Monica Biringer

The parties brought a joint motion under section 58 of the Tax Court of Canada Rules (General Procedure) to determine whether paragraph 40(3.6)(a) of the Income Tax Act applied to deem the appellant's loss from the disposition of shares in a foreign subsidiary to be nil.

The appellant argued that the loss was a foreign exchange loss under subsection 39(2) and therefore excluded from subsection 40(3.6).

The Tax Court held that, based on the Federal Court of Appeal's decision in R. v. Bank of Montreal, the loss must first be determined under subsection 40(1), which is subject to the overriding rule in subsection 40(3.6).

Therefore, the loss was deemed to be nil, and the question was answered in the affirmative.

Following a successful appeal in a complex tax case, the appellant sought costs of the trial and appeal totaling over $1.3 million.

The respondent agreed costs should follow the event but argued the amounts were excessive.

The Court of Appeal declined to apply a 25% bump-up for a non-Rule 49 settlement offer, noting the respondent's obligation to protect the public purse in a test case.

The Court awarded the appellant costs of the appeal and trial fixed at $925,000 inclusive of disbursements and HST.

The appellant challenged reassessments imposing Ontario corporate income tax and corporate minimum tax on interest received under specialty debt instruments created through an inter-corporate refinancing designed to reduce provincial tax.

The court held the interest was income from property, not income from business, because the appellant's activity was minimal and the debt instruments were not employed or risked in any separate business.

Applying GAAR principles, the court found that even if the transactions generated a tax benefit or constituted avoidance transactions, they were not abusive because the statutory scheme deliberately distinguished between business income and property income for foreign-incorporated corporations with an Ontario permanent establishment.

The court also held the specialty debt instruments were not property situated in Canada because, under the settled common law situs rule, specialty debts are located where the instruments are physically found, here the British Virgin Islands.

The appeal was allowed and the reassessments were to be vacated.

Following an appeal involving a dispute between a corporate appellant and the provincial Minister of Revenue, the court addressed the issue of costs.

The parties agreed on a fixed amount for legal fees and disbursements payable to the respondent.

The court endorsed the agreement and ordered that the respondent recover the agreed costs.

The decision reflects the court’s approval of negotiated costs following the disposition of the appeal.

The appellant corporation appealed Ontario corporate tax assessments arising from interest income earned through refinancing transactions within a corporate group.

The appellant argued the interest constituted income from property and therefore fell outside the scope of Ontario taxation under the pre‑2005 Corporations Tax Act regime applicable to non‑Canadian incorporated corporations.

The court held that the interest income formed part of a business carried on in Canada because the corporation’s core purpose was to facilitate financing transactions within the corporate group and administer the resulting debt instruments in Canada.

As a result, the interest income constituted income from a business carried on in Canada within the meaning of s. 115 of the Income Tax Act and was taxable in Ontario.

The court upheld the Minister’s assessments and found it unnecessary to conduct a full GAAR analysis.

The respondent mortgage company purchased trailers and leased them back to the vendor to claim a substantial capital cost allowance (CCA) and offset revenue from other leased assets.

The Minister of National Revenue reassessed the respondent and disallowed the CCA claim under the general anti-avoidance rule (GAAR).

The Supreme Court of Canada held that while the transaction resulted in a tax benefit and was an avoidance transaction, it was not abusive tax avoidance under s. 245(4) of the Income Tax Act.

The Court found that the transaction was consistent with the object, spirit, and purpose of the CCA provisions, which permit deductions based on the cost of assets acquired, regardless of the economic risk involved.