E-Views

There is general agreement that tariffs add to the cost of importers and users of the imported products. That conclusion seems obvious. If United States businesses and consumers are buying Canadian products and tariffs are added to those prices going forward, that can only make those products more expensive. It seems equally obvious that if we impose retaliatory tariffs, then those products that we buy will… Read More »Tariffs — the problem doesn’t go away with the man

Here is an interesting distinction between treatment of dissolved corporations under the CBCA and under the Ontario Business Corporations Act: [15] …  Pursuant to subsection 226(2) of the Canada Business Corporations Act (“CBCA”), the Minister had only two years to issue the assessment after the corporation dissolved.2 That’s a remarkable point to know about related to dissolutions of corporations.  Here is the actual CBCA wording:… Read More »Watts v HMK 2023 TCC 11 (MacPhee J.) — Section 160 assessment; judge’s duty to disregard admissions

In this case, the assessed director’s estate tried to claim that he never agreed to be a director.  But that argument was only made by a late amendment to the notice of appeal and had never been raised earlier with the CRA. So it failed because of lack of evidence. However, in dismissing this argument, the FCA gave this useful advice: Dans les provinces de… Read More »Gagné (Succession) c. Canada 2023 CAF 9 — Director’s liability — Disproving consent to be a director

Justice Graham wrote a 2007 BC paper on net worth assessments: “Anatomy of a Net Worth Assessment”, 2007 BC Tax Conference. pp. 11:1-55, (Canadian Tax Foundation). So he seems to like this area, making it less surprising that we get a detailed exploration of alternative assessing techniques from him. [6] I have never seen so many different alternative assessment techniques used for one taxpayer. … … Read More »Bousfield v. The King – 2022 TCC 169 (Graham GST) — Review of law on alternative assessing techniques including net worth

McCullough, an engineer, works for a subsidiary of an international arms manufacturer. He helps make rifles. This case is about claims for travel expenses (lodging, meals, travel). Generally, employees aren’t allowed to claim many expenses against taxable employment income. They can claim travel costs, if their employers require them to travel for work away from the employer’s place of business and to pay for their… Read More »McCullough v. The King – 2022 TCC 118 (MacPhee) IT_I — It’s okay to deduct travel expenses if your employer tells you to help out an affiliated company outside the country

This was a construction dispute.  Edges, the plaintiff, succeeded in its Small Claims Court action to collect about $25,000 remaining on a contract for over $200,000 for the defendant dentist. Dr. Ghotbi felt there had been deficiencies in the contract performance and was withholding payment pending satisfaction of those deficiencies. By text message, Edges’s principal agreed to examine the deficiencies if Dr. Ghotbi presented him with the final payment.… Read More »1475182 Ontario Inc. o/a Edges Contracting v. Ghotbi, 2021 ONSC 3477 (Divisional Court) – a text message incorporates a digital signature for Ontario limitations act purposes

This case deals with whether a disposition of a distressed debt gave rise to a non-capital loss. In his customarily meticulous analysis, Justice Sommerfeldt examines whether the disposition of the debt arose from an adventure in the nature of trade (a business), the amount of the loss, if there was one, and whether there was, in fact, a disposition of the debt that allowed realization of a… Read More »Leonard v. The Queen – 2021 TCC 33 (Sommerfeldt) — the Tax Court is not bound by parties’ admissions

This Ontario Court of Appeal decision illuminates (in part of its 182 pages) legal principles of estoppel by representation and convention.  These principles might, in rare cases, apply to contracts between parties. One would generally not expect them to arise in tax disputes because the CRA is bound to apply the law: “●         Expectations of a substantive outcome. Sometimes an administrative decision-maker may lead one to… Read More »Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, 2021 ONCA 201 — estoppel by representation and estoppel by convention

This was an incidental argument over a sealing order for two documents representing an exchange between the Ministry of Colleges and Universities and the University.  However, it draws more attention to the astonishing insolvency of a Canadian University.  (Laurentian University has protection under the Companies’ Creditors Arrangement Act .) Over the past year, there has been some news about the impact on universities of being closed off from foreign students.  In… Read More »Laurentian University of Sudbury (Re), 2021 ONCA 199 — University Insolvent — implications for government

In an interpretation given to the Canadian Dental Association in 2004, CRA set out a policy to allow orthodontists to claim up to 35% of their taxable inputs as input tax credits.  The letter explained that orthodontists could “use an estimate of 35% of the cost to the patient of the orthodontic treatment” as the cost of zero-rated orthodontic appliances.  Dentists were supposed to adjust their… Read More »Dr. Kevin L. Davis Dentistry Professional Corporation v. The Queen – 2021 TCC 25 (Wong) — TCC overrides its own decision in Brian Hurd, now allowing ITCs for orthodontists

Here was an interesting attempt — failed — to get the Crown to pay the interest and legal fees related to the audit for HST of Jayco’s cross-border recreational vehicle business.  (Jayco successfully appealed to the TCC but it failed there in its effort to get the Tax Court to order CRA to pay interest costs related to posted security.)  (D’Auray J. was the TCC judge.) … Read More »Jayco, Inc .v. Her Majesty the Queen in Right of Canada, 2021 ONSC 2120 (Myers J.) — no right in Ontario, for now, to sue CRA for negligent audit

These were beautifully written reasons leading to a despicable decision.  Unfortunately, it seems legally right. The gist of the scheme was to trade in currency futures contracts in a way that involves minimal risk, because the currencies would be sold and bought so as to “hedge” any risk. The schemes are called “straddles”  because you cancel (“close”) the contract with the loss in your current tax year but… Read More »Paletta Estate v. The Queen – 2021 TCC 11 (Spiro J) — a scheme with no business purpose except to reduce taxes is a business

Enterprise collected tax on insurance premiums but mistakenly sent it to CRA as HST. Ontario assessed Enterprise for failing to remit the tax, which Ontario said was RST collected on the premiums. Enterprise sought summary judgment on the basis that, however wrongly, the tax it collected was collected as HST, not RST, so it had not failed to remit to Ontario what it had not collected.… Read More »Enterprise Rent-A-Car Canada Company v.The Minister of Finance, 2020 ONSC 5339 — PST on insurance sent to CRA, owed to Ontario

A father designated his two daughters as beneficiaries of his RRSP. On his death, each daughter received half the RRSP. CRA assessed each daughter for the full amount of the father’s tax debt existing at the time of his death. The daughters relied on Kiperchuk v. The Queen, 2013 TCC 60 (Lamarre) which held that section 160 could not apply to a transfer to the deceased’s wife of an… Read More »Dreger v. The Queen – 2020 TCC 25 (D’Arcy) – You are always a child for s. 160 non-arm’s-length transfer purposes

This is an employee benefits case dealing with meal allowances and travel allowances to remote locations. Justice Campbell considered ITA s. 6(6)(b)(i), which allows travel allowances covering “the principal place of residence and the special work site referred to in subparagraph (a)(i)” (the worksite being too far away to go home at night.) Under a collective bargaining agreement, the employer had to pay the employees using a formula based on distance… Read More »Hamilton v. The Queen – 2020 TCC 23 (Campbell)_IT_I — Travel allowances to remote work sites denied if the allowances are based on a starting point other than the employee’s home

Taxpayers reasonably expect that, if CRA accepted a filing position in prior years, it will continue to apply the same approach for later tax years.   Here, the Federal Court of Appeal confirmed that CRA can change its mind: [13] It is well-established law that the doctrine of estoppel cannot be invoked to preclude the exercise of a statutory duty (Ludmer v. Canada, [1995] 2 F.C. 3;… Read More »Landbouwbedrijf Backx B.V. v. Canada 2019_FCA_310 — CRA’s past assessments don’t prevent changed treatment for later years

This was an ITA section 160 case. The learned judge went on his own excursion to consider a point that was not pled or argued.   In 2002, there was a trust set up under which two children took title to property that had formally been held in the name of father and another child. The beneficiaries of the trust were father (husband) and wife.  Father… Read More »Singh v. The Queen – 2019 TCC 265 (MacPhee  J) — What is the liability of a trustee under a non-arm’s length trust transfer?

Safe Workforce was under GST audit.  It asked for disclosure of CRA audit documents; CRA gave part of these but told SW to apply under the Access to Information Act for the rest.   SW asked the auditor to delay the audit until the AIA records came and it could make fuller submissions.   The auditor and his superiors refused; SW sought judicial review to delay the audit and… Read More »Safe Workforce Inc. v. Canada (Attorney General)_2019_FC_645 (Boswell J) — Can you use judicial review to stop a GST assessment?

The taxpayer here tried to get an extension of time to appeal reassessments of his 2009 and 2010 tax years. He filed his request in the Tax Court almost 2 1/2 years after the 2014 reassessments. To excuse the delay, the taxpayer referred to his depression and the fact that his accountants let him down. His first accountant had, though, properly filed objections to the assessment.… Read More »Gauthier c. La Reine – 2019 CCI 115_IT_APP – filing returns is not a substitute for appealing

We have 2 recent decisions of the Tax Court of Canada, one of the 3rd May (Monaghan J.) and one of 9 May (Smith J.) coming to opposing results. Both involved someone working outside Canada for a Dutch company (Shell oil) or a Dutch company’s subsidiary (Philips lighting). Gendron worked in the Netherlands. Herta worked in the US.  Gendron was found not to be an EI-qualifying employee; Herta was. Both… Read More »EI disentitlement for Canadian workers abroad – two decisions, nearly same facts, opposite results – Gendron (Monaghan, J) vs Herta (Smith, J)

This decision, now in French only, clarifies that a corporate taxpayer must file its T2 return within 3 years of being arbitrarily assessed by CRA or lose the chance to correct the assessment.   The corporate taxpayer in this case was arbitrarily assessed. It had not filed a tax return for its 2010 and 2012 tax years. CRA arbitrarily assessed those years. More than 3 years after… Read More »If CRA arbitrarily assesses your corporation for an unfiled tax year, you must file your correcting return within 3 years or lose the chance to correct it – 6075240 Canada Inc. c. Canada (Revenu national) – 2019 CF 642

CRA has several audit projects designed to identify unreported income in certain industries. One interesting, surprising and intrusive method it has for identifying unreported income involves forcing 3rd-party suppliers to disclose their customers’ purchases & identities. For example, Brewers Retail was forced to disclose to CRA sales of beer it had made, including the volumes sold, quantity and price, along with details identifying the customer: MNR v. Brewers… Read More »CRA Audit project against roofers buying from Roofmart – Canada (National Revenue) v. Roofmart Ontario Inc., 2019 FC 506

This case deals with tax on a capital gain of a Dutch corporation operated under the control of two Dutch émigrés living in Canada. The corporation bought a partnership interest in a Canadian farm owned 51% by its Dutch shareholders (husband and wife). The shareholders had immigrated to Canada in May 1998, after which they bought the farm property and began to run the farm. The… Read More »Landbouwbedrijf Backx B.V. v. The Queen, 2018 TCC 142 (Smith) — Does a corporation have a deemed disposition if it becomes resident in Canada because of its central mind & management?

In this decision, Justice Dominique Lafleur has decided that an heir can appeal an assessment of an estate.  There is a missing element to the analysis.  But as this case stands, it leaves open the possibility that, where an heir is unhappy with how the executor is handling the estate’s tax affairs, either or both of these two (the heir or the legal representative) could file an objection and Tax Court appeal against… Read More »Estate of Winifred Straessle v. The Queen, 2018 TCC 144 (Lafleur) –an heir can appeal an assessment of an estate

This is a disturbing decision from an extremely fine judge of the Federal Court of Appeal. ITA s. 129(1) allows refunds of tax a corporation has paid on passive sources of income, once the corporation pays a dividend to its shareholders.   The refund is not allowed, though, unless the corporation has filed its tax return “within 3 years after the end of the year”.   Here, Bonnybrook asked CRA to use its… Read More »Bonnybrook Industrial Park Development Co. Ltd. v. Canada (National Revenue), 2018 FCA 136 — CRA has power to extend filing time limit indefinitely

The builder appellant credited buyers the New Housing Rebate and claimed a corresponding deduction against its net tax. The buyers did not submit the prescribed form to the builder within two years (ETA s. 254(4)(c)). Nor, evidently, did the builder submit those forms with the return for the reporting period in which it credited the rebate (ETA s. 254(5)). It would have been helpful for a full canvassing… Read More »9118-5322 Québec inc. c. La Reine 2018 TCC (Lafleur) – New Housing Rebate – two-year time limit for submitting the prescribed form to a builder

In this case, Justice Webb has confused the law on void assessments.  It had been somewhat settled that assessments made after the normal reassessment period were void.  In this case, Justice Webb has overlooked those earlier authorities to conclude that the rule in ITA s. 152(8) can validate a late assessment unless the taxpayer objects. Here, Justice Webb had cleverly concluded that a late reassessment resulting in tax payable could not have… Read More »Freitas v The Queen, 2018 FCA 110 – when is a late reassessment void?

This is not a very impressive paper.  One might have expected better from the Parliamentary Budget Office, given that people who make law are relying on it. The paper estimates $3.8 billion of savings for the federal government by eliminating free employer-paid health benefits. In coming at its estimate, the PBO seems to consider only one potentially small negative effect of changing tax status: couples each… Read More »Parliamentary Budget Office — estimate of the impacts of including employer-paid health benefits in an individual’s taxable income.

In this ABIL case, Ouimet J. allowed the appeal. Hebert’s corporation hadn’t had revenue since 2007 but claimed an ABIL in 2011, the year of dissolution. Justice Ouimet allowed the appeal on the basis that, first, the Federal Court of Appeal has said that almost any activity can constitute an active business. Second, although a corporation must have assets used in an active business (not just ones that were… Read More »Hébert c. La Reine 2018 CCI 48 (Ouimet) — ABIL allowed for business with no sale for 4 years before dissolution

Recently, CRA released two interpretations that deal with section 144 of the Excise Tax Act, a rule that says supplies are made outside Canada (and so not taxable) if they are made before Customs release. Both CRA interpretations are by the same author and both are founded on this interpretation of section 144: “One of the requirements of section 144 is that the goods be imported… Read More »CRA Documents 175518 & 180362: Interpretation of section 144 of the Excise Tax Act

For 2014-2017 audit statistics, see the attached tables released by CRA under the Access to Information Act.  The tables show tax earned by audit for various directorates & programs (GST, Criminal Investigations (CID), International Large Business (ILBD), Offshore Compliance (OCD), Small and Medium Enterprises (SMED) and SR&ED.  Based on the CRA AIA release, there were 20,456 SME audits in 2016-2017, with average “tax earned by audit” of… Read More »CRA Audit statistics 2016-2017 — Tax earned by audit (TEBA), by program category & directorate

“The Issue [1]               The Monitor asks the court, under s. 36.1 of the Companies’ Creditors Arrangement Act, RSC 1985, c.C-36, to declare void as an unjust preference, under s. 95 of the Bankruptcy and Insolvency Act, RSC 1985, c.B-3, two payments of HST made to the Canada Revenue Agency by an insolvent debtor less than three months before it commenced a proposal proceeding. [2]               The question as… Read More »Urbancorp Cumberland 2 GP Inc., (Re)., 2017 ONSC 7156 (Myers) — CRA HST payment before bankruptcy proposal OK because paid from 3d party loan

Under the Ontario Rebate for Electricity Consumers Act, 2016, S.O. 2016, c. 19, “consumers” are entitled to “financial assistance” for their “eligible accounts”. A “consumer” is not what you would think. It includes anyone who gets an invoice for an “eligible account”. Your business could have an “eligible account” either because (a) you don’t use more than 50 kW of power; or (b) you don’t consume… Read More »CRA allows GST ITC or rebate “double-counting” of provincial electricity rebate

The appellant sought to deduct legal fees spent resisting collection attempts against him by three professionals who had worked for a start-up airline that the appellant ran with three others through two corporations.   The Court rejected the appellant’s claim in part because:  “[25] Even if the airline activities were to constitute a source of income for the appellant, that source of income disappeared when Val… Read More »Nandlal v. The Queen 2017 TCC 162 (Favreau) — Can you deduct business expenses after your business ceases?

Although the taxpayer lost, this decision has an extensive discussion of when a waiver might be set aside (1) for reason of having be coerced, (2) due to the taxpayer’s mental incapacity at the time he gave it, or (3) on the basis that the taxpayer did not intend to waive the normal limitation period. [14]        It is established law that a waiver such as the… Read More »Radelet v. The Queen 2017 TCC 159 (Bocock J) — when can waiver be set aside?

The vendor (appellant), winding up its limousine business, sold the limousines. The buyer registered them with the Ministry of Transportation and paid 13% Ontario retail sales tax. Knowing that the buyer paid (or would pay) the retail sales tax, the vendor did not collect or remit HST.  Justice D’Auray gives an illuminating explanation of how the 13% Ontario Motor Vehicle Tax interacts with the GST/HST.… Read More »Brian & Deborah Dewan Enterprises Ltd. v. The Queen 2017 TCC 135 (D’Auray) — Interaction of Ontario Motor Vehicle Tax and HST

Heron v. The Queen 2017 TCC 71 (D’Auray) TCC GPR Rule 53 allows a taxpayer or the Crown to eliminate pleadings or paragraphs from them.  The tactical advantage is that the discovery is restricted to the pleadings; an eliminated fact can eliminate exposure to cross-examination and damning evidence.   “[12] When a party states that the allegation is not relevant, the “irrelevancy must be quite clear and,… Read More »Heron v. The Queen 2017 TCC 71 (D’Auray) — taxpayer’s r. 53 motion to strike references to criminal convictions from the Reply

Could you pay two brothers who are directors and 50% shareholders wages only for their SRED work and not for their managerial work, so that the full amount of the wages could be used for calculating SRED qualified expenditures?  Yes, of course.   The appellant’s accountant told the brothers that they could get credit for wages paid for SRED work but not other work. So… Read More »AG Shield Ltd. v. The Queen, 2017 TCC 68 (D’Arcy) — SRED — streaming wages and dividends to isolate SRED payments

Rio Tinto refused to sign waivers for 2006 and 2007. So CRA reassessed to allow Rio Tinto’s own claims for SRED but not Rio Tinto’s claims for SRED carried on by AAI in which it had an interest.  The reason for the problem was that Rio Tinto was audited out of Montréal but AAI was audited out of Québec. The Québec audit was not done… Read More »Rio Tinto Alcan Inc. c. La Reine, 2017 CCI 67 (D’Auray) — SRED r 58 motion — CRA can reassess without a complete audit

This decision considers when it will be appropriate to allow a non-lawyer to represent a corporation in the Tax Court for a General Procedure hearing.  The application was refused for this shareholder-director, as he would be the primary witness, he was in Panama when he swore the supporting affidavit (for the motion that was heard in writing), and there was no evidence that the corporation… Read More »WJZ Enterprises v. The Queen 2017 TCC 57 (Jorre) — When may a non-lawyer represent a party in a General Procedure appeal?

In this case, we are trying to draw a distinction between ETA section 181 and section 232.1. The analysis focused on the Tele-Mobile-established principle that a coupon must be tendered by the customer. The analysis was supplemented by a Crown discussion of the underlying purpose for the coupon rule. See, especially text around and note 4.  The distinction, apparently, was created to aid tax reporting… Read More »Nestlé Canada Inc v The Queen 2017 TCC 33 (Lamarre, ACJ) — Manufacturer denied ITC for store coupons on basis they were promotional allowances to the retailer

Here, a PWC was appointed receiver for a real estate broker.  It collected funds, primarily commissions and deposits for transactions that had or were yet to close.  As in all such cases, there were limited funds to distribute and the task of the Court was to allocate the money received among the receiver (for its fees), the various agents and brokers working with the insolvent… Read More »PriceWaterhouseCoopers v. Bank of Montreal et al., 2017 CanLII 11229 (NL SCTD) (Stack, J.) — Priorities in RE Broker’s insolvency

At the TCC, Rossiter CJ ordered $7000 for security for costs against this non-resident appellant, though the Crown had asked for $13,850. The appellant appealed successfully because Chief Justice Rossiter had failed to give any reason for the amount or why he ignored the appellant’s submissions. The FCA agreed that the reasons were deficient.  On that basis, the FCA looked at the matter de novo (anew, or… Read More »Mathias v. Canada 2017 FCA 19 — winning its appeal costs taxpayer $7,850 

At the 2016 Annual Canadian Tax Foundation Tax Conference CRA Roundtable,  CRA announced a change in policy on the payment of registered plan fees by plan beneficiaries.   CRA has been accepting for years that a beneficiary of one of these plans could pay the investment management fees personally without having the plan pay the fee. The obvious benefit is that the amount left in the tax-exempt plan… Read More »No more paying TFSA, RRSP and RRIF investment management fees outside plan as of January 2018

The Federal Court has ordered Rona to disclose commercial customer purchase records to CRA’s non-filer section.  The order covers 57 listed stores across Canada.  (23 QC; 10 Prairies; 9 BC; 15 ON.)   The order requires Rona to give electronic records showing:​a) The name of each commercial client;b) The client’s address; c) The total annual transactions for each client from 2012 to end of 2015 or… Read More »Caution to those in construction industry who buy from Rona and have unreported income — Rona may disclose your purchases to CRA: Minister of National Revenue v. Rona Inc. (FC) (Martineau J) (unreported)

[2] … After 2007, her loans were obtained under a program for students with disabilities. Cissé provided me with evidence indicating that she continues to be disabled. [3] Cissé did not repay her loans. However, she entered into a payment arrangement with the plaintiff, The Queen … On January 29, 2014, about a week after the parties entered into this arrangement, Cissé was served with a… Read More »Minister of National Revenue v Cisse, 2016 ONSC 7217 (Akbarali, J.) — Crown Student loan claim default judgment and garnishment set aside with costs

In this restaurant unreported sales appeal, CRA had used a sampling technique, which the experts and the court found unreliable: [59]        De plus, avant d’avoir recours à une méthode de vérification indirecte, le fisc devait d’abord avoir conclu, pour des motifs raisonnables, que les livres, les registres et les pièces justificatives de l’entreprise n’étaient pas fiables ou comportaient des inexactitudes ou des lacunes importantes (voir l’arrêtCompagnie… Read More »2741-2568 Québec Inc. c. La Reine 2016 CCI 207 (Favreau) — Before using an alternative assessing technique, CRA auditors must establish that the books and records are not reliable

See paras. 22-31 under the heading “C. Use of Transcript to Refresh Memory”.  The goal of preventing the witness from reading her evidence is the appearance that she will adjust her evidence on cross-examination to conform to her earlier testimony.  The witness was the CRA auditor, who could refresh her memory from her own audit notes and working paper.  There was no obvious need for… Read More »van der Steen v. The Queen 2016 TCC 205 (Sommerfeldt) — in a long break between hearing dates, a witness may not refer to a transcript to refresh her memory before cross-examination

[9]               The judge erred in concluding that the respondents resigned as directors. In the absence of the communication of a written resignation to the corporation, a resignation is not effective. On the facts before the judge, the respondents did not resign in 2001. [17]           In finding that Mrs. Chriss exercised due diligence, the judge committed an error on an extricable question of law. A director may be… Read More »Canada v. Chriss 2016 FCA 236 — Director must communicate resignation to be effective as release from director’s liability

Even though the accountants had recorded the rollover in the financial records and filed the rollover form T2057 to reflect instructions given in October 2011, the rectification application was not allowed because the legal documents were not prepared until June 2013 (and dated then although with backdated effect).  The CRA recognized that there was “an oral agreement on October 6, 2011, to undertake a transaction in order to… Read More »Anderson v Benson Trithardt Noren LLP, 2016 SKCA 120 — retroactive ITA s. 85 rollover not allowed