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…
Mutual fund tax bomb?
Someone forwarded to me an email from a local accountant who was warning his clients who own mutual funds about large capital gains distributions that funds will be required to make at the end of this year because of record redemptions of units during the recent market slide.
The Cottage as a Principal Residence
The following article appeared in the latest edition of the Hamilton Law Association Law Journal.
In many families, the summer cottage is something like an institution. It provides happy memories of lazy days spent on the water and cool nights with only the crickets to disturb one’s sleep. A cottage, however, can also present a tax problem. We are regularly consulted by taxpayers concerned about how their estates will pay the Canada Revenue Agency (the “CRA”) when it comes calling about the cottage after the death of its owner.
Jeopardy
Generally speaking, the CRA cannot collect an income tax debt from a taxpayer while the taxpayer disputes the assessment from which the debt is derived before the Tax Court renders a judgment on the assessment. The CRA, however, can apply to a court for a jeopardy collection order “ex parte” (without the taxpayer having the right to appear to contest the application) that will allow the CRA to proceed to take collection action. The taxpayer can then apply to have the ex parte order set aside. In Alexander (Re), 2008 FC 902, the taxpayer succeeded in having the order overturned by the Federal Court.
Corporations as Beneficiaries
It is often quite useful to have Holdco own shares of Opco through a trust rather than directly. In general, the other beneficiaries of the trust can still claim the capital gain exemption in respect of a disposition of the shares of Opco, and keeping the redundant assets of Opco to a minimum while deferring tax at the individual shareholder level can be as simple as paying a dividend from Opco that is allocated to Holdco as a beneficiary of the trust.
Leaving a Sinking Ship
The following article on resignation as a director of a corporation and directors’ liability under the Income Tax Act (Canada) appeared in the latest edition of the Hamilton Law Association Law Journal.
PC Wind Down
What happens to a professional corporation (a “PC”) when the doctor is no longer in the house?
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.
Golf and tax
A number of my faithful correspondents have written to me to draw my attention to a story on the front page of yesterday’s Globe and Mail. The story recounts the saga of an insurance executive who went to Tax Court…
Legal fees paid to defend against a claim for support
In Melnyk v. The Queen, 2007 TCC 733, and Beauchamp v. The Queen, 2007 TCC 747, the Tax Court refused to allow a taxpayer to deduct legal fees paid to defend against a claim for increased support payments. The Court…