A wife pays interest under a line of credit that her husband used to buy shares in a business. Can the wife deduct the interest? Not according to Bernacchi v. The Queen, 2010 TCC 306, unsurprisingly: All in all, I…
Exida.com Appeal Dismissed
In Exida.Com Limited Liability Company v. The Queen, 2010 FCA 159, the Federal Court of Appeal dismissed the appeal of the taxpayer from the decision of Justice Woods (see “Contradiction“). The Federal Court of Appeal’s reasoning is surprising and, perhaps, disturbing.
Current cases
Joe Monaco presented “Current Tax Cases” at the CRA’s Tax Practitioner’s Consultation Group meeting at the Royal Botanical Gardens this morning.
Retiring allowance exception
In Rae v. The Queen, 2010 TCC 130, the taxpayer left his position as the controller of one corporation and joined another. Soon after he started his new employment, he discovered what he thought were serious improprieties in the financial statements and accounting practices of his new employer. He resigned his position but then negotiated a settlement under which he received a large payment for negligent misrepresentation and as damages for retaliation. The CRA took the position that the entire amount received was a retiring allowance. The taxpayer appealed; the Tax Court agreed with him in part.
Assessments
In Danso-Coffey v. Ontario, 2010 ONCA 171, the Ontario Court of Appeal considered whether Ontario could assess and collect tax from an individual who was supposedly a director of a corporation when, it turned out, she wasn’t. The Court concluded that Ontario could assess and collect the tax if the individual failed to follow the appropriate procedures in the Retail Sales Tax Act (the “RSTA”) for disputing the assessment.
Criminal Minds
Mr. Mortensen was convicted of tax evasion in respect of some commissions he earned but failed to report. He filed an appeal with the Tax Court, and the Crown responded by bringing a motion to dismiss the appeal. The taxpayer, the Crown argued, shouldn’t be permitted to contest the tax owing and the gross negligence penalties imposed in respect of amounts for which he had been convicted of evasion.
Self-Assessment
In Rezler v. The Queen, 2009 TCC 609, the taxpayer made excess contributions to her RRSP. On appeal, the Tax Court judge responded as follows:
Partnership freeze
Tax Topics number 1984 (March 18, 2010) has an interesting article on estate freezes using partnerships in light of Krauss v. The Queen, 2009 TCC 597.
84.1 Gotcha
Assume that A and B, who deal at arms length, own 55 and 20 common shares in the capital of Opco respectively. A and B also own 95 and 5 common shares in the capital of Holdco respectively. Assume that B’s tax adviser suggests to her that she can sell her common shares in the capital of Opco to Holdco for a purchase price equal to $400,000 cash. What could possibly go wrong? See Emory v. The Queen, 2010 TCC 71, for the answer to that question.
Famliy Members as Directors
I’ve seen a number of cases where a family member consents to be a director of a corporation—exactly why nobody seems to know after the fact—and then ends up being assessed for unremitted source deductions. The family member might be uneducated and barely able to speak English, but that won’t stop the assessments. The CRA and the Ministry of Revenue are unsympathetic. The courts are less cold-blooded it seems.