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Employment And Shareholder Tax Issues

Leith v. The Queen 2015 TCC 314 (Graham)–Failure to file a prescribed form is not fatal if CRA says you don’t have to

[4] … It would appear on the face of subsection 8(10) that a failure to file a T2200 with a tax return would be fatal to a claim to deduct expenses pursuant to any of the paragraphs described in subsection 8(10). However, as set out below, I find that this is not the case. [5]             The fact that Mr. Leith did not file T2200’s with his tax… Read More »Leith v. The Queen 2015 TCC 314 (Graham)–Failure to file a prescribed form is not fatal if CRA says you don’t have to

Rogers Estate v. The Queen, 2014 TCC (Hogan) — Gain on surrender of options is taxable as capital gain if not taxable as employment income because of s. 7(3)(a)

In this decision, recently released on the treatment of options exercised by the late Ted Rogers of the telecom and media businesses Rogers Communications Inc., Justice Hogan makes a deft and clever conclusion affirming the capital gains treatment for the disposition of the options, because they were not subject to tax as employment income. “(3)    New Argument “[74]        On August 29, 2014, almost three… Read More »Rogers Estate v. The Queen, 2014 TCC (Hogan) — Gain on surrender of options is taxable as capital gain if not taxable as employment income because of s. 7(3)(a)

9016-9202 Québec Inc. c. La Reine, 2014 CCI (Favreau) — to decide if a corporation is a “personal services business” and disallowed deductions, use common law tests for independent contractors but the intention of the parties doesn’t matter

J. Favreau repeats the law that the intention of the parties is not relevant to deciding whether a corporation is a “personal services business” (to be denied the small business deduction under ITA s. 125(1) because of the definition of “active business carried on by a corporation” in s. 125(7) and to have restricted allowable expenses under ITA s. 18(1)(p))  But the common law tests are relevant: [63]    … Read More »9016-9202 Québec Inc. c. La Reine, 2014 CCI (Favreau) — to decide if a corporation is a “personal services business” and disallowed deductions, use common law tests for independent contractors but the intention of the parties doesn’t matter

Perera v. The Queen, 2014 TCC (Lyons) — Excessive deductions for personal amounts damages credibility for the rest of the expenses; Late filing penalties may be waived if you were sick

Commission salesmen, like Mr. Perera, are allowed extra employment expenses.   “[13]        A commissioned sales employee can make deductions from her or his employment income only if the type of expense is specified under section 8 of the Act.[5] Each subsection stipulates that the employee must be required by her or his employer, under a contract of employment, to pay for the expenses in the year in the… Read More »Perera v. The Queen, 2014 TCC (Lyons) — Excessive deductions for personal amounts damages credibility for the rest of the expenses; Late filing penalties may be waived if you were sick

Sirivar v. The Queen, (2014 TCC Hogan) — Moving for work?  You can sleep or eat but you cannot deduct both for more than 15 days.   

If you sleep and eat during your move, you can only claim the expenses for 15 days.  But if you only eat or sleep but not both, you can deduct as long as you take.  Does that make sense? This is an unusual case.  First, the taxpayer appealing was a CRA Appeals officer at the time of the appeal.  (He retired in March 2012).  One… Read More »Sirivar v. The Queen, (2014 TCC Hogan) — Moving for work?  You can sleep or eat but you cannot deduct both for more than 15 days.   

Strachan v. The Queen, (2013 TCC Rip CJ) —  If you let your spouse buy shares in your corporation for less than fair value, your spouse can be liable for your tax debts

If you have your corporation issue shares to your spouse for less than fair market value, have you “transferred” something valuable to your spouse?  Yes, you gave up a share of the value of the corporation.  So, if you owed taxes at the time of the share issue, your spouse must pay your tax debts up to the value of the shares (less what your… Read More »Strachan v. The Queen, (2013 TCC Rip CJ) —  If you let your spouse buy shares in your corporation for less than fair value, your spouse can be liable for your tax debts

Mast v. The Queen, (2013 TCC Angers) — You can borrow money from your corporation to buy a house, but the loan must be on reasonable terms and for no more than an employee could borrow 

If (a) you have your corporation lend you, interest-free and unsecured, “a very substantial part of [its] retained earnings” to build your home,  (b) you only must repay 5% a year over ten years, starting in the 4th year of the loan, and  (c) you show the loan in the corporation’s books as a “loan receivable – shareholder”,  is that a tax-free employee housing loan, or is it a… Read More »Mast v. The Queen, (2013 TCC Angers) — You can borrow money from your corporation to buy a house, but the loan must be on reasonable terms and for no more than an employee could borrow 

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

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

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

Auclair v. The Queen (2013 TCC, Masse) — You cannot deduct work-related courses as an employment expense

Mr. Auclair was a pilot.  His employer had him take a course to qualify for piloting a particular plane.  The course cost $12,000 and, because he quit the employer early, he had to pay $9,000 of that course fee.  He deducted the cost as an employment expense for his 2010 tax year.  You can deduct the cost of supplies you consume in your work, where… Read More »Auclair v. The Queen (2013 TCC, Masse) — You cannot deduct work-related courses as an employment expense