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Burlington Resources Finance Company v. The Queen 2015 TCC 71 (Campbell) — The scope of discovery is broad, to narrow or eliminate issues

This decision, on the taxpayers’ motions to force Crown answers, reviews the law on discovery principles.  The Principles of Discovery [11]        Caselaw is clear and abundant. The core of discovery principles is that its scope should be wide, with relevancy construed liberally, without, however, allowing it to enter the realm of a fishing expedition. These basic principles are essential because the purpose of discovery is to… Read More »Burlington Resources Finance Company v. The Queen 2015 TCC 71 (Campbell) — The scope of discovery is broad, to narrow or eliminate issues

AgraCity Ltd. v. The Queen 2014-1537(IT)G (C. Miller, unreported) – Nothing stops CRA from issuing inconsistent assessments to different taxpayers; conditions for rule 82 full disclosure 

This was a transfer pricing case. So it involved related corporations.  The taxpayer complained that the Crown had unfairly made inconsistent assumptions. Justice Miller saw no problem with that:  “[T]hat decision of Justice Addy [Suburban Realty Trust (Trustee of) v Canada, [1977] FCJ no 82 (FCTD)] of the Federal Court of Canada was in connection with a matter that was all one action. Justice Addy also indicated… Read More »AgraCity Ltd. v. The Queen 2014-1537(IT)G (C. Miller, unreported) – Nothing stops CRA from issuing inconsistent assessments to different taxpayers; conditions for rule 82 full disclosure 

McCartie v. Canada (National Revenue), 2015 FC 222 (Zinn) – CRA can register you for GST even if you don’t agree

[22]           The CRA also submits that any issues relating to whether Mr. McCartie owes a GST debt, falls within the jurisdiction of the Tax Court of Canada and says that Mr. McCartie’s allegation that the CRA does not have the constitutional authority to register his GST account is a disguised attack on the validity of the GST debt.  The owing of GST, it… Read More »McCartie v. Canada (National Revenue), 2015 FC 222 (Zinn) – CRA can register you for GST even if you don’t agree

Ghaffar v. The Queen 2015 TCC 46 (Graham) – Extension of time to set aside default judgement – criteria

If you fail to go to a status hearing (held because you don’t pursue your case within normal time limits), the Court may dismiss the case — but you could apply to set aside the default judgment within 30 days.  If you miss the 30 days, you must meet 4 criteria to get an extension of time to apply.   See Ghaffar v. The Queen 2015 TCC… Read More »Ghaffar v. The Queen 2015 TCC 46 (Graham) – Extension of time to set aside default judgement – criteria

Gramiak v The Queen, 2015 FCA 40 — Limits for alternative CRA reassessment arguments under ITA s. 152(9); a waiver can’t protect you from transactions you hide

This was a motion to strike a Crown pleading in an “RRSP value stripping” case.  In it, the FCA considers when the Crown can add an alternative argument to support its reassessment after the limitation period has passed.  The FCA also considers when the CRA can reassess beyond the normal limitation period, despite the restrictions set out in a taxpayer’s waiver.  [32] At issue [was] whether assessing… Read More »Gramiak v The Queen, 2015 FCA 40 — Limits for alternative CRA reassessment arguments under ITA s. 152(9); a waiver can’t protect you from transactions you hide

Canada v. Diflorio, 2015 FCA 11 — TCC has no discretion to award costs in GST informal procedure cases where amount in dispute exceeds $7,000

The Tax Court of Canada has no “discretion to award any costs at all in cases in which the amount in dispute exceeds $7,000”.  (Para. 9.)  This costs limitation only applies to GST appeals under the Informal Procedure (i.e., those where “(ii) the amount in dispute does not exceed $50,000.”  (See TCCA s. 18.3001(c). See Canada v. Diflorio, 2015 FCA 11

Dominion Nickel Investments Ltd v. The Queen, 2015 TCC 14 (Jorre) — Parties have wide scope for documentary discovery in tax cases 

This motion dealt with the scope of documentary discovery in a case involving the Banyan Tree tax donation scheme. The taxpayer seems to be well funded. On this motion for enhanced disclosure, Justice Jorre lists the factors to consider in ordering disclosure without redactions.  Among the interesting passages are these: “[22]  . . . 1.   The examining party is entitled to “any information, and production… Read More »Dominion Nickel Investments Ltd v. The Queen, 2015 TCC 14 (Jorre) — Parties have wide scope for documentary discovery in tax cases 

Murphy Estate v. The Queen 2015 TCC 8 (VA Miller) — Children must disclaim their interests in an RSP for it to past tax-free from an estate to the spouse 

Murphy died intestate. His second wife and children fought over the estate. They settled, in part, by the children assigning their interests as designated beneficiaries of an RSP to the wife. Then the children and wife signed a consent order for the provincial court to sanction the settlement. The group then sought to get CRA to accept the transfer to the wife as a “refund… Read More »Murphy Estate v. The Queen 2015 TCC 8 (VA Miller) — Children must disclaim their interests in an RSP for it to past tax-free from an estate to the spouse 

Simard v. The Queen, 2015 TCC 2 (Rip) — If you allege unproven criminal charges, you risk paying solicitor-client costs

[12] … To allege in a pleading that a person is charged with a criminal offence, but the charge has not been proven, serves no legitimate purpose. [15] … unfounded allegations of a criminal matter based on affidavit evidence that have caused the appellant to incur unnecessary costs in making the motion to strike  [entitle the appellant to solicit and client costs].  Counsel, in preparing… Read More »Simard v. The Queen, 2015 TCC 2 (Rip) — If you allege unproven criminal charges, you risk paying solicitor-client costs

Al-Hossain v. The Queen, 2014 TCC 379 (Lyons) — TCC wrongly says you must go to provincial court to appeal disallowed Ontario New Housing Rebate

As many do, the new home buyer in this case added a friend’s name to the agreement of purchase and sale and to the title for the home, to help get bank mortgage financing.  The friend never intended to live in the building and never did.  So, the TCC confirmed the CRA’s decision to refuse the appellant’s claim for the rebate.   But in a… Read More »Al-Hossain v. The Queen, 2014 TCC 379 (Lyons) — TCC wrongly says you must go to provincial court to appeal disallowed Ontario New Housing Rebate

Budwal v. The Queen, 2014 TCC 370 (Hogan) — You might reduce a shareholder benefit liability by the amount of your liability under s. 160 for non-arm’s length transfers 

Here is a very interesting argument on s.  160 assessments. Hogan J.  makes this in a footnote in a s.  160 assessment within a corporate context where there was a corresponding s.  15 (1) assessment.    “[FN 2]   The argument is that the benefit under subsection 15(1) of the Act should be reduced by the liability under section 160 of the Act because the appropriation… Read More »Budwal v. The Queen, 2014 TCC 370 (Hogan) — You might reduce a shareholder benefit liability by the amount of your liability under s. 160 for non-arm’s length transfers 

Pyontka c. La Reine 2014 CCI 374 (D’Auray) — If you take part in a fraudulent scheme, you could be liable for tax on the whole fraud, not just your commission 

In this case the evidence showed that the appellant was party to a house flipping scheme. The scheme worked this way: the appellant would buy a property, say for $160,000. He would then sell it within a few months to a third party (also part of the scheme) who would pay an inflated sum, say $320,000. The third party would then go to a financial… Read More »Pyontka c. La Reine 2014 CCI 374 (D’Auray) — If you take part in a fraudulent scheme, you could be liable for tax on the whole fraud, not just your commission 

Klemen v. The Queen 2014 TCC 369 (Hogan) — Costs awards may threaten taxpayers

In this case, there was roughly $100,000 in dispute.  Taxpayer’s counsel’s fees at $66,000 were roughly the same as the amount won. For that, he got $20,000 plus disbursements. This is a dangerous precedent.  Will the Court be one-sided, awarding hefty amounts to taxpayers but confining the Crown to tariff? (In this case, the taxpayer got relatively large costs despite divided success.)  A.      Result… Read More »Klemen v. The Queen 2014 TCC 369 (Hogan) — Costs awards may threaten taxpayers

Cameco Corporation v. The Queen 2014 TCC 367 (Pizzitelli) — On discovery, a party may not ask compound questions; Solicitor-client costs to the Crown 

This decision deals with the propriety of Crown pleadings and responses to discovery questions. It is also a rare decision where the court orders solicitor-client costs, and is especially rarer because the costs were awarded to the Crown.  [42]        With the questions at hand the deponent was essentially being asked to recall all the contracts between the Appellant and CEL and other members of the group as… Read More »Cameco Corporation v. The Queen 2014 TCC 367 (Pizzitelli) — On discovery, a party may not ask compound questions; Solicitor-client costs to the Crown 

Neely v. MacDonald, 2014 ONCA 874–Headings in a contract are important for interpreting the contract 

To decide the income tax or HST implications of a contract, tax courts must refer to provincial law. So, it is helpful to follow and keep in mind important statements of principle made by provincial courts. On this topic, see for example, s.  8.1 of the Federal Interpretation Act: “Duality of legal traditions and application of provincial law“8.1 Both the common law and the civil law are… Read More »Neely v. MacDonald, 2014 ONCA 874–Headings in a contract are important for interpreting the contract 

Otteson v. The Queen, 2014 TCC 362 (Hogan) – You could get a costs award of 20% of legal fees for a case of moderate difficulty 

This is another in a series of cases which establish generous costs awards in favor of appellants under General Procedure rules. “[31]        In light of the above, and given that there are no other factors relevant in determining costs here, I believe that an appropriate costs award under section 147 is one based on 20% of the fees incurred, plus disbursements. This works out to… Read More »Otteson v. The Queen, 2014 TCC 362 (Hogan) – You could get a costs award of 20% of legal fees for a case of moderate difficulty 

McGillivray Restaurant Ltd. v. The Queen, 2014 TCC (Boyle) – A person who has effective control over daily operations controls the corporation 

This case discusses the tests for deciding whether two corporations are associated based on common control.  It details the factors for considering whether a person has de facto (effective) control as opposed to de jure (based on shareholdings) control. “[44]        However, the Federal Court of Appeal’s 2003 decision in Mimetix Pharmaceuticals appears very clear as it upheld the trial judge with brief oral reasons from Justice Rothstein and concluded she did… Read More »McGillivray Restaurant Ltd. v. The Queen, 2014 TCC (Boyle) – A person who has effective control over daily operations controls the corporation 

Saber & Sone Group v. Canada (National Revenue), 2014 FC 1119 (Kane) – A decision to revoke E-filer rights must consider the accountants’ compliance history and the impact of the loss of privileges on the accountants. 

In this case, the taxpayers were accountants.  They had had a dispute with their children and had used their CRA authorizations to access information about the children.  The children complained. CRA revoked the accountants’ E-filer status.  The accountants sought administrative review. When the revocation was confirmed, they sought judicial review. The Federal Court usually upholds CRA’s decisions but not in this case.  [30]           The reasonableness… Read More »Saber & Sone Group v. Canada (National Revenue), 2014 FC 1119 (Kane) – A decision to revoke E-filer rights must consider the accountants’ compliance history and the impact of the loss of privileges on the accountants. 

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)

Belval c. La Reine, 2014 CCI (Jorre) — You must pursue your appeal diligently or risk having it dismissed 

This is a rare case where the Court dismisses a tax appeal for delay: “[55]       When one considers the events that I have just described, it is clear that the appellant has not acted with promptness. Not only has the appellant not complied with two orders, but more generally the appellant has a way of acting in which he does not respond or responds… Read More »Belval c. La Reine, 2014 CCI (Jorre) — You must pursue your appeal diligently or risk having it dismissed 

Jobin c. La Reine, 2014 CCI (Rip CJ) — If you bankrupt your corporation, resign as director to protect yourself from tax liability 

The taxpayer in this case was assessed for his corporation’s payroll remittance failures. He argued that he was protected by the two-year limitation period in ITA s. 227.1(4). He said that when the CRA assessed him in 2010 he had ceased to be a director more than two years earlier when: (a) the corporation made a bankruptcy assignment in February 2003 and the trustee was… Read More »Jobin c. La Reine, 2014 CCI (Rip CJ) — If you bankrupt your corporation, resign as director to protect yourself from tax liability 

Lyrtech RD inc. c. Canada, 2014 CAF 267 (FCA, Scott, Nadon, Boivin) — If you control a trust that controls a corporation, you control the corporation — No refundable SR&ED credits in this case

A public company controlled a trust that controlled an R and D corporation.  The scheme was devised to allow the public company to access research and development tax credits. To qualify for the refundable R&D tax credits, the new subsidiary had to be a “Canadian-controlled private corporation”, as defined in ITA s. 125(7). This meant that the public corporation could not be seen to control… Read More »Lyrtech RD inc. c. Canada, 2014 CAF 267 (FCA, Scott, Nadon, Boivin) — If you control a trust that controls a corporation, you control the corporation — No refundable SR&ED credits in this case

St-Hilaire c. La Reine, 2014 CCI 336 (Favreau) — No ABIL if you agree to the cancellation of your loan in a bankruptcy proposal of a small business corporation

In this case, the taxpayer waived any right to be paid on a debt of a small business corporation, as part of a BIA proposal.  So he lost access to an ABIL, because he did not own the debt at the end of the year, having given up all right to payment at that time.   (The ABIL depends on your owning the debt at… Read More »St-Hilaire c. La Reine, 2014 CCI 336 (Favreau) — No ABIL if you agree to the cancellation of your loan in a bankruptcy proposal of a small business corporation

Humanics Institute v. Canada (National Revenue), 2014 FCA 265 — You must promote your religion to be a religious charity

CRA refused to allow the taxpayer to register as a charity. The FCA agreed, relying, in part, on the definition of religion in Syndicat Northcrest v. Amselem, 2004 SCC 47 (CanLII), [2004] 2 S.C.R. 551 at para. 39: “39                              In order to define religious freedom, we must first ask ourselves what we mean by “religion”.  While it is perhaps not possible to define religion precisely, some outer… Read More »Humanics Institute v. Canada (National Revenue), 2014 FCA 265 — You must promote your religion to be a religious charity

Sailsman v. Canada (National Revenue), 2014 FC (LeBlanc) — Is CRA your adversary?

The taxpayer, having returned to Canada at the end of 2010, presumed that he no longer had to file a 2010 Rental Income Return.  CRA took the view that he had to file the return due under s. 216(4), even though he was no longer a non-resident. Having failed to do so, he had to pay the higher amount due under that subsection. So Mr. Salisman… Read More »Sailsman v. Canada (National Revenue), 2014 FC (LeBlanc) — Is CRA your adversary?

Abeilles service de conditionnement inc. c. La Reine, 2014 CCI (Jorre) — For SR & ED credits, there must be technical uncertainty and methodical steps to resolve it 

This case turned largely on its facts. It offers some good guidance on the importance of impartiality for experts.  The Crown’s expert relied heavily on CRA guidelines so that the court rejected his evidence as impartial. The expert had also made a material error in his assumptions of fact. The court adopted these criteria for deciding when there has been creditable scientific research or experimental development:   “[141]   The… Read More »Abeilles service de conditionnement inc. c. La Reine, 2014 CCI (Jorre) — For SR & ED credits, there must be technical uncertainty and methodical steps to resolve it 

Bérubé c. La Reine, 2014 CCI (Tardif) — You can’t appeal an assessment that says you don’t owe tax.  But you can claim the loss in later years.

“[50]        It is thus clearly established in the jurisprudence that a taxpayer can not file an appeal against a nil assessment for the simple reason that an assessment according to which no tax is payable is not an assessment within the meaning of the ITA. “[51]       Moreover, the right to appeal an assessment has for its goal the reduction of tax payable or… Read More »Bérubé c. La Reine, 2014 CCI (Tardif) — You can’t appeal an assessment that says you don’t owe tax.  But you can claim the loss in later years.

Le sage au piano c. La Reine, 2014 CCI (D’Auray) — A wrong suite number may invalidate CRA’s service, so that the objection time limit doesn’t start to run

“[40]        In my opinion, in light of the facts of this case, that in a building with many floors where the post box does not show the name of the applicant, the suite number takes on an essential character, one which might be different for a duplex or a building with few occupants. “[41]        Although the Minister showed that… Read More »Le sage au piano c. La Reine, 2014 CCI (D’Auray) — A wrong suite number may invalidate CRA’s service, so that the objection time limit doesn’t start to run

McDonald v. The Queen, 2014 TCC (Campbell) — You need not be involved in all facets of the management of the corporate operations to be held to be a de facto director liable for payroll and GST debts. 

“[29]        I am of the view that an individual need not be involved in all facets of the management of the corporate operations to be held to be a de facto director. Depending on the corporate structure and the complexity of the corporate operations, it will be a question of fact as to whether an individual has performed duties that one would expect only a de jure director… Read More »McDonald v. The Queen, 2014 TCC (Campbell) — You need not be involved in all facets of the management of the corporate operations to be held to be a de facto director liable for payroll and GST debts. 

Wise v. Canada (Public Safety and Emergency Preparedness), 2014 FC (O’Keefe) — Crossing the border, you must report more than $10,000 in cash, even if half belongs to your spouse 

“[ 14]           Section 12 requires people to report any currency they actually possess if it is equal to or greater than the prescribed amount. The amount is prescribed as $10,000 by subsection 2(1) of the Cross-border Currency and Monetary Instruments Reporting Regulations, SOR/2002-412. “[15]           The issue in this case largely revolves around the interpretation of the term “actual possession” in paragraph 12(3)(a). The plaintiff essentially contends that… Read More »Wise v. Canada (Public Safety and Emergency Preparedness), 2014 FC (O’Keefe) — Crossing the border, you must report more than $10,000 in cash, even if half belongs to your spouse 

Vachon c. Canada, 2014 CAF (Scott, Nadon, Gauthier) — For statute-barred tax years, negligence of the taxpayer, not his accountant, is critical 

“[4]               In Aridi c. La Reine, 2013 CCI 74 (CanLII), … the TCC states at paragraph 34 that “negligence of an accountant is not the factor that allows one to by-pass the time limit under 152(4)a)(i) of the ITA.  It is the negligence of the taxpayer at the time of filing that must be analyzed. … “[7]        … Read More »Vachon c. Canada, 2014 CAF (Scott, Nadon, Gauthier) — For statute-barred tax years, negligence of the taxpayer, not his accountant, is critical 

MacDonald v. The Queen, 2014 TCC (Rossiter ACJ) — You’re not a director just because you sign some documents that call you one and your name is shown on the public register, if you didn’t agree to be a director

CRA will often rely on the public registry to decide if someone is a director liable for a corporation’s HST or payroll amounts.  “[33]        The public registry of directors could lead to a presumption that one is a director but this presumption may be overcome provided there is evidence the person never consented to be a director. “[34]        The Tax Court of Canada has previously… Read More »MacDonald v. The Queen, 2014 TCC (Rossiter ACJ) — You’re not a director just because you sign some documents that call you one and your name is shown on the public register, if you didn’t agree to be a director

Kosma-Kare Canada inc. c. Canada, 2014 CAF (Gauthier) — You can’t claim ITCs for work your contractor did not do, but you don’t have to pay penalties for using employees below minimum wage

Kosma-Kare lost its appeal against disallowed ITCs.  “[5]   … the [Tax Court] judge had already concluded that the respondent [the Crown] had shown that the workers used by Kosma-Kare could not have been the employees either of 9167 nor of 9199 [the supposed empolyment agencies whose invoices Kosma-Kare had sought to use to get input tax credits], nor of subcontractors with whom these agencies… Read More »Kosma-Kare Canada inc. c. Canada, 2014 CAF (Gauthier) — You can’t claim ITCs for work your contractor did not do, but you don’t have to pay penalties for using employees below minimum wage

Canada (Public Safety and Emergency Preparedness) v. Huang, 2014 FCA (Dawson, Gauthier, Trudel) — PCTFMLA – CBSA can release the part of the funds seized that aren’t proceeds of crime

This decision affirms the FC’s decision.  (See 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.) “[78]           Having conducted the required textual, contextual and purposive analysis I am satisfied that subsection 29(1) of the Act allows the Minister to grant relief from forfeiture in respect of a portion… Read More »Canada (Public Safety and Emergency Preparedness) v. Huang, 2014 FCA (Dawson, Gauthier, Trudel) — PCTFMLA – CBSA can release the part of the funds seized that aren’t proceeds of crime

0742443 B.C. Ltd. v. The Queen, 2014 TCC (C Miller)–Hotels and motels can get the small business deduction but renters of storage space cannot unless they employ more than 5-full time staff

The small business deduction allows low-rate tax for small business corporations. Because it’s designed to encourage small businesses, it’s not allowed to passive investment corporations, which earn rental or investment income from property, unless those businesses employ more than 5 full-time employees.   Justice Miller decided that a corporation that rented storage space was a “specified investment business” and, so, not entitled to the small… Read More »0742443 B.C. Ltd. v. The Queen, 2014 TCC (C Miller)–Hotels and motels can get the small business deduction but renters of storage space cannot unless they employ more than 5-full time staff

Grenon v. The Queen, 2014 TCC (Graham)–It does not offend the Charter of Rights that recipients can deduct legal fees to enforce support orders but payers cannot deduct the fees to resist a support order 

You may think it odd that a payer of support cannot deduct legal fees spent to resist a support order but a recipient of support can deduct fees spent to get or enforce the order.  Justice Graham explains the background to these differences and shows that they do not result in unfair discrimination contrary to equality protection in the Charter of Rights.   “[8]        … Read More »Grenon v. The Queen, 2014 TCC (Graham)–It does not offend the Charter of Rights that recipients can deduct legal fees to enforce support orders but payers cannot deduct the fees to resist a support order 

Bleiler v. The Queen, 2014 TCC (Graham) – Denial of disability tax credit to persons with less severe handicaps (such as blindness in one eye only) does not breach equality rights under the Charter

“[11]        However, it is not enough for Mr. Bleiler to demonstrate that people with less severe disabilities suffer prejudice or stereotyping. Mr. Bleiler must also show that the denial of the disability tax credit to those people has the effect of perpetuating that prejudice or disadvantage. The only effect of being denied the disability tax credit that Mr. Bleiler described was the fact that… Read More »Bleiler v. The Queen, 2014 TCC (Graham) – Denial of disability tax credit to persons with less severe handicaps (such as blindness in one eye only) does not breach equality rights under the Charter

Rio Tinto Alcan inc. c. La Reine, 2014 CCI (Favreau) — If CRA reassesses you to increase a previous assessment, you may need to file another objection

“[15]        Case law and commentary are plentiful in the taking the same view in the situation where the revised taxable income of a taxpayer is increased taking account of prior adjustments, in that that constitutes a very clear indication for treating the assessment as being a “new assessment” instead of an “additional assessment”.   … “[17]       In the same… Read More »Rio Tinto Alcan inc. c. La Reine, 2014 CCI (Favreau) — If CRA reassesses you to increase a previous assessment, you may need to file another objection

Fung v. Canada (Attorney General), 2014 FC (Mactavish) — If you want taxpayer relief for late filing a T1135 foreign property return you must give CRA proper evidence and you need more than ignorance of the rules for your excuse

Ms. Fung sought judicial review of CRA’s refusal to cancel penalties and interest for her failure to file the T1135 on time.  (The case isn’t clear whether Ms. Fung filed only because she was caught.)  CRA did not accept her excuse that she was affected by the need to care for her premature infant (the facts contradicted her).  She also said she didn’t know she… Read More »Fung v. Canada (Attorney General), 2014 FC (Mactavish) — If you want taxpayer relief for late filing a T1135 foreign property return you must give CRA proper evidence and you need more than ignorance of the rules for your excuse

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

Enseignants de langue anglaise de Montréal. v. M.N.R., 2014 TCC (Jorre)–Quebec civil law tests for employee-independent contractor cases are similar to tests for other provinces

This case involved French language teachers whom the appellant contracted to fulfill contracts with various corporate clients, including Agropur and CBC.  Classes were taught at the clients’ offices.  The appellant had no classroom.   “[30]        While Connor Homes is an Ontario case and the test in article 2085 of the Civil Code is subordination, which is different from the common law test, Grimard makes it clear[10] that, in determining whether or not there… Read More »Enseignants de langue anglaise de Montréal. v. M.N.R., 2014 TCC (Jorre)–Quebec civil law tests for employee-independent contractor cases are similar to tests for other provinces

Garage Gilles Roy (2007) inc. c. La Reine, 2014 CCI (Favreau) — GST on warranty repairs isn’t remittable until the reporting period when the manufacturer approves the work

The appellant made warranty repairs to heavy trucks.  It sent warranty claims to the manufacturers who appraised the work and approved all, part or none of the bill.  Only on approval would the manufacturer pay the bill.  CRA claimed that GST was collectible when the claim was sent; the appellant said the amount payable was not fixed and due until the manufacturer approved it.  Justice… Read More »Garage Gilles Roy (2007) inc. c. La Reine, 2014 CCI (Favreau) — GST on warranty repairs isn’t remittable until the reporting period when the manufacturer approves the work

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

Pouliot c. La Reine, 2014 CCI (Lamarre) — CRA’s audit deposit method for unreliable tax reporting — losses aren’t relevant; to avoid penalties, taxpayer must show a credible explanation for under-reporting

Mr. Pouliot ran strip clubs and was a loan shark.  Revenue Quebec seems to have started the audit based on a police referral.  Justice Lamarre explained the principles of the deposit method which CRA used to challenge Mr. Pouliot’s 2000-2003 reported taxable income: “[11]   Briefly, the verification method based on deposits consists of adding all the deposits and from them subtracting all the amounts… Read More »Pouliot c. La Reine, 2014 CCI (Lamarre) — CRA’s audit deposit method for unreliable tax reporting — losses aren’t relevant; to avoid penalties, taxpayer must show a credible explanation for under-reporting

Pépinière A. Massé Inc. c. La Reine, 2014 CCI (Paris) — If you can’t prove that a real person sold you goods or services, you can’t claim input tax credits

The GST system works by having businesses collect GST (or QST and HST) from their customers.  The businesses are supposed to remit the tax collected to CRA (RQ) but they may deduct amounts they pay their suppliers (input tax credits) to reduce the amount remitted.   Businesses do not pay GST to their employees and so amounts paid to employees do not reduce the GST… Read More »Pépinière A. Massé Inc. c. La Reine, 2014 CCI (Paris) — If you can’t prove that a real person sold you goods or services, you can’t claim input tax credits

1057513 Ontario Inc. v. The Queen, 2014 TCC (Bocock) — To get the dividend refund under ITA s. 129(1), you must file your corporate tax return within three years of the due date and claim the refund within the normal reassessment period

Because its shareholders and directors didn’t understand the rules, he corporate taxpayer stood to lose $1,442,760 of dividend refunds, plus about $600,000 of penalties and interest.  It tried to persuade the Court that the refund rule should be interpreted generously to prevent that harsh result.   Here, Justice Bocock gives us a helpful explanation of an important principle of income tax law, “Integration”, and how the… Read More »1057513 Ontario Inc. v. The Queen, 2014 TCC (Bocock) — To get the dividend refund under ITA s. 129(1), you must file your corporate tax return within three years of the due date and claim the refund within the normal reassessment period

Berkovich v. The Queen, 2014 TCC (Lyons) — To qualify for the GST New Housing Rebate a judge must believe that you signed the agreement to purchase intending to live in the unit as your home

CRA refused to give the Appellant, a real estate agent, the new housing rebate.  She claimed she bought the condominium unit to live in with her spouse who (at the time they signed the agreement) worked 30 kilometers from the condominium.  She also claimed that they lived in the condominium unit, though her credit card statements and other facts didn’t support that.  The judge did… Read More »Berkovich v. The Queen, 2014 TCC (Lyons) — To qualify for the GST New Housing Rebate a judge must believe that you signed the agreement to purchase intending to live in the unit as your home

Maddin v. The Queen, 2014 TCC (Bocock) — Director’s liability: You can be liable if you don’t ask an obvious question about the status of source deduction remittances.

Mr. Maddin was a shareholder, officer and director of Quadra Marble and Granite Inc. (“Marble”).  His family corporation was Marble’s landlord.  Another family corporation sold its business to Marble.  Mr. Maddin was at Marble’s office 2-3 days a week.  His long-time bookkeeper was Marble’s bookkeeper.  By early 2008, he knew Marble was slow paying its rent to his corporation and there were other signs of financial… Read More »Maddin v. The Queen, 2014 TCC (Bocock) — Director’s liability: You can be liable if you don’t ask an obvious question about the status of source deduction remittances.

Landry c. La Reine, 2014 CCI (Lamarre) — You cannot deduct legal fees you spend to stop paying child or spousal support, even though your success will increase your personal wealth

“[10]        In fact, in the case Nadeau v. M.N.R., [2004] 1 FCR 587, 2003 FCA 400, the Federal Court of Appeal clearly held,  at paragraph 18, that expenses “incurred” by the payer of support (including those to put an end to it) cannot be considered as having been “incurred” to earn income and said that courts have never recognized any right to the deduction of… Read More »Landry c. La Reine, 2014 CCI (Lamarre) — You cannot deduct legal fees you spend to stop paying child or spousal support, even though your success will increase your personal wealth