Nathalie Labbé

The appellant appealed an assessment under section 160 of the Income Tax Act holding him jointly and severally liable for the tax debt of a trust.

The trust had emigrated to Barbados, triggering a deemed year end and disposition of property under subsection 128.1(4).

The trust subsequently distributed capital to the appellant.

The Tax Court of Canada held that subsection 128.1(4) applied to create a deemed year end, taking precedence over subsection 94(1).

Furthermore, the Court found that the appellant gave no consideration for the capital distributions, rejecting the argument that subsection 107(2) deemed consideration to have been paid.

The appeal was dismissed.

The Respondent brought a motion for leave to amend its Reply to the Notice of Appeal to add an alternative argument based on the General Anti-Avoidance Rule (GAAR).

The Appellant opposed the motion, arguing it would suffer non-compensable prejudice because the corporate reorganization occurred 20 years ago and the non-resident shareholders who authorized it were no longer available to testify about their bona fide purposes.

The Tax Court of Canada granted the motion, finding that the amendment would assist in determining the real questions in controversy and would not result in non-compensable prejudice, as the Appellant's CEO had direct knowledge of the transactions and access to the relevant corporate records.