter as the new Associate Chief Justice. Justice Rossiter is a relative newcomer to the Court: he was only appointed in 2006. Perhaps he is being groomed for the Chief’s chair.

New legislation

Finance released new draft legislation today.

Canada Approves

According to the Department of Finance website, “Canada Supports U.S. Technical Explanation of the Fifth Protocol to the Canada-United States Income Tax Convention“.

Not-for-profit

BBM Canada v. The Queen, 2008 TCC 341, is a surprise, not because of the result but because of the novel position advanced by the Crown in support of the assessment in question. The organization assessed had taken the position that it was exempt from tax under paragraph 149(1)(l) of the Income Tax Act because it was a not-for-profit. The CRA thought otherwise.

Foreign tax credits

In Marchan v. The Queen, 2008 TCC 158, the taxpayer received stock options from the U.S. parent of the Canadian subsidiary for which he worked in Canada. He exercised the options and sold the underlying securities, but the brokers handling the transactions withheld amounts from his proceeds, presumably on account of U.S. taxes. The taxpayer tried to claim a foreign tax credit.

Another loss

Another tax shelter case, another loss for the taxpayer: see Norton v. The Queen, 2008 TCC 91. It’s clear that the courts have little patience for these schemes, which is a real problem for those trying to promote legitimate shelters.…

Objection Held in Abeyance

In my post for June 17, I discussed a case allowing interest relief for court-related delay for a taxpayer whose objection was held in abeyance pending the outcome of the court case. In the June 5 Tax Topics, John Yuan points out a potential trap for a taxpayer whose objection is being held in abeyance.

C-50 Now Law

Bill C-50 received Royal Assent yesterday and became law as S.C. 2008, c. 28.

LPC Notes (page 85)