SimpsonWigle Law LLP Tax News

I’ve just published a permanent page to my blog on voluntary disclosures.

You need to purify a corporation of its bad assets so that the corporation’s shares will be qualified small business corporation shares for the purposes of the $750,000 capital gains exemption. Let’s assume that you are confident about the values of the assets involved, so that you can leave bad assets with a value equal to exactly 10% of the total gross value of all assets of the corporation. How do you calculate the amount to remove, given that what you remove reduces both the gross value of the bad assets and the gross value of all of the assets of the corporation? The following formula seems to work: (more…)

In Suffolk v. The Queen, 2010 TCC 295 (an informal procedure case), the Court undertook an interesting review of the caselaw relating to the validity of notices of assessment that contain errors and the form required for a valid notice of assessment. The short story is as follows:

[17] Contrary to the position taken by the Appellant, the Federal Court of Appeal in Stephens v. The Queen [[1988] DTC 1170 at 1171] has held that there is no prescribed form for a notice of assessment issued under the Act:

Subsection 152(2) requires the Minister to “send a notice of assessment” to the taxpayer. Nowhere in the Act do we find prescriptions relating to the form of that notice. It follows, in our view, that the form of the notice does not matter and that the subsection merely requires that the notice be expressed in terms that will clearly make the taxpayer aware of the assessment made by the Minister.

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A few months ago, I wrote a post complaining about how the CRA tends to go after the taxpayers who get the caught in the middle of tax schemes rather than the schemers themselves. Karen Cooper has written an interesting piece on a set of cases where the CRA went after both the schemers and the taxpayers.

In Rae v. The Queen, 2010 TCC 130, the taxpayer left his position as the controller of one corporation and joined another. Soon after he started his new employment, he discovered what he thought were serious improprieties in the financial statements and accounting practices of his new employer. He resigned his position but then negotiated a settlement under which he received a large payment for negligent misrepresentation and as damages for retaliation. The CRA took the position that the entire amount received was a retiring allowance. The taxpayer appealed; the Tax Court agreed with him in part. (more…)

The following article appeared in a recent edition of the Hamilton Law Association Law Journal.

The police execute a search at your client’s house. They find pot plants and a large amount of cash. They seize the cash and charge your client with trafficking, and he is later convicted of that crime. (more…)

Tax Topics number 1984 (March 18, 2010) has an interesting article on estate freezes using partnerships in light of Krauss v. The Queen, 2009 TCC 597. (more…)

Assume that A and B, who deal at arms length, own 55 and 20 common shares in the capital of Opco respectively. A and B also own 95 and 5 common shares in the capital of Holdco respectively. Assume that B’s tax adviser suggests to her that she can sell her common shares in the capital of Opco to Holdco for a purchase price equal to $400,000 cash. What could possibly go wrong? See Emory v. The Queen, 2010 TCC 71, for the answer to that question. (more…)

I’ve seen a number of cases where a family member consents to be a director of a corporation—exactly why nobody seems to know after the fact—and then ends up being assessed for unremitted source deductions. The family member might be uneducated and barely able to speak English, but that won’t stop the assessments. The CRA and the Ministry of Revenue are unsympathetic. The courts are less cold-blooded it seems. (more…)

Tax Court litigation—or any other kind of litigation for that matter—is inherently unpredictable. Take Pigeau v. The Queen, 2009 TCC 582, for example. In that case, a key issue was the value of a property transferred from an individual to his grandfather. The taxpayer, who had the onus of proving value, showed up with nothing more than an MLS listing and a report that couldn’t be entered into evidence because the agent failed to give the proper notice. The Minister, on the other hand, had an expert’s appraisal in hand and the expert available to testify. The expert’s report was duly received, but the taxpayer still won, however, because the judge gave the benefit of the doubt to the taxpayer in choosing values from the ranges given by the expert. Which just goes to show you.