Salvatore Mirandola

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 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 appellants appealed their 2012 taxation year reassessments, arguing that the trust from which they received corporate shares was a 'prescribed trust' rather than an 'employee benefit plan' (EBP).

The Minister had reassessed them on the basis that the trust was an EBP, requiring the fair market value of the shares to be included in their income from employment.

The Tax Court of Canada held that the trust met the broad definition of an EBP and could not concurrently be a prescribed trust.

The court also rejected the argument that the shares received by the founding employee were not received by virtue of his employment.

The appeals were dismissed.