For some reason, the CRA seems to want to believe that an accounting entry by itself is a real transaction that can give rise to tax consequences. The Tax Court, in Cook v. The Queen, 2006 TCC 344 was called on to remind the CRA, again, that an accounting entry as such does not create a taxable reality.
Amalgamations, Long and Short
An amalgamation is an important tool in the tax adviser’s toolbox. He or she can use amalgamations to simplify corporate structures, get rid of unwanted shell corporations, permit the interest expense on debt used to acquire another corporation to be deducted in computing income from that corporation’s business or bump the cost of non-depreciable capital property for income tax purposes. Understanding the rules that govern amalgamations, then, is important for a tax practitioner, and an understanding of those rules begins with an understanding of the nature of an amalgamation from a corporate law perspective.
Control and groups
Crystal Beach Park Limited v. The Queen, 2006 TCC 183 is an interesting case with some local roots
De Facto Control
I am regularly asked whether it is possible to “multiply” the small business deduction (the SBD), and just as regularly I find it difficult to provide easy-to-understand advice and guidance. The association rules are complex, and even if their technical requirements are met the CRA can still reassess to require corporations to share the SBD on the grounds that they are controlled de facto by the same person. Two recent cases show that the courts are willing to uphold such reassessments.
Some Notes on CDA
Calculating CDA
Canada’s income tax system aspires to “neutrality” so that, in theory, an individual should be indifferent about whether he earns income directly or through a corporation. The CDA is one of the mechanisms employed to achieve this neutrality.
Paid-up Capital Traps
According to the Income Tax Act (Canada) (the “Act”), when computing paid-up capital (“PUC”) for tax purposes, one must begin with “an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act”.
What is PUC “computed without reference to the provisions of this Act”?
Reallocation of Partnership Income
Subsection 103(1) of the Income Tax Act (Canada) is an anti-avoidance rule that permits the Minister to reallocate (among other things) income among the partners of a partnership where the “principal reason” for the allocation agreed upon by the partners…
Section 84.1
What tax practitioner hasn’t woken up in the middle of the night, sweating, because of dreams haunted by section 84.1 file demons? I will try to banish the demons — or propitiate them anyway — in a short presentation on February 2, 2006 at the CRA’s Hamilton & District Tax Consultation Group.
Finance on Income Trusts
In a press release that appeared on the Department of Finance website today, Finance Minister Ralph Goodale announced that Finance consultations on income trusts had ended and that it would attempt to solve the problem posed by the vehicles by reducing “personal income taxes on dividends, which will help level the playing field between corporations and income trusts.”
Safe Income and Partial Rollovers, Again
At the end of our article on 729658 Alberta Ltd. v. The Queen, 2004 TCC 474, we speculated that the case might create new opportunities for taxpayers. A CRA technical interpretation dated February 5, 2005, suggests that the Agency disagrees.