Justin Kutyan

The appellant appealed the Minister's assessment characterizing the proceeds from the disposition of two properties as income rather than capital gains.

The Tax Court of Canada allowed the appeal, finding that the properties were originally acquired as capital properties and held as such until September 16, 2011, when they underwent a change in use to inventory upon the approval of bank financing for a condominium development project.

The Court determined the intention at the time of the original purchases by the appellant's predecessors, rather than at the time of a subsequent subsection 85(1) rollover, and concluded there was no secondary intention to sell for profit at acquisition.

The Respondent brought a motion under section 99 of the Tax Court of Canada Rules (General Procedure) to examine a representative of Maple Leaf Sports & Entertainment Partnership Ltd. (MLSE) for discovery.

The underlying appeal concerns the characterization of a signing bonus paid to the appellant, a professional hockey player.

The Court dismissed the motion, finding that the Respondent failed to demonstrate an inability to obtain the sought information from the appellant during his examination for discovery, or from MLSE directly.

Following the death of the original trial judge before judgment was rendered, a new trial was ordered.

The Crown applied for directions to have the transcripts of the oral evidence from the first trial accepted as sworn evidence at the new trial to save time and resources.

The Tax Court dismissed the application, emphasizing the overwhelming advantage of a trial judge directly observing witnesses to assess credibility, and concluded that a new trial with live testimony would best preserve fairness.

The parties brought cross-motions to compel answers to questions refused during examinations for discovery in an appeal involving allegations of sham transactions and the general anti-avoidance rule (GAAR).

The Respondent also sought leave to amend its replies to withdraw certain factual assumptions.

The Tax Court of Canada granted both motions to compel in part, ordering further answers and productions where relevant to the objective reality of the transactions and the Minister's GAAR policy, while protecting privileged communications.

The Court also granted the Respondent leave to amend its replies, provided the amendments were made with greater clarity.

The parties brought cross-motions to compel better answers to questions posed during examinations for discovery.

The respondent also sought leave to amend its replies.

The Tax Court of Canada granted and denied the motions to compel in part, in accordance with a separate directive order, and granted the respondent leave to amend its replies subject to directions.

The appellant engaged in foreign exchange straddle trading, realizing a large loss in 2011 and an offsetting gain in 2012, to defer taxes.

The Minister reassessed the appellant, denying the 2011 business loss on the basis that the trades were a sham, legally ineffective, or not a source of income.

The Tax Court found that the trades were not a sham and were legally effective under English law.

However, applying the Stewart test, the Court concluded that the trading activity lacked a predominant intention to profit, as the strategy was designed to generate a specific tax loss and was heavily hedged to avoid actual market risk.

Therefore, the activity was not a source of income, and the appeal was dismissed.

The Respondent brought a motion to compel unredacted copies of five documents over which the Appellants claimed solicitor-client privilege during examinations for discovery.

The Tax Court of Canada reviewed the unredacted documents and concluded that they contained legal advice and were protected by solicitor-client privilege.

The Respondent's motion for unredacted copies was denied.

The Minister assessed the appellant for foreign accrual property income (FAPI) relating to research and development services provided by its US affiliates.

The appellant appealed, arguing the services did not constitute FAPI or fell within statutory exceptions.

The Tax Court of Canada allowed the appeal, finding that the services provided by the foreign affiliates were not FAPI because they did not erode the Canadian tax base and were inextricably linked to the manufacturing and sale of goods outside Canada.

The Court held that the statutory exceptions for services performed in connection with the sale of goods and manufacturing applied.

The respondent Minister brought a motion to compel the appellant to answer outstanding discovery questions, request documents from third-party advisors, and produce documents over which the appellant claimed solicitor-client privilege.

The Tax Court granted the motion in part.

The appellant was ordered to answer questions regarding the purpose of the transactions, as they were relevant to the GAAR assessment.

The Court declined to order the appellant to request documents from third parties, finding the rules for partial disclosure did not compel such inquiries.

Finally, the Court reviewed 19 documents for solicitor-client privilege, finding that most were not privileged as the appellant failed to provide sufficient evidence that the accounting firm was acting as an agent in the continuum of legal advice.

The Minister of National Revenue brought a motion to strike three affidavits filed by Gold Line Telemanagement Inc. in opposition to an application under section 311 of the Excise Tax Act.

The Court struck portions of the expert affidavit of Timo Vainionpaa that directly challenged the CRA's analysis of call detail records, finding them irrelevant to the preliminary stages of the application.

However, the Court declined to strike the balance of the Vainionpaa affidavit or the factual affidavits of Joel Bowers and Alexei Tretiakov, finding they provided necessary technical background and foundational evidence.

The respondent brought a voir dire motion to exclude two expert reports tendered by the appellant in a tax appeal concerning foreign accrual property income (FAPI) and foreign accrual tax (FAT) deductions.

The Tax Court of Canada ruled that the report of Dr. Jack Mintz was inadmissible in its entirety as it offered legal opinions on domestic statutory interpretation.

The report of Brad Rolph was ruled partially admissible; the section detailing alternative transfer pricing structures was admitted for the limited purpose of providing a foundation for the appellant's argument, while the section opining on the Minister's policy and statutory interpretation was excluded.

The Tax Court of Canada awarded costs to the Respondent following the dismissal of the Appellant's motion to strike.

The Court applied the factors in Rule 147 of the Tax Court of Canada Rules (General Procedure) and determined that an award of costs greater than the Tariff was justified, awarding $7,000 to the Respondent.

The Appellant was substantially successful in its appeals regarding the deductibility of losses from straddle trading.

The parties could not agree on costs.

The Court considered the factors in Rule 147(3) of the Tax Court of Canada Rules (General Procedure), including the result of the proceeding, the amounts in issue, the importance of the issues, the volume of work, and the complexity of the issues.

The Court awarded the Appellant costs in a lump sum of $2,241,025, reflecting 45% of its legal fees and adjusted disbursements.

The taxpayer engaged in forward foreign exchange straddle trading on the over-the-counter market to generate non-capital losses to offset his other income.

The Minister reassessed the taxpayer beyond the normal reassessment period, disallowing the losses on the basis that the trading was a sham and did not constitute a source of income, and assessed gross negligence penalties.

The Tax Court allowed the appeals for all years except 2002, finding that the trading was not a sham and constituted a source of income under the Stewart test.

For 2002, the Court found the taxpayer was grossly negligent in failing to report over $8 million in gains, justifying the reopening of that year and the imposition of a penalty.

The appellant, Stonehouse Group Inc., appealed a motion judge's decision denying enhanced refund interest on an overpayment of provincial tax.

The overpayment resulted from a disallowed loss carry back under the Corporations Tax Act, which was later reversed.

The motion judge interpreted s. 79(7) of the Act as precluding enhanced interest for loss carry back refunds.

The Court of Appeal allowed the appeal, finding the motion judge's interpretation incorrect.

The Court held that such an interpretation would unfairly deny any refund interest, contrary to the legislative intent of the interest payment provisions, which aimed to balance the rights of government and taxpayers and provide enhanced interest for compelled overpayments arising from disputes.

The Appellant appealed reassessments for its 2014, 2015, and 2016 taxation years, seeking to carry back a non-capital loss from 2017.

The 2017 loss was based on a terminal loss from the disposition of Class 13 property.

The Appellant argued it could unilaterally adjust its initial capital cost allowance (CCA) claims from 1997-2003 downwards to increase the undepreciated capital cost balance and the resulting terminal loss, because the Minister had issued nil assessments for those years.

The Tax Court of Canada dismissed the appeal, holding that the Income Tax Act does not permit a taxpayer to unilaterally adjust discretionary CCA claims retroactively to avoid the expiration of non-capital losses.

The Minister reassessed the appellant under the transfer pricing rules in section 247 of the Income Tax Act, reallocating all profits earned by a related Barbados corporation from the sale of a herbicide to the appellant's income.

The Minister argued the transactions were a sham, or alternatively, that they should be recharacterised or adjusted because arm's length parties would not have entered into them or agreed to the same terms.

The Tax Court of Canada allowed the appeal, finding no evidence of deceit to support a sham.

The court held that the Barbados corporation bore real risks, owned the inventory, and performed valuable functions.

Furthermore, the appellant demolished the Minister's assumptions by providing unrefuted expert evidence that the service fee paid to the appellant was within a reasonable arm's length range.

The reassessments and associated penalties were vacated.

The applicants sought rectification of transaction documents following the acquisition of a telecommunications partnership in order to allow executives who exercised stock options to qualify for the 50% stock option deduction under the Income Tax Act.

The closing structure caused the option shares to be acquired by non‑arm’s‑length vendors rather than by the purchaser, leading the Canada Revenue Agency to deny the deduction.

The court held that rectification requires proof of a prior agreement and common intention that the written instrument failed to record, or strict conditions for unilateral mistake.

The evidence did not establish that the tax treatment of the executives was a shared or material intention of the contracting parties when the agreement was executed.

Unexpected tax consequences alone could not justify retroactively restructuring a completed transaction through rectification.