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Brent Kern Family Trust v. The Queen, (2013 TCC Boccok) — The more twists in your tax plan, the more places it can break: tax avoidance plan, using anti-avoidance rule for trusts, fails

This case is a great example of how, in the tortured world of tax avoidance, one taxpayer’s success can wreck another’s tax plan.  Mr. Kern set up the Brent Kern Family Trust to take advantage of an anti-avoidance rule.  This rule, in ITA s. 75(2) prevents high income taxpayers from splitting income with low-income taxpayers (usually family members).  The rule says that, despite the transfer to the trust, any… Read More »Brent Kern Family Trust v. The Queen, (2013 TCC Boccok) — The more twists in your tax plan, the more places it can break: tax avoidance plan, using anti-avoidance rule for trusts, fails

Brighton v. Canada (Human Resources ans Skills Developement), (2013 TCC Paris) — Large RSP withdrawals can deny you Old Age Security payments

The Guaranteed Income Supplement (GIS) under the Old Age Security Act is an income-based benefit, as is the refundable GST credit and the Child Tax Benefit and other refundable credits.   Ms. Brighton, who estimated her annual income (after her business failed) was under $10,000, did not realize that the RRSP withdrawal she made in 2011 “would affect her GIS entitlement.”  Because of it, her income exceeded the… Read More »Brighton v. Canada (Human Resources ans Skills Developement), (2013 TCC Paris) — Large RSP withdrawals can deny you Old Age Security payments

Johnson v. HMTQ, (2013 FC Manson) — Don’t expect the Federal Court to help you stop or reverse collection action.  

CRA Collections officers have great powers and sometimes they use them harshly, where they feel a taxpayer has been dishonest and especially, as here, where the tax debtor had been involved in drug trafficking.   Faced with harsh CRA Collections practices, people have asked the Federal Court judges to intervene to stop or reverse CRA’s action.  (The process is called “judicial review”.)  But, as this case… Read More »Johnson v. HMTQ, (2013 FC Manson) — Don’t expect the Federal Court to help you stop or reverse collection action.  

Tsenkova v. The Queen, (2013 TCC Sheridan) — To get the Landlord’s GST rebate, you must expect to rent for at least a year (but you don’t need many witnesses to prove that)

This case involved a claim for the landlord’s GST rebate for new residential rental property.  Ms. Tsenkova got it, even though her lease was for “temporary accommodation”.   Under ETA s. 256.2, if you pay GST when you buy a new home, you may claim a GST/HST rebate if you plan to use the home or part of it to lease to residential tenants and the lease will be… Read More »Tsenkova v. The Queen, (2013 TCC Sheridan) — To get the Landlord’s GST rebate, you must expect to rent for at least a year (but you don’t need many witnesses to prove that)

Severinov c. La Reine, (2013 CCI Woods) — You can claim a credit for a dependent child, even if she doesn’t live with you or live in Canada

Suppose your spouse  lives in the family house in San Francisco and you live in Vancouver.  Your child occasionally visits you.  Are you entitled to claim the Child tax credit for that child?  Justice Woods says you can.   The unusual feature of this credit in ITA s. 118(1)B(b.1) is that it applies where “at any time in the year” your child is “wholly dependent for support… Read More »Severinov c. La Reine, (2013 CCI Woods) — You can claim a credit for a dependent child, even if she doesn’t live with you or live in Canada

Hall v. The Queen, (2013 TCC Pizzitelli) — The Charter of Rights does not guarantee you tax credits for all your medical expenses or for all your donations to every charity

Mr. Hall donated “$24,800 to the International Association of Scientologists”, which does many clearly charitable things.  But IAS was not a registered charity in Canada; so he was not entitled to the donation tax credit he claimed.  That is a simple result and the case would not be interesting except that Mr. Hall claimed that denying him the credits infringed his right to equality under s.… Read More »Hall v. The Queen, (2013 TCC Pizzitelli) — The Charter of Rights does not guarantee you tax credits for all your medical expenses or for all your donations to every charity

2177936 Ontario Ltd. v. M.N.R., (2013 TCC C. Miller) — A taxi driver can be his own boss for CPP, EI, even if someone else owns the cab

“There have been many taxi driver cases in this Court and, not surprisingly, given how fact-specific this issue is, the cases go both ways. A careful review of the facts is critical.”  So says Justice Campbell Miller.  (Para. 1) This was another “independent contractor” case: If the taxi driver was an employee, the cab corporation had to pay a share of his CPP and EI… Read More »2177936 Ontario Ltd. v. M.N.R., (2013 TCC C. Miller) — A taxi driver can be his own boss for CPP, EI, even if someone else owns the cab

Chomatas v. The Queen, 2013 (TCC Woods) — If you miss the notice of objection deadline because you didn’t get CRA’s reassessment notice, ask for proof CRA sent it

Suppose you miss the 90-day deadline for filing a notice of objection to CRA’s reassessment of your tax return and you miss the one-year extension period too.  The law is strict then: You can’t object to the reassessment, no matter how good your reasons.  But if you could show that CRA never sent you the reassessment notice or that it sent it to a wrong… Read More »Chomatas v. The Queen, 2013 (TCC Woods) — If you miss the notice of objection deadline because you didn’t get CRA’s reassessment notice, ask for proof CRA sent it

DouangChanh v. The Queen, (2013 TCC Woods) — You can invalidate your ongoing Objection by asking CRA to adjust your tax return    

What happens if CRA reassesses you and you disagree?  You file a Notice of Objection.  What happens if, while you wait for CRA to review your objection, you ask it to adjust your tax return for other reasons, unrelated to the issues in the objection?  You could unwittingly invalidate your Notice of Objection, lose your right to challenge the earlier reassessment, and be forced to… Read More »DouangChanh v. The Queen, (2013 TCC Woods) — You can invalidate your ongoing Objection by asking CRA to adjust your tax return    

Kotel v. Canada (Attorney General), 2013 FC (McVeigh)  — Taxpayer relief — CRA won’t waive interest and penalty you owe if you or your spouse can afford to pay where your error arose from bad accounting advice 

Alex Kotel paid CRA $150,000.  He still owed that amount for taxes, interest and penalties, even after CRA cancelled $38,156.75 of interest because it had taken three years to deal with his Notice of Objection.  He asked CRA to cancel more interest and the $13,000 of late filing penalties he owed for not filing his 1999-2002 personal tax returns on time.  It refused, in part because it didn’t think he… Read More »Kotel v. Canada (Attorney General), 2013 FC (McVeigh)  — Taxpayer relief — CRA won’t waive interest and penalty you owe if you or your spouse can afford to pay where your error arose from bad accounting advice 

Napoli v. The Queen, (2013 TCC Paris)  — New Housing Rebates: You have 2 years to apply & you must choose between owner-used or rented

This is a simple case on a failed New Housing Rebate application.   There is a range of rebates related to new housing.  The most common rebate is the one for new housing bought from a builder.  If you want the GST New Housing Rebate (with a provincial rebate portion, it can be very valuable), you must meet two main conditions:  (1) When you sign… Read More »Napoli v. The Queen, (2013 TCC Paris)  — New Housing Rebates: You have 2 years to apply & you must choose between owner-used or rented

Kwangwari v. The Queen, (2013 TCC Lamarre) — Canada Child Tax Benefit: You or spouse must be a Canadian citizen or qualified resident and CRA’s mistakes can’t make you qualify

As noted in an earlier post on the Bower case, Canada spent about $4 billion in 2011-2012 on the refundable GST credit and about $10 billion on the Child Tax Benefit. This may explain why the rules are complex and the CRA is strict.  Obviously, Canada can only afford to give these credits to its own residents.  (See the tables in the Department of Finance’s Tax Expenditures and Evaluations… Read More »Kwangwari v. The Queen, (2013 TCC Lamarre) — Canada Child Tax Benefit: You or spouse must be a Canadian citizen or qualified resident and CRA’s mistakes can’t make you qualify

Newcombe v. Canada, 2013 FC 955 (Harrington) — A payment from your employer on termination may not be taxable but, if you get a T4, you must challenge it with a CRA objection or TCC appeal

This employment termination case is a bit unusual.  The employee worked for the Department of Justice (which acts for CRA in Tax Court appeals).  She was a secretary; she complained of harassment and being forced to quit; she settled, after negotiations with the employer led by Mr. Tax (his real name).  She claimed the settlement payment was tax exempt, as damages for her grievances, not… Read More »Newcombe v. Canada, 2013 FC 955 (Harrington) — A payment from your employer on termination may not be taxable but, if you get a T4, you must challenge it with a CRA objection or TCC appeal

Slansky v. Canada (Attorney General), 2013 FCA 199 (Evans) – When does “Solicitor Client privilege” apply?  What does it get you?

This is a long decision (100 pages), arising from a complaint against a judge of the Ontario Superior Court of Justice and his conduct of a 2-year murder re-trial.  Complaints against Canada’s superior court judges are made to the Canadian Judicial Council under the Judges Act, R.S.C. 1985, c. J-1.  Relying on a report of a distinguished University of Toronto law professor, the Chair of the reviewing… Read More »Slansky v. Canada (Attorney General), 2013 FCA 199 (Evans) – When does “Solicitor Client privilege” apply?  What does it get you?

Golini v. The Queen, (2013 TCC C. Miller)  — If you don’t give an auditor information, CRA can issue a “protective reassessment”

For most taxpayers, CRA has only 3 years to reassess a tax return, after originally processing it.  For GST/HST returns, the period is four years after the person was supposed to file the return, whether or not he filed it.  (See ITA s. 152(3.1) and ETA s. 298(1)(a).) As Justice Campbell Miller confirms in this decision, if the CRA has “‘requested additional information from the [taxpayer or registrant] and not having… Read More »Golini v. The Queen, (2013 TCC C. Miller)  — If you don’t give an auditor information, CRA can issue a “protective reassessment”

Sotski v. The Queen, (2013 TCC Pizzitelli)  — Medical expense credit for engineered laminate hardwood flooring

Taxpayers may claim a credit against taxes for their “medical expenses” if the expenses are higher than $2,152 (for 2013) or “3% of net income” (whichever is less).   “Medical expenses” are defined in s. 118.2(2).  They can include renovations or alterations to your home if they help a person with a “severe and prolonged mobility impairment” access or move around in the home.  In cases before… Read More »Sotski v. The Queen, (2013 TCC Pizzitelli)  — Medical expense credit for engineered laminate hardwood flooring

Radonjic v .Canada Revenue Agency, (2013 FC Russell) — Even if you play poker full time, your winnings may not be taxable

Mr. Radonjic was a poker player.  In 2004, he began winning in online poker and by May, he was so successful, he made poker his full-time job.  He had multiple computer screens (up to 10 monitors) running poker games in his home office.  So, relying on advice from his accountant and on CRA’s discussion of Gambling Profits in its Bulletin IT-334R2 (“Miscellaneous Receipts”), he filed his 2004-2007… Read More »Radonjic v .Canada Revenue Agency, (2013 FC Russell) — Even if you play poker full time, your winnings may not be taxable

Bandula v. The Queen, (2013 TCC Bocock) — Drywall contractor escapes gross negligence penalties despite admitted under-reporting

Mr. Bandula, was a drywall contractor who immigrated to Canada in 2000.  The reassessments related to his 2002 and 2003 tax years and GST reporting periods.  Justice Bocock didn’t believe the contractor’s excuses for under-reporting or his claims to extra, unreceipted business expenses.  (CRA had allowed unvouchered business expenses and, because the Appellant couldn’t show which of his claims were beyond those allowed, the TCC… Read More »Bandula v. The Queen, (2013 TCC Bocock) — Drywall contractor escapes gross negligence penalties despite admitted under-reporting

Rizak v. M.N.R., (2013 TCC, Graham) — a university graduate research student’s pay is employment income for EI benefits

In Employment Insurance cases, like this one, either the business denies that the worker was an employee (to avoid EI and CPP payments) or the worker claims to be an employee so that he can have EI benefits.  Here, the  worker, Mr. Rizak, claimed he was a university employee when he worked as a graduate research assistant in neuroscience at the University of British Columbia.  The TCC agreed.  Businesses… Read More »Rizak v. M.N.R., (2013 TCC, Graham) — a university graduate research student’s pay is employment income for EI benefits

Golini v. The Queen, (2013 TCC C. Miller)  — If you don’t give an auditor information, CRA can issue a “protective reassessment”

27/9/2013 0 Comments For most taxpayers, CRA has only 3 years to reassess a tax return, after originally processing it.  For GST/HST returns, the period is four years after the person was supposed to file the return, whether or not he filed it.  (See ITA s. 152(3.1) and ETA s. 298(1)(a).) As Justice Campbell Miller confirms in this decision, if the CRA has “‘requested additional information from the [taxpayer or registrant]… Read More »Golini v. The Queen, (2013 TCC C. Miller)  — If you don’t give an auditor information, CRA can issue a “protective reassessment”

Thompson v. Canada (National Revenue), (2013 FCA Trudel) – Solicitor-client privilege protects clients not lawyers from audit

Solicitor-client privilege “belongs to the client, not the lawyer”.  (Para. 39.)  It “applies only to a communication between a lawyer and client, which is of a confidential character, and which is directly related to the seeking, formulating or giving of legal advice. Put differently, privilege will not attach to communications in which legal advice is neither sought nor offered or where the communication is not… Read More »Thompson v. Canada (National Revenue), (2013 FCA Trudel) – Solicitor-client privilege protects clients not lawyers from audit

Sentinel Hill Productions IV Corporation v. The Queen, (2013 TCC, Woods) – Ways to speed up your appeal

This decision deals with Tax Court procedure: How can you speed up your case?  There are at least two rules designed to help parties end a case early.   One rule, for the “special case”, recognizes that sometimes the parties may agree on the facts so that the Court need simply decide a question of law.  If the Court decides that hearing the case in… Read More »Sentinel Hill Productions IV Corporation v. The Queen, (2013 TCC, Woods) – Ways to speed up your appeal

Estate of the Deceased Martin Hollinger c. La Reine, (2013 TCC, Rip CJ) – You can’t deduct legal fees paid to get future employment income

ITA para. 8(1)(b) allows you to deduct your legal fees spent to “collect or establish a right to” amounts “owed” to you for employment.   In this case, the Estate sought to deduct legal fees Mr. Hollinger had spent in a family dispute.  He was trying to get back control of the family business from his son.  He lost that court case and died soon after.  His… Read More »Estate of the Deceased Martin Hollinger c. La Reine, (2013 TCC, Rip CJ) – You can’t deduct legal fees paid to get future employment income

Niagara Gorge Jet Boating Ltd. v. M.N.R., (2013 TCC Hogan) — CPP can be pro-rated for non-resident employees based on percent of work in Canada

This was a CPP appeal by the employer.  The employee was a US resident.  There were two issues: (1) was he an employee (subject to CPP) or an independent contractor (not subject to CPP) and (2) because he was a non-resident, how much of his pay was subject to CPP rules? Hogan J. decided that the worker was an employee, even though he owned 25%… Read More »Niagara Gorge Jet Boating Ltd. v. M.N.R., (2013 TCC Hogan) — CPP can be pro-rated for non-resident employees based on percent of work in Canada

Newfoundland Transshipment Limited v. The Queen, (2013 TCC, D’Auray) – If you want to amend your tax return, you might need to file a waiver or an Objection

CRA has 3 or 4 years to reassess you after it first reviews your tax return.  If you want to amend your return at any time during that “normal reassessment period”, and if CRA agrees, it can allow the adjustments.  After that 3-4 year period, CRA may not be able to allow adjustments to your return, even if it wants to, unless you filed a… Read More »Newfoundland Transshipment Limited v. The Queen, (2013 TCC, D’Auray) – If you want to amend your tax return, you might need to file a waiver or an Objection

Kérouac c. La Reine, (2013 TCC, Jorre) – You can’t go into someone else’s Tax Court Appeal just to get help with your civil lawsuit

This was a procedural motion.  Mr. Kerouac claimed a tax credit for a $2 million donation to the City of Larouche in Quebec.  CRA said he had only donated $1 million.  As well as appealing CRA’s reassessment in the Tax Court, Mr. Kerouac was suing the City in Quebec Superior Court, to get back his $2 million.   The City brought a motion in the Tax… Read More »Kérouac c. La Reine, (2013 TCC, Jorre) – You can’t go into someone else’s Tax Court Appeal just to get help with your civil lawsuit

Gélinas c. La Reine (2013 TCC, Jorre) – Alternative minimum tax:  You can’t use prior year losses from rental interest expense to reduce your income for AMT  

There aren’t many cases dealing with Alternative Minimum Tax and how to calculate it.  This is one.  Mr. Gelinas had rental properties.  He had losses in the 2009 and 2008 tax years.  Alternative Minimum Tax (AMT) is designed to make sure that high income taxpayers pay some tax on their income, even though their tax deductions from investment losses or exempt gains might otherwise mean… Read More »Gélinas c. La Reine (2013 TCC, Jorre) – Alternative minimum tax:  You can’t use prior year losses from rental interest expense to reduce your income for AMT  

Terry E. Taylor v. Her Majesty the Queen, (2013 SCC) — If you agree to settle your tax dispute with CRA, you probably can’t reverse it in Tax Court

CRA investigated Mr. Taylor for criminal tax evasion but didn’t lay charges.  The case involved business and employment expenses, loans and embezzlement.  After 3 years of negotiations, Mr. Taylor, eager to have “the matter concluded quickly” signed a waiver of his appeal rights in exchange for CRA’s agreeing to remove gross negligence penalties.  Within days of signing his waiver, Mr. Taylor wrote the CRA that… Read More »Terry E. Taylor v. Her Majesty the Queen, (2013 SCC) — If you agree to settle your tax dispute with CRA, you probably can’t reverse it in Tax Court

River Hills Ranch Ltd. v. The Queen, 2013 TCC (Hogan) — You can use background oral and documentary evidence to explain a contract’s terms.

This decision is helpful for saying when you may use background evidence to help interpret a contract.   Here, the taxpayers were farmers who supplied the Pharmaceutical company Wyeth Organics with estrogen from pregnant mares.  Wyeth paid the farmers several different amounts to cancel the supply contracts.  The CRA said that one of these amounts was a substitute or “surrogate” for annual revenue so that… Read More »River Hills Ranch Ltd. v. The Queen, 2013 TCC (Hogan) — You can use background oral and documentary evidence to explain a contract’s terms.

Wiley v. The Queen, 2013 TCC (VA Miller) – you can claim the disability tax credit if you can’t dress and bathe in a normal amount of time

ITA s. 118.3 allows you a credit for physical or mental impairment.  You can get the credit if your impairment has lasted or will last for at least one year and, 90% or more of the time, your ability to do a basic act of daily life is “markedly restricted”.  One of these “basic acts” is dressing yourself.   In this case, Justice Miller thought… Read More »Wiley v. The Queen, 2013 TCC (VA Miller) – you can claim the disability tax credit if you can’t dress and bathe in a normal amount of time

Pratt & Whitney Canada Cie c. Agence du revenu du Québec, 2013 QCCA  — A Canadian employer need not pay payroll taxes on benefits paid by its foreign parent

In this recent case, the Quebec Court of Appeal said that Pratt & Whitney (“PWC”) was not required to pay payroll taxes on options issued to key PWC employees by PWC’s parent, United Technologies (UTC).  Though this case arose under Quebec laws, it is an interesting precedent for other provinces’ payroll taxes and employment laws and for the federal Income Tax Act, EI and CPP rules.  And though… Read More »Pratt & Whitney Canada Cie c. Agence du revenu du Québec, 2013 QCCA  — A Canadian employer need not pay payroll taxes on benefits paid by its foreign parent

McKenzie v. The Queen, 2013 TCC (Hershfield)–in defending yourself from a director’s liability assessment, you needn’t show you were perfect, just that you believed reasonably that the corporation had remitted the taxes it should; (Indian Act exemption)

The judge’s reasons in this case are long — 50 pages — but essentially this was a directors’ liability case and the question was whether the used car auctioneer had delivered the cars to Indians under GST tax-exempt conditions.  Based on CRA policy on GST for car sales to Indians, no GST applied to the sales of cars delivered to a reserve.  The judge found… Read More »McKenzie v. The Queen, 2013 TCC (Hershfield)–in defending yourself from a director’s liability assessment, you needn’t show you were perfect, just that you believed reasonably that the corporation had remitted the taxes it should; (Indian Act exemption)

McLeod v. The Queen, 2013 TCC (Woods) – Employees: Do not listen to false business loss schemes.  The penalties will ruin you.

Ms. McLeod’s is another example of a fake business loss scheme.  Many of these are in the TCC now.  A group called “Fiscal Arbitrators” was the main advocate but many others modeled on them.   The idea is that you are not taxable because you are an agent for yourself.  (The argument’s more involved but, as Justice Woods said, it’s “pure nonsense”.) Ms. McLeod “was… Read More »McLeod v. The Queen, 2013 TCC (Woods) – Employees: Do not listen to false business loss schemes.  The penalties will ruin you.

Morgan v. The Queen, (2013 TCC Woods) — If you don’t report income, you could pay a 20% penalty, even if all tax was withheld

Mr. Morgan retired.  His employer gave him the funds from his pension.  Some went to a locked-in RSP.  $143,510 went to him directly and the balance, $36,102, the employer transferred to an RRSP for Mr. Morgan’s wife.  Mr. Morgan hadn’t reported some trust income in two of the 3 earlier tax years. Those failures made him liable for a penalty under ITA s. 163(1) on the amount… Read More »Morgan v. The Queen, (2013 TCC Woods) — If you don’t report income, you could pay a 20% penalty, even if all tax was withheld

R. v. InfoSpec Systems Inc., (2013 BCCA Frankel) — It’s OK to sell “zapper” software, knowing that its only use is to delete cash register sales to evade taxes — But the Government will change the law on 01Jan 2014

InfoSpec sold “zapper” software.  It was convicted of fraud under s. 380 of the Criminal Code of Canada.  (It wasn’t convicted of the charge of tax evasion.)  It appealed the fraud conviction saying that “the sale of software designed to assist a third-party to commit fraud is not itself fraud.” (Para. 3).  The BC Court of Appeal agreed and over-turned the conviction.   As the BCCA… Read More »R. v. InfoSpec Systems Inc., (2013 BCCA Frankel) — It’s OK to sell “zapper” software, knowing that its only use is to delete cash register sales to evade taxes — But the Government will change the law on 01Jan 2014

Fisher v. The Queen, (2013 TCC, Paris) – When is a debt bad so that you can claim a capital loss?

This is a helpful case because it repeats the tests for “when a debt owing to the taxpayer had become bad” so that the taxpayer could claim a capital loss.  Paris J. relied on the FCA decision Rich v The Queen2003 FCA 38 (CanLII), where Rothstein J. (now on the SCC) said: “[12 ]     The assessment of whether a debt is bad is one based… Read More »Fisher v. The Queen, (2013 TCC, Paris) – When is a debt bad so that you can claim a capital loss?

Piersanti v. The Queen, (2013 TCC, V. Miller) – CRA may reassess you using documents it gets in a criminal investigation, even if it couldn’t use the documents in a criminal prosecution

In this case Justice Valerie Miller said that CRA may use documents it gets in a criminal investigation to assess the taxpayer’s income tax obligation, even if the evidence couldn’t be used for criminal prosecution.  In this view, she seems to disagree with Justice D’Arcy, who thought that such evidence might be inadmissible on a GST reassessment.  See Cambridge Leasing v. The Queen. Here’s what happened… Read More »Piersanti v. The Queen, (2013 TCC, V. Miller) – CRA may reassess you using documents it gets in a criminal investigation, even if it couldn’t use the documents in a criminal prosecution

McCreight v. Canada (Attorney General), (2013 ONCA, Pepall) – You can sue CRA for misfeasance, abuse of process and negligence but that doesn’t mean you will win

This is another procedural case dealing with taxpayer rights to sue CRA.  It is a technical decision; it doesn’t say CRA did wrong.  It simply says that the tax advisors are entitled to a court trial for their abuse of process and negligence claims against the CRA investigators.  The plaintiffs advised taxpayers on Scientific Research & Experimental Development (SR&ED) claims.  CRA prosecuted them for fraud… Read More »McCreight v. Canada (Attorney General), (2013 ONCA, Pepall) – You can sue CRA for misfeasance, abuse of process and negligence but that doesn’t mean you will win

Goulet v. The Queen (2013 TCC, Graham) – You can get a GST new housing rebate for a renovation but only if it guts the old house

Mr. Goulet renovated his house and garage, almost doubling its size.  He applied for the HST new housing rebate.  He didn’t get it.  You are entitled to a new housing rebate if you “substantially renovate” your home.  But the TCC said that to qualify as a “substantial renovation”, “The definition essentially requires that the existing house be gutted.”  (Para. 15.)  An addition, to qualify, must… Read More »Goulet v. The Queen (2013 TCC, Graham) – You can get a GST new housing rebate for a renovation but only if it guts the old house

Chadwick (2013 FCA, Near) – A divorce decree after April 1997 may not wreck your right to child support deductions

Before May 1997, the Income Tax Act allowed the paying spouse a deduction for child support payments, while the spouse who got the payments had to include them in her income.  As of May 1997, child support is no longer taxable or tax deductible.  What happens if your child support agreement was made before May 1997 but changed later?  That was Mr. Chadwick’s case: the spouses signed… Read More »Chadwick (2013 FCA, Near) – A divorce decree after April 1997 may not wreck your right to child support deductions

Black Sun Rising Inc., 2013 FC (Harrington) – You are liable to imprisonment if you don’t comply with CRA audit demands, but Crown must prove beyond reasonable doubt that your failure was deliberate

CRA auditors can demand that you answer questions, give access to your books and records, or give documents or information about another taxpayer.  (ITA ss. 231.1 and 231.2.)  If you refuse to comply with CRA’s demands, it may apply to the Federal Court for an order forcing you to comply.  If you ignore that Court order, CRA can ask the Court to find you are in… Read More »Black Sun Rising Inc., 2013 FC (Harrington) – You are liable to imprisonment if you don’t comply with CRA audit demands, but Crown must prove beyond reasonable doubt that your failure was deliberate

Da Huang (2013 FCC, Simpson) – If you can show legal sources for part of the money CBSA seized from you at the border, it should give it back

This is an important case for people who fail to report having $10,000 or more of cash when crossing Canada’s borders.   Under the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act, the Canada Border Services Agency can seize your cash or negotiable instruments if you don’t report having them when you cross the border.  (See my article on the Proceeds of Crime (Money Laundering) and Terrorist… Read More »Da Huang (2013 FCC, Simpson) – If you can show legal sources for part of the money CBSA seized from you at the border, it should give it back

McLeod v. The Queen, 2013 TCC (Woods) – Employees: Do not listen to false business loss schemes.  The penalties will ruin you.  

Ms. McLeod’s is another example of a fake business loss scheme.  Many of these are in the TCC now.  A group called “Fiscal Arbitrators” was the main advocate but many others modeled on them.   The idea is that you are not taxable because you are an agent for yourself.  (The argument’s more involved but, as Justice Woods said, it’s “pure nonsense”.) Ms. McLeod “was… Read More »McLeod v. The Queen, 2013 TCC (Woods) – Employees: Do not listen to false business loss schemes.  The penalties will ruin you.  

Berty v. The Queen (2013 TCC, Bedard)  — You cannot deduct combined spousal and child support amounts you pay from your bonus

This decision is interesting for family law lawyers.  Under a separation agreement Mr. Berty paid “Fifty percent (50%), net of income tax, of any bonus income received by [him] …  to the wife as lump sum child and spousal support”.  Bedard J. said the amount was not deductible because it was not periodic and because it included an indeterminate portion for child support.  He said:… Read More »Berty v. The Queen (2013 TCC, Bedard)  — You cannot deduct combined spousal and child support amounts you pay from your bonus

Cambridge Leasing v. The Queen (2013 TCC, D’Arcy) — TCC may reject evidence because it couldn’t be used in a criminal prosecution

Like Klundert, this is another case where the TCC said that it might refuse CRA evidence if the evidence could not be used in a criminal prosecution.  This view seems unreliable.  The Supreme Court of Canada said, in a 2002 case called R. v. Jarvis, that the CRA cannot use its normal audit powers to investigate a criminal case.  The usual audit powers, which are broad, are… Read More »Cambridge Leasing v. The Queen (2013 TCC, D’Arcy) — TCC may reject evidence because it couldn’t be used in a criminal prosecution

Almoradi v. The Queen (2013 TCC, Bedard) — If someone who owes taxes gives you a gift, you may have to pay the taxes

Both the income tax and GST laws have rules that can make you liable for someone else’s tax debts.  If you take money or other property from a related person (such as a spouse, or, as in this case, a corporation you control), and that person owes taxes, you are liable to pay the taxes, unless you gave fair value for the property you got. … Read More »Almoradi v. The Queen (2013 TCC, Bedard) — If someone who owes taxes gives you a gift, you may have to pay the taxes

Klundert v. The Queen (2013 TCC, Pizzitelli) – If a criminal court says CRA’s evidence is illegal, the TCC may refuse it too

Dr. Klundert was an optometrist who didn’t report his income.  CRA prosecuted him through three trials, two appeals to the Ontario Court of Appeal and one attempt to appeal to the Supreme Court of Canada.  The Ontario Court convicted him of tax evasion.  CRA then reassessed his 1993 – 1996 tax years and he appealed the reassessments to the TCC.  Justice Pizzitelli dismissed Dr. Klundert’s… Read More »Klundert v. The Queen (2013 TCC, Pizzitelli) – If a criminal court says CRA’s evidence is illegal, the TCC may refuse it too

CalAmp Wireless (2013 TCC, Bedard) — SRED proxy method – bonuses must relate to the SRED work

Canada has a rich but complex set of tax rules to help businesses carry out scientific research and experimental development (“SRED”).  The rules include a simpler “proxy method” for calculating the expenses that qualify for tax incentives. CalAmp hoped to include bonuses it paid to some of its employees when it was sold and became a public corporation trading shares in the US.  For Justice Bedard, the… Read More »CalAmp Wireless (2013 TCC, Bedard) — SRED proxy method – bonuses must relate to the SRED work

CIBC (2013 FCA, Sharlow) – You can deduct losses from your illegal business

In Canada, our tax laws are strange: We expect to share in your profits from the same businesses that we have our police try to shut down.  But for tax laws, we are your partners, whether your business is illegal or legal. If you make a profit, we share; if you have a loss, you can deduct it from your income from that business or… Read More »CIBC (2013 FCA, Sharlow) – You can deduct losses from your illegal business

1148902 Ontario Limited (2013 FC, Zinn) – CRA can waive interest but will not if you’re at fault

The taxpayer is a corporation.  It didn’t withhold CPP from payments to its sole shareholder and officer, as CRA had told it to do.  Finally, CRA charged it $9,000 in interest and penalties.  The corporation asked CRA to waive these charges; CRA disagreed; the taxpayer asked again (as you are allowed to do); CRA refused again and the taxpayer asked the Federal Court to get… Read More »1148902 Ontario Limited (2013 FC, Zinn) – CRA can waive interest but will not if you’re at fault