Perry Derksen

Following the dismissal of the appellant's tax appeal, the parties were unable to reach an agreement on costs.

The respondent sought lump sum costs of $408,833.77, representing 35% of its actual legal costs, plus disbursements.

The Tax Court of Canada reviewed the factors under subsection 147(3) of the Tax Court of Canada Rules (General Procedure) and awarded the respondent its requested costs and disbursements in full.

The Appellant, an insolvent mining company with significant tax losses, underwent a series of transactions to spin out its mining assets and acquire a real estate business from two corporate groups.

To avoid an acquisition of control that would restrict the use of its losses under subsection 111(4) of the Income Tax Act, the corporate groups structured their share consideration to include non-voting shares, ensuring they held less than 50% of the voting shares despite owning over 90% of the equity.

The Minister reassessed the Appellant to deny the deduction of net capital losses under the general anti-avoidance rule (GAAR).

The Tax Court of Canada dismissed the appeal, finding that the corporate groups acted in concert as a group of persons, the use of non-voting shares was an avoidance transaction that resulted in a tax benefit, and the transactions abused the object, spirit, and purpose of subsection 111(4) by fundamentally transforming the corporation to allow new shareholders to benefit from its historical losses.

Following a decision dismissing the appellant's appeal regarding tax on a business of trading qualified securities within a TFSA, the respondent sought enhanced costs.

The Tax Court of Canada reviewed the factors under Rule 147, noting the importance of the issue and the appellant's conduct which unnecessarily lengthened the proceedings.

The Court awarded the respondent enhanced costs fixed at 35% of total costs, amounting to $95,980.38 inclusive of disbursements.

The appellant corporation, which held approximately $90 million in non-capital losses and other tax attributes it could not itself utilize, entered into a complex arrangement with a venture capital company to monetize those tax attributes.

Through a series of transactions, the appellant's assets and liabilities were stripped into a parent company, and the venture capital company obtained contractual control over the appellant's board composition and activities via an investment agreement, while never formally acquiring de jure control of its shares.

The appellant then carried on a new investment business using the tax attributes to shelter income.

The Supreme Court held, 7-1, that the transactions constituted abusive tax avoidance under the general anti-avoidance rule (GAAR) in s. 245 of the Income Tax Act.

The object, spirit and purpose of s. 111(5) is to prevent corporations from being acquired by unrelated parties in order to deduct unused losses against income from another business for the benefit of new shareholders; the transactions achieved the functional equivalent of an acquisition of control and frustrated that rationale.

The appellant, a TFSA trust, engaged in frequent trading of qualified investments, primarily speculative penny stocks.

The Minister reassessed the appellant for the 2009 to 2012 taxation years on the basis that it carried on a business of trading qualified investments, making its income subject to Part I tax under subsection 146.2(6) of the Income Tax Act.

The appellant argued that trading qualified investments does not constitute carrying on a business for a TFSA, pointing to the RRSP rules which explicitly exempt such income.

The Tax Court of Canada dismissed the appeals, holding that the text of subsection 146.2(6) is clear and unambiguous: a TFSA that carries on any business, including trading qualified investments, is not tax-exempt.

Parliament deliberately chose not to include the RRSP exemption in the TFSA regime.