Lisa Macdonell

Following a successful Rule 58 application, the Respondent sought enhanced costs beyond the Tariff.

The Court considered the factors in subsection 147(3) of the Tax Court of Canada Rules (General Procedure), noting the importance of the issues, the volume of work, and the precedential value of the decision.

The Court awarded the Respondent costs under the Tariff, plus an additional $48,800, and $1,000 for the costs submissions.

The appellant brought a motion under Rule 58 to determine whether the advantage charge imposed by sections 207.05 and 207.06 of the Income Tax Act is a tax or a penalty, and whether it is unconstitutional as an improper delegation of taxing power.

The Tax Court of Canada held that the charge is a tax, not a penalty, and that the provisions are constitutional because Parliament did not improperly delegate rate-setting authority to the Minister.

The appellant sold two forest tenures in Alberta, under which the purchasers assumed statutory reforestation obligations arising from past harvesting.

The Minister reassessed the appellant to include the estimated cost of those reforestation obligations in the vendor's proceeds of disposition under s. 13(21) of the Income Tax Act.

The Supreme Court of Canada unanimously allowed the appeal, holding that the reforestation obligations were not a distinct existing liability of the vendor but rather a future cost embedded in the forest tenure by virtue of Alberta's regulatory scheme, which depressed the tenure's value.

The Court rejected both the Minister's mortgage analogy and the appellant's contingent liability argument, finding the obligations properly excluded from proceeds of disposition regardless of whether they were contingent or absolute.