Bryan Walters has drawn my attention to an interesting CRA technical interpretation (2011-0404641C6 or CCH Window ¶10,832) in which the CRA states that the provisions of a shareholder agreement might reduce the value of freeze shares that otherwise have the “right” attributes for the purposes of a freeze (see “Freeze Shares“). Continue reading
I didn’t understand CRA technical interpretation 2011-0394191 at first, but I think I get it now. Continue reading
Mark Brohman at Durward Jones Barkwell was kind enough to send to me a reminder in the form of a technical interpretation of a very important fact about goodwill and estate planning. Continue reading
In Vankerk v R, 2006 FCA 96 (which I wrote about here), the Court held that a taxpayer could not deduct a loss incurred in connection with an “investment” in a business that turned out to be a fraud. A taxpayer cannot deduct a loss where there is no source of income. The corollary appears to be that a taxpayer who realizes a gain where there is no source should not be required to include the gain in income for tax purposes. In Johnson v R, 2011 TCC 540, the taxpayer was one of the lucky few to receive more than she “invested” in a Ponzi scheme. The Tax Court held that the taxpayer’s gain should not be included in the her income for tax purposes because there was no source of income.
For an article on donation tax shelter class actions, click here.
The CRA is warning Canadians to stay away from the tax protest movement, again. I can’t believe people are still falling for this crap given that, as the CRA release points out, “Canadian courts have repeatedly and consistently rejected all arguments made in these tax protester schemes.” That the arguments keep getting made must surely be fodder for a PhD thesis.
The CRA issued a couple of interesting technical interpretations in the last few months.
The CRA will no longer issue technical interpretations on foreign entity classification (CRA technical dated August 04, 2011, 2011-0415141E5) because whether the foreign entity is a trust, corporation or partnership is a “question of fact”. Is this CRA-sponsored FUD (fear, uncertainty, doubt) that is meant to discourage offshore planning?
In a technical dated August 22, 2011 (2011-0415161E5), the CRA reiterated that the asset tests for the capital gain deduction refer to the gross fair market value of the assets, and so it is not possible to “purify” a corporation by netting liabilities against certain assets or by making journal entries that have the same effect. If a corporation has excess cash, then, to purify it, the cash must be removed via legally-effective transactions (eg the payment of a dividend by resolution).
Is a gain realized on a sale of real property a capital gain or must it be fully included in income, perhaps because the sale was in connection with an “adventure in the nature of trade”? One might think that the answer will be of the either/or variety: either the gain is capital in nature or it is not, in which case it will be an income gain the entire amount of which must be included in income. Von Realty Limited v R, 2011 TCC 345 is a good reminder that any particular gain might be on capital account for a portion of the gain and on income account for the remainder because the owner’s intentions with respect to a property can change during the time he or she owns it.
Brian Arnold maintains a blog of sorts over at the CTF website. I say “of sorts” not to denigrate what he does with his posts—which are always informative and often quite funny—but to point out that when you number your posts (“Posting: 22″, “Posting: 23″) it means you’re still not quite comfortable with the whole social media thing (or maybe you don’t want to be identified with it?).
Anyway, I quite liked his last post on the government’s efforts to make tax legislation clearer or at least “more less incomprehensible”.
Yes, this is a joke. Finance hasn’t hired Humpty Dumpty to work on the foreign affiliate rules. I think.
Two unrelated individuals each own 50% of a corporation. If the daughter of one of them is an employee of the corporation, does she deal with it at arm’s length for the purposes of subsection 5(2) of the Employment Insurance Act (Canada)? 5119235 Manitoba Inc. v MNR, 2011 TCC 494, says she’s not if she and the corporate employer are “acting in concert”. Apparently they are acting in concert if the daughter works overtime and isn’t paid extra for it, or customers make complaints about her work, but the employer does little or nothing about it.
