Harry Cho

The Appellants brought a motion to strike portions of the Respondent's replies to their notices of appeal.

The impugned paragraphs advanced an alternative argument under subsection 152(9) of the Income Tax Act, alleging the Appellants were required to include foreign accrual property income (FAPI) in their assessments.

The Tax Court of Canada granted the motion, finding it plain and obvious that subsection 152(9) does not permit the Minister to advance an alternative FAPI argument based on entirely new transactions and income earned by foreign affiliates that formed no part of the initial assessment.

The appellant corporation sold real estate and realized a significant capital gain.

Prior to closing, it continued into the British Virgin Islands to avoid tax under section 123.3 of the Income Tax Act and to claim a general rate reduction under section 123.4, arguing it was no longer a Canadian-controlled private corporation (CCPC).

The Tax Court of Canada dismissed the appeal, finding that under the statutory definition in section 89(1)(b), the appellant remained a Canadian corporation and thus a CCPC.

Alternatively, the Court held that the General Anti-Avoidance Rule (GAAR) would apply to deny the tax benefits, as the continuation was an abusive avoidance transaction.

The appellants brought a motion seeking an order under subsection 135(2) of the Tax Court of Canada Rules (General Procedure) to reverse the order of proceedings at trial so the respondent would present evidence first.

The motion judge dismissed the motion as premature, holding that such a determination must be made by the trial judge rather than a motion judge.