Despite the many technical pitfalls in the reorganization provisions of the Income Tax Act, cases involving those provisions do not often come before the Tax Court. Husky Oil Limited v. The Queen, 2009 TCC 118, is one such case that…
Capital dividends and 160
The Tax Court, in Neumann v. The Queen, 2009 TCC 81, has decided that a capital dividend is a transfer of property for the purposes of section 160, just like an ordinary dividend.
Capital Dividends Again
The following article appeared in the latest edition of the Hamilton Law Association Law Journal.
The Exemption
I delivered a paper on the capital gains exemption at the Ontario Bar Association yesterday in Toronto at a conference for estates and trusts lawyers.
CDA
The capital dividend account of a corporation (“CDA”) is defined in subsection 89(1) of the Income Tax Act (Canada), and the definition requires that the balance of the account be calculated using something like the following formula:
A + B + C + D + E + F + G – H
Dividend Caps
Sometimes we receive instructions for incorporation that include a request to create shares with a fixed redemption amount and a right to receive unlimited dividends. We generally advise against creating such shares, especially if they are to be used in a freeze, because we are concerned that the fair market value of such a share will not be equal to its redemption amount, especially if the share will be held by a controlling shareholder.
Dividends and Section 160
Assume that Corp X owes tax to the CRA. Assume that, while it owes that tax, Corp X pays a dividend to Mr. X who deals not at arm’s length with the corporation. What can the CRA do about it…
Directors and revival, again
In Leger v. The Queen, 2007 TCC 322 (which I discussed here) the Court held that the dissolution of a corporation that was later revived did not engage the two-year limitation period otherwise applicable under subsection 227.1(4) of the Income Tax Act. Mr. Justice Bowie arrived at a different conclusion in Aujla v. The Queen, 2007 TCC 764, in respect of a company under the British Columbia Company Act.
Control Premiums
David Louis at Minden Gross has an interesting article in the October 16 issue of Tax Topics on control premiums for “thin voting shares” (shares that do not participate significantly in the earnings or assets of a corporation but that confer voting rights on the holder). The CRA, at the 2007 CTF Tax Conference, when asked about such shares responded that “It is the opinion of the CRA that a hypothetical purchaser would be willing to pay some amount for the voting control of a company.”
Rectification, again
The Niagara region seems to be doing its part to contribute to the law of rectification in the tax context. Juliar v. Canada (Attorney General), 1999 CanLII 15097 (ON S.C.) originated in the peninsula. Now comes QL Hotel Service Limited v. Ontario (Finance), 2008 CanLII 15226 (ON S.C.). In the latter case, one corporation incorporated another and then transferred intangible property to the other for one common share and tangible property for one million Class A Special Shares. The transferor then sold the shares of the transferee to an arm’s length purchaser.