Tax & Accounting May 15, 2019

Tax news headlines for May 15, 2019

Trending this week

  • In 2018-0783741E5, the CRA comments on how the excluded business might apply to a spouse who worked full-time for the business in prior years but is not currently working. 
  • The CRA has announced that it is expanding its liaison officer program to provide assistance to incorporated small businesses. Prior to this, only unincorporated small businesses were eligible. 

Federal income tax

Canada Revenue Agency Documents

2015-0585681R3 - Cross-border spin-off butterfly

The CRA ruled favourably on a spin-off butterfly of Canadian assets of a foreign public company group into a new corporation to form a new business unit.

2016-0645351R3 - Loss consolidation

The CRA ruled favourably on a standard loss consolidation transaction designed to permit related corporations to undertake loss consolidation by utilizing inter-company debt to create interest expense in a profitco and interest income in the lossco.

2018-0784941R3 - Supplemental Ruling

The CRA issued a supplemental ruling to rulings 2018-076504R3, 2015-056473R3 and 2015-062209R3 based on changes to the facts and transactions proposed in those rulings.

2019-0797491E5 - CCA for Equipment Used to Produce Biofuels

The CRA confirmed that, provided certain conditions were met, equipment used by a corporation primarily for the production of biofuels and chemicals from municipal non-organic solid waste for sale to fuel or chemical distributors could be included in Class 53 of Schedule II of the Regulations for the purpsoe ofclaiming a capital cost allowance deduction.

2019-0801391E5 - Assignment of structured settlement

The CRA confirmed that a casualty insurer could assign or transfer (e.g., to another insurer) the ownership of a structured settlement without affecting the tax-free status of the periodic payments made to the claimant  provided the claimant provided his/her consent to such assignment or transfer.

Government of Canada

SI/2019-25 P.C. 2019-424. Order Fixing January 1, 2019 as the Day on which Sections 176 to 178 of the Budget Implementation Act, 2018, No. 2, S.C. 2018, c. 27, are Deemed to Come into Force. [Canada Gazette, Part II,
Vol. 153, No. 10, May 15, 2019. Bilingual.] 

News Release: Strengthening the middle-class by putting more money in the pockets of Canadians

Court decisions 

Case (Full Text): 2019 FCA 104, Ron Goheen v. Her Majesty the Queen

Ron Goheen v. Her Majesty the Queen. Federal Court of Appeal, May 1, 2019, 2019 FCA 104. Court File No.: A-126-18. Stratas, Rennie and Laskin JJ.A. Charitable donations – Appeal from Tax Court decision affirming Minister’s denial of charitable donation tax credit – On reassessment, the Minister denied the taxpayer’s claim for the 2000, 2001, 2002 and 2003 taxation years for charitable donations made, on the basis that the payments made did not constitute a gift. The taxpayer appealed to the Tax Court of Canada and his appeal was dismissed, with the Tax Court holding that the appellant had lacked the requisite donative intent. As well, the Tax Court judge held that evidence of a deposit made to the taxpayer’s bank account in the exact amount of the claimed charitable donations was relevant evidence and constituted an independent basis for dismissal of the appeal. The Tax Court also held that the fact that the Minister had no knowledge of that deposit until examinations for discovery were held did not mean that her reliance on that fact constituted, as argued by the appellant, a departure from the underlying basis of the reassessments that the appellant lacked donative intent. The appellant appealed from that decision, arguing that the Tax Court had made an error of law in permitting the Minister to advance an alternative basis of assessment at trial, where that basis was not pled in her Reply and she had not sought leave to amend that Reply. The Federal Court of Appeal held that the appellant had had notice that the deposit would form part of the Minister’s case at trial and that the trial judge had not erred in finding that evidence of the deposit was relevant to the question of intent. The appellate Court also held that reliance on the deposit was not a new theory or basis of reassessment, but rather constituted additional particularized evidence in support of the Minister’s overarching theory that there was no donative intent. The Federal Court of Appeal concluded that no error had been made by the Tax Court judge and the appeal from that decision was dismissed. 

Case (Full Text): 2019 FCA 120, Atlas Tube Canada ULC v. MNR and Chartered Professional Accountants of Canada

Atlas Tube Canada ULC v. MNR and Chartered Professional Accountants of Canada, Federal Court of Appeal, May 13, 2019, 2019 FCA 120, Court File No.: A-396-18. Stratas J.A. Appeals procedure – Motion for intervenor status in appeal from issuance of compliance order under section 231.7 – A compliance order under section 231.7 of the Income Tax Act was ordered in respect of the corporate taxpayer, requiring it to produce a draft due diligence report. An appeal from that order was filed, and the Chartered Professional Accountants of Canada then brought a motion seeking intervenor status in the appeal. The Federal Court of Appeal held that it was required to evaluate whether the proposed intervention was supported by the criteria in Rule 109 of the Federal Courts Rules. That evaluation required the Court to assess whether the participation of the proposed intervenor “will assist the determination of … legal issue[s] relating to the proceeding”. The Court noted that the proposed intervenors sought to bring the perspective of their members, who were potentially subject to production requests from the Canada Revenue Agency in respect of work done for their clients. The Court concluded that the intervenors had a useful and helpful role to play in the appeal, particularly in light of their practical experience, and could assist the Court in its task of analyzing the legislative purpose of the relevant provision and how it should be applied to the facts of the appeal. The motion brought seeking intervener status was therefore allowed.

Case (Full Text): 2019 TCC 113, Sorin Herta v. The Minister of National Revenue

Sorin Herta v. The Minister of National Revenue. Tax Court of Canada, May 9, 2019, 2019 TCC 113. Court File No.: 2018-4301(EI). Smith J. Employment Insurance – Whether appellant engaged in insurable employment outside of Canada – A ruling was made by the Canada Revenue Agency that he taxpayer, who worked outside of Canada, was not engaged in insurable employment for purposes of the Employment Insurance Act. That Ruling was confirmed by the Minister of National Revenue and the taxpayer appealed from the Minister’s decision. The Tax Court of Canada held that the facts of the appellant’s situation were not in dispute and, in particular, it was agreed that the appellant was a resident of Canada who, while working in the United States, had paid social security premiums. The Minister argued that the appellant’s employment was not insurable employment, as section 5(1) of the Employment Insurance Act refers to “employment in Canada”. The Court reviewed the relevant provisions and noted that subsection 5(4) provides that regulations may be made for including in insurable employment “employment outside of Canada”. In the Court’s view, the wording of section 5 of the Regulations provides that employment outside of Canada is included in insurable employment if four specific conditions are met. The parties were agreed that the first three conditions were met, and the only issue for determination was that “the employment was not insurable employment under the laws of the country in which it takes place”. The Court rejected the respondent’s argument that the appellant had been engaged in insurable employment under U.S. laws. It held that such employment, which was dependent on the appellant’s temporary work visa, was not insurable employment under the laws of the United States, and that such conclusion was confirmed by the fact that the appellant was denied unemployment benefits by the state of Massachusetts. The Court concluded that the appellant’s employment in the U.S. during the relevant period was therefore insurable employment for purposes of the Employment Insurance Act, and his appeal was allowed, without costs.


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