Taxation ofPrivate Corporationsand TheirShareholders

Taxation ofPrivate Corporationsand TheirShareholdersFifth EditionEditors:Rachel GervaisJohn SorensenDavid StevensDave Walsh

A Canadian Tax Foundation publication by

BDO Canada llpGowling WLG (Canada) llp

Copyright © 2020 Canadian Tax Foundation. All rights reserved. No part of this publication may be reproduced in any format without the prior written permission of the Canadian Tax Foundation.

Disclaimer. The material contained in this publication is not intended to be advice on any particu-lar matter. No reader should act on the basis of any matter contained in this publication without considering appropriate professional advice. The publisher, and the authors and editors, expressly disclaim all and any liability to any person, whether a purchaser of this publication or not, in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance upon the contents of this publication.

Library and Archives Canada Cataloguing in Publication

Title: Taxation of private corporations and their shareholders / editors, Rachel Gervais, John Sorensen, David Stevens, Dave Walsh.

Names: Gervais, Rachel, editor. | Canadian Tax Foundation, publisher.Description: Fifth edition. | “A Canadian Tax Foundation publication by BDO Canada LLP,

Gowling WLG (Canada) LLP.” | Includes bibliographical references.Identifiers: Canadiana 20200194534 | ISBN 9780888083074 (hardcover)Subjects: LCSH: Canada. Income Tax Act. | LCSH: Private companies—Taxation—Canada. |

LCSH: Stockholders—Taxation—Canada. | LCSH: Income tax—Canada.Classification: LCC KE5906 .T39 2020 | LCC KF6499.ZA2 T396 2020 kfmod |

DDC 343.7105/267—dc23

Canadian Tax Foundation145 Wellington Street West, Suite 1400Toronto, OntarioM5J 1H8 Canadawww.ctf.cawww.fcf-ctf.ca

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Contents

Detailed Contents viiTable of Cases xliiiForeword lxiiiAuthors’ Note lxvAcknowledgments lxvii

1 Introduction: The Corporation as a Person in Tax Law 1:1 2 The Decision To Incorporate 2:1 3 Capitalizing a Corporation 3:1 4 The Decision To Use a Holding Corporation 4:1 5 The Use of Professional and Personal Service Corporations 5:1 6 The Small Business Deduction and Associated Corporations 6:1 7 Remuneration of the Owner-Manager 7:1 8 Income Splitting and TOSI 8:1 9 Dividend Taxation and the Passive Income Rules 9:110 Section 55: Intercorporate Dividends and Related Issues 10:111 Transferring Assets to a Private Corporation 11:112 Corporate Reorganizations 12:113 Transferring Share Ownership to Employees or Other Shareholders 13:114 Alternative Buy-Sell Arrangements for Shareholders of Private Corporations 14:115 Capital Gains Exemption and Qualified Small Business Corporation Shares 15:116 Tax Considerations in Buying or Selling a Business 16:117 Utilization of Corporate Losses 17:118 Provincial and Territorial Taxation of the Private Corporation 18:119 Passage of Shares of a Private Corporation on Death 19:120 Scientific Research and Experimental Development and

Investment Tax Credit Incentives 20:121 Tax Planning and Tax Avoidance 21:1

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Chapter 1 Introduction: The Corporation as a Person in Tax Law

I. Introduction 1:1A. What Is a Corporation and What Is a Shareholder? 1:1B. Corporations 1:3C. Corporations and Legal Personality 1:4

II. The Nature of the Corporate Personality 1:4A. Legal Personality 1:4B. Corporate Personality 1:5C. The Nature of a Corporation 1:9D. The Corporate Capacity To Own Property 1:11E. Corporate Personality and Limited Liability 1:11F. Residence of a Corporation 1:12G. Impact of Tax Treaties 1:13

III. Shares and Shareholders 1:14A. The Nature of a Share 1:14B. Rule for Hybrid Securities 1:16C. Sham and the General Anti-Avoidance Rule 1:18

IV. Piercing the Corporate Veil 1:18

Chapter 2 The Decision To Incorporate

I. Introduction 2:3II. Theory of Integration 2:4

A. Background 2:4B. The Existing Integration Model 2:6

1. Investment Income 2:62. ABI Eligible for the SBD 2:83. ABI Ineligible for the SBD 2:9

III. Integration: The Real Story 2:11A. Provincial and Territorial Rates: Actual Versus Theoretical 2:11

1. Provincial and Territorial Personal Rates 2:112. Provincial and Territorial Corporate Rates on Investment Income 2:12

B. Integration in Practice 2:121. Investment Income 2:122. Capital Gains 2:143. Dividend Income 2:164. ABI Eligible for the SBD 2:165. ABI Ineligible for the SBD 2:16

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IV. Advantages of Incorporation 2:16A. Income Tax Deferral 2:16

1. Investment Income 2:172. ABI Ineligible for the SBD 2:173. ABI Eligible for the SBD 2:184. Clawback of the SBD 2:18

B. Enhanced Capital Gains Exemption 2:20C. Income Splitting 2:22

1. Corporate Attribution Rules 2:222. Tax on Split Income 2:243. Income-Splitting Loans for Value 2:244. Family Trusts 2:255. Professional Corporations 2:25

D. Estate Freezes 2:26E. Deductibility of Interest on Borrowed Funds 2:27

1. Loans to a Corporation 2:282. Subscription for Preferred or Common Shares 2:293. Borrowing To Acquire Dividend-Paying Securities 2:29

F. Capital Gains on Property Acquired Before December 31, 1971 2:30G. Principal-Business Corporations 2:32H. Rules Concerning Restricted Farming Losses 2:32I. M & P Credit 2:32J. SR & ED Costs 2:33K. Personal Minimum Tax 2:33L. Holding Foreign Investments 2:34M. Employee Ownership 2:35

1. Stock Options and Grants 2:352. RRSP Ownership 2:35

V. Disadvantages of Incorporation 2:36A. Double Taxation on Death When Capital Losses Are Not Used 2:36

1. How Does Double Taxation Arise? 2:362. Alleviation of Double Taxation: Subsection 164(6) 2:403. A Second Alternative: “Partial” Subsection 164(6) 2:414. A Third Alternative: The Subsection 88(1) Bump 2:43

B. Unused Capital Dividend Account 2:44C. Unused RDTOH Account 2:45D. Taxable Income in Excess of the SBD 2:46E. Trapped Non-Capital Losses 2:49F. Expiration of Capital Losses on Acquisition of Control 2:49G. Transferring Assets out of a Corporation 2:49

1. Transfer of Capital Assets with Accrued Gains 2:492. Transfer of Capital Assets with Accrued Losses 2:493. Transfer of Depreciable Properties 2:50

H. Dividend Distribution 2:51I. Denial of Refundable Dividend Tax 2:51J. Potential Exclusion from the Subsection 39(4) Election 2:52K. Personal Services Business 2:53L. General Administrative Costs 2:53

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VI. Rules To Remember 2:53A. Loss-Disallowance Rules 2:53

1. Disallowance of Capital Loss to Corporation: Subsection 40(3.4) 2:542. Disallowed Loss on Share Redemption: Subsection 40(3.6) 2:553. Disallowance of Terminal Loss: Subsection 13(21.2) 2:554. Superficial Loss: Subparagraph 40(2)(g)(i) 2:56

B. PUC Reduction and Deemed Dividend: Section 84.1 2:56

Chapter 3 Capitalizing a Corporation

I. Introduction 3:2II. Types of Capital for Corporate and Income Tax Purposes 3:3

A. Income Tax Share Capital 3:3B. Corporate Share Capital 3:3C. Corporate Debt 3:4D. Preferred Shares and Other After-Tax Financing 3:4

1. The Preferred Share Rules 3:5a. Term Preferred Shares 3:6b. Short-Term Preferred Shares 3:8c. Taxable Preferred Shares 3:10

E. When Should a Corporation Be Capitalized by Shares or Debt? 3:11III. Selecting the Capital Structure 3:14

A. Estate Freezing: Reduction of Share Value 3:15B. Preservation of Income and Capital 3:15C. Income Splitting 3:15D. Control 3:15E. Pipeline to Capital 3:16F. Elimination of Benefits 3:16G. Deductibility of Interest on Borrowings Used To Subscribe for Capital 3:16H. Flexibility Without Adverse Income Tax Consequences 3:16

IV. Selecting the Share Structure 3:17A. The Importance of Share Rights and Restrictions 3:17

1. The Valuation Dilemma: The CRA’s Concern 3:19B. Specific Share Characteristics 3:21

1. The Right to Dividends 3:21a. Cumulative or Non-Cumulative Dividends 3:21b. Dividend Rate 3:22c. Tax-Free and Taxable Dividends 3:23

2. Redemption and Purchase by a Corporation 3:243. Retraction Rights 3:254. Redemption Amount 3:265. Voting Rights 3:276. Limitation on Payment of Dividends on Common Shares 3:297. Price Adjustment Clauses 3:308. Rights on Dissolution 3:309. Right of Conversion 3:31

V. Determining a Corporation’s PUC 3:31A. The Income Tax Concept of PUC 3:31

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B. The Corporate Concept of Share Capital 3:32C. The Corporations Statutes 3:37D. Share Exchanges and Internal Reorganizations of Share Capital 3:38

1. Alteration of Share Rights 3:382. Exchange of Shares 3:383. Changes to PUC 3:394. Reallocating PUC 3:40

VI. Deductibility of Interest 3:41A. Bronfman Trust 3:41B. Subsequent Court Decisions 3:42

1. Ludco Enterprises Ltd. 3:422. Shell Canada 3:423. Singleton and Lipson 3:42

C. Current State of Interest Deductibility and the CRA’s Administrative Views 3:43D. Filling the Hole 3:43E. Tracing 3:44F. Exceptional Circumstances 3:44G. Other Provisions 3:45

Chapter 4 The Decision To Use a Holding Corporation

I. Introduction 4:2II. Advantages Related to the Flow of Funds 4:2III. Conversion to Deductible Interest 4:5IV. Income Splitting and Estate Freezing 4:6

A. Fair Value Consideration 4:7B. Interest Deductibility 4:8C. The Shareholder’s Future Growth Participation 4:8D. Alternative Freeze Methods 4:9E. QSBC Status and Other Considerations 4:9

V. Considerations Related to Intercorporate Dividends 4:10A. Suspension of the Tax Effects of Dividends 4:10B. Creating Connected Corporations 4:11

VI. Multiple Ownership of a Holding Corporation 4:12VII. Corporate Share Acquisitions 4:12

A. Advantages to the Purchaser 4:121. Purchaser Corporation Bears Acquisition Financing 4:122. Target Corporation Bears Acquisition Financing 4:14

B. Advantages to the Vendor 4:151. Dividends to Holdco 4:162. Redemption of Opco Shares 4:163. Transfer to Purchaser for “High-Low” Shares 4:164. Effect of Subsection 55(2) 4:16

VIII. Other Advantages 4:17A. Overcoming Double Taxation on Death 4:17B. Corporate Breakup and Distribution 4:17C. Avoidance of Employee-Shareholder Loan Provisions 4:17D. Updating of Losses 4:18

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E. Buy-Sell Arrangements 4:18F. Risk Management 4:18G. A Tax Deferral for Investments? 4:19H. Crystallizing the Lifetime Capital Gains Exemption 4:19I. Using a Holding Corporation To Own Real Property 4:20J. Acquiring a Canadian Corporation 4:21

1. Bumping Up the Cost Base of Non-Depreciable Assets 4:212. Non-Resident’s Acquisition of a Canadian Business 4:21

IX. The Application of Section 84.1 on Share Transfers 4:22A. Section 84.1 4:22B. Prerequisites 4:24C. Application of Section 84.1 4:25

1. Reduction of PUC 4:252. Deemed Dividend 4:263. Arm’s-Length ACB 4:26

D. Mechanics of Section 84.1 4:28E. Circumstances in Which Paragraph 84.1(1)(b) Does Not Apply 4:29F. Non-Arm’s-Length Transfers 4:29G. Review of Recent Jurisprudence 4:30H. Comments 4:31

Chapter 5 The Use of Professional and Personal Service Corporations

I. Introduction 5:3II. Professional Corporations 5:4

A. The Nature of a Profession 5:4B. Incorporating a Professional Practice 5:5

1. Review of Relevant Legislation 5:6a. Provincial Legislation Governing Professional Corporations 5:6

i. Ontario 5:6b. Relevant Federal Legislation 5:7

i. GST/HST 5:7ii. Tax on Split Income 5:7

C. Professional Corporations for Athletes and Entertainers 5:9III. The WIP Deduction: Changes for 2018 and Subsequent Taxation Years 5:10

A. Overview of the WIP Deduction 5:101. History 5:102. Legacy Rules: Post-1982 5:113. Budget 2017 5:114. September 8, 2017 Draft Legislation 5:11

B. Application of Transitional Rules 5:12C. Accounting and Tax Reporting 5:12

1. WIP Not Reported 5:122. WIP Reported at Cost 5:133. WIP Reported at Fair Market Value 5:13

D. Adjusting Accounting Income to Income for Tax Purposes 5:131. Accounting Income Adjustment Example: Prior to 2017 Changes 5:142. Accounting Income Adjustment Example: Subsequent to 2017 Changes 5:14

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E. Current Issues with Amendments 5:141. Measurement of WIP 5:14

a. WIP Costing 5:15b. WIP Valuation and Contingent WIP 5:17

2. Cash Flow 5:193. Sidecars and Management Service Vehicles 5:194. WIP Allocation to Partners 5:20

IV. Who Can Claim the SBD? 5:22A. The SBD 5:22B. The Basic Requirements 5:22

1. Specified Investment Business 5:232. Personal Services Business 5:233. The $500,000 Limit 5:234. The Meaning of “Associated” and the Subsection 256(2.1) Association Rules 5:24

C. Entitlement to a Separate Small Business Limit 5:251. Specified Partnership Income 5:252. Specified Corporate Income 5:25

D. CRA Rulings Prior to the 2016 Budget 5:26E. Impact of the 2016 Amendments 5:27

1. Former Structures Affected by the SPI and SCI Rules 5:27a. Central Partnership 5:27b. Central Corporation 5:28c. Sidecar Corporation 5:29d. Management Partnerships or Corporations 5:30

F. Alternative Structures To Consider 5:311. Structures That May Be Unaffected by the SPI and SCI Rules 5:31

a. Reduction of the Number of Shareholders of a Central Corporation 5:31b. Central Trust 5:31c. Cost-Sharing Arrangement 5:32d. Revenue-Sharing Arrangement 5:33

G. Other Challenges 5:341. Taxing Income of a Professional Corporation in the Hands of the Professional 5:34

V. Personal Services Businesses and Management/Executive Management Corporations 5:37A. Personal Services Business 5:37

1. Implications of Carrying On a Personal Services Business 5:38a. Full Rate Taxable Income 5:38b. Additional Tax on PSB Income 5:39c. Combined Tax Rate on PSB Income 5:39d. Limitation on PSB Expenses 5:39

2. Determination of PSB Status 5:40a. Incorporated Employee 5:40b. Specified Shareholder 5:40c. Reasonably Regarded as an Officer or Employee 5:41

i. Common Law 5:41ii. CRA Policy 5:44

d. Exceptions 5:45i. More Than Five Full-Time Employees 5:47ii. Amounts Received by an “Associated Corporation” 5:48

B. Management Corporations 5:48

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C. Executive Management Corporations 5:491. Executive Management/Personal Service Corporations 5:492. Income Tax Treatment of Management Corporations 5:49

VI. Why Incorporate? 5:50A. Advantages 5:50

1. Protection Against Personal Liability 5:502. Tax Benefits 5:52

a. Tax Rates 5:53b. Tax Deferral 5:53c. Private Health Services Plans 5:54d. Club Dues and Fees 5:54e. Death Benefits 5:55f. Lifetime Capital Gains Exemption 5:55g. Changing the Cumulative Net Investment Loss Account 5:55

B. Disadvantages of Incorporating 5:561. Non-Capital Losses 5:562. Capital Losses 5:563. Costs of Incorporating 5:564. Administrative Burden 5:56

C. Other Available Structures To Limit Liability 5:571. Trusts 5:572. Limited Partnerships 5:573. LLPs 5:57

VII. Conclusion 5:58

Chapter 6 The Small Business Deduction and Associated CorporationsI. Introduction  6:3II. The Relevance of Association 6:4III. The Federal SBD 6:6

A. The Federal SBD 6:7B. Eligibility 6:8

1. Canadian Corporation 6:102. Private Corporation 6:113. Public Corporation 6:114. Prescribed Venture Capital Corporation 6:115. Direct or Indirect Control 6:11

C. Active Business Income 6:121. Ordinary Definition 6:122. Pertaining To or Incident To 6:123. What Is a Business? 6:154. Specified Investment Business 6:165. Personal Services Business 6:20

D. Carried On in Canada 6:20E. Specified Corporate Income 6:21

1. Tainted Corporate Income 6:22a. Conditions 6:22b. Determination 6:22c. Carve-Outs 6:24

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2. Assigning the Business Limit 6:253. Ministerial Discretion 6:254. Anti-Avoidance 6:26

F. Specified Partnership Income and the Corporate Partnership Rules 6:261. Designated Member of a Partnership 6:262. Specified Partnership Income 6:273. Specified Partnership Business Limit 6:294. Anti-Avoidance 6:295. Example of the SPI Rules 6:296. The Partnership Anti-Avoidance Provisions 6:317. The Partnership Lookthrough Provision 6:318. Partnerships Controlled by Non-Residents or Public Corporations 6:32

G. The Business Limit 6:321. Sharing the Low Rate of Tax with Associated Corporations 6:322. Assigning the Business Limit 6:34

a. Assignment by a Corporation 6:35b. Assignment by a Partnership 6:37

3. Reductions to the Business Limit: Taxable Capital and Passive Investments 6:38IV. Associated Corporations 6:40

A. The Effect of Association 6:40B. The Basic Rules 6:41

1. Control of One Corporation by Another 6:412. Control by the Same Person or Group of Persons 6:413. Control by Related Persons 6:424. Specified Class 6:435. Control by One Person and a Related Group of Persons 6:466. Control by Two Related Groups 6:467. De Facto Control 6:47

C. Related Persons 6:56D. The Extended Meaning of Control and Ownership 6:58

1. Definition of “Group” 6:592. Control by a Group 6:593. The FMV Test 6:604. The Lookthrough Provisions 6:64

a. Holding Corporations 6:64b. Partnerships 6:66c. Trusts 6:67

5. The FMV of Shares 6:706. Parent Deemed To Own Shares 6:717. Options and Rights 6:728. Exceptions for Financial Difficulty and Specified Class 6:779. Association with a Third Corporation 6:77

E. Association Overruled 6:811. Subsection 256(6) 6:812. Subsection 256(3) 6:843. Subsection 256(4) 6:844. Subsection 256(5) 6:845. Subsection 256(9) 6:85

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F. Anti-Avoidance 6:861. The Objective of Subsection 256(2.1) 6:862. Criteria 6:873. Review of the Case Law Relating to Subsection 256(2.1) and Former

Subsection 247(2) 6:89

Chapter 7 Remuneration of the Owner-Manager

I. Introduction 7:4II. Capacity in Which Owner-Manager Is Remunerated: Shareholder or Employee 7:5

A. The Owner-Manager as Shareholder 7:5B. Determining the Capacity of an Owner-Manager: Shareholder or Employee 7:7C. Deductibility: Payments Received in the Capacity of Shareholder 7:8D. Reasonableness of Payments 7:10

III. Salaries, Bonuses, and Management Fees 7:13A. Introduction 7:13B. Reasonableness of Salaries and Management Fees 7:13C. The CRA’s Attitude to the Reasonableness Question 7:14

1. Active Owner-Managers 7:142. Non-Active Owner-Managers 7:153. Non-Resident Owner-Managers 7:164. Management Corporations 7:165. Reasonableness and Investment Income 7:176. Sale of Major Business Assets or Unusual Transactions 7:187. Summary 7:18

D. Reasonableness and the Jurisprudence 7:19E. Bonus Accruals 7:22

1. Bonus and Contingent Liabilities 7:222. Unpaid Amounts 7:233. Impact on Source Deductions 7:24

IV. Salary or Dividends? 7:25A. The Theory of Integration Under the Act 7:25B. The Salary-Dividend Mix 7:26

1. Salaries 7:262. Dividends 7:273. Maintaining Qualified Small Business Corporation Status 7:28

C. Flexible and Discretionary Dividend Distributions 7:291. Waiver of Dividends 7:302. Discretionary Dividends 7:313. High-Low Preferred Shares 7:344. Holding Corporations 7:355. Corporate Partnership 7:356. Special Shares 7:35

V. Benefits and Appropriations to Shareholders 7:36A. Payments to Shareholders: Subsection 15(1) 7:37B. Conferral of a Benefit 7:38

1. Stock Dividends 7:382. Rights To Acquire Shares 7:39

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3. Forgiveness of Loans 7:394. Automobiles 7:395. Additions or Improvements to a Shareholder’s Building 7:406. Private Health Services Plan 7:407. Commitment on Acquisition of Shares 7:418. Impact of Taxes on the Cost of a Property or Service 7:419. Review of Selected Cases 7:42

C. Amount or Value of the Benefit 7:451. The CRA’s Assessing Practice 7:452. Review of Selected Cases 7:453. Administrative Relief for Sole-Purpose Corporation 7:49

D. Other Applicable Provisions 7:511. Subsection 69(4) 7:512. Subsection 69(1) 7:51

VI. Loans to Shareholders and Employees 7:51A. Loans to Shareholders and Connected Persons: Subsection 15(2) 7:52

1. Who Is Caught by Subsection 15(2)? 7:53a. Connected Persons 7:53b. Canadian Corporations 7:54c. Non-Shareholders 7:54d. Employees 7:54e. Others 7:55

2. Loans and Indebtedness Excluded from Income 7:55a. Loans Between Non-Residents 7:55b. Loans or Indebtedness Made in the Ordinary Course of Business 7:55c. Non-Specified Employees: Paragraph 15(2.4)(a) 7:57d. Loans To Acquire a Dwelling: Paragraph 15(2.4)(b) 7:58e. Treasury Shares: Paragraph 15(2.4)(c) 7:60f. Automobiles: Paragraph 15(2.4)(d) 7:60

3. Bona Fide Arrangements for Repayment 7:614. Indebtedness Incurred Because of Employment 7:625. Repayment 7:636. Series of Loans and Repayments 7:637. Repayments of Loans Previously Included in Income 7:658. Meaning of “Loan or Indebtedness” 7:659. Loans to Shareholders Under Corporate Law 7:6610. Right of Setoff 7:66

B. Interest-Free and Low-Interest Loans: Section 80.4 7:671. Application of Section 80.4 7:672. Taxable Benefit and Exclusions 7:683. Home Purchase Loans 7:684. Home Relocation Loans 7:695. Relief for Income-Earning Loans 7:706. Relationship of Section 80.4 to Subsection 15(2) 7:707. Deductibility of Outside Financing Charges by Employer 7:70

VII. Other Benefits Available to an Owner-Manager 7:71A. Company-Owned Automobiles 7:71

1. Applicability of Standby Charge 7:712. Restricted Deductions 7:73

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3. Automobile Allowances 7:734. Implications for the Owner-Manager 7:74

B. Entertainment and Other Benefits 7:751. Club Memberships and Recreational Facilities 7:752. 50 Percent Restriction on Entertainment 7:773. Frequent Flyer Programs 7:77

C. Moving Expenses 7:77D. Retiring Allowances 7:78

1. Meaning of “Retiring Allowance” 7:792. Determining the Amount of a Retiring Allowance 7:81

E. Death Benefit Programs 7:811. Tax-Free Receipt 7:822. Taxable Amounts 7:823. Qualifying Payments 7:82

VIII. Deferred Income Plans 7:83A. Background on Pension Reform 7:84B. RRSPs 7:85

1. Comprehensive Retirement Savings Limits 7:85a. Unused RRSP Deduction Room 7:85b. RRSP Dollar Limit 7:86c. Earned Income 7:86d. Pension Adjustment 7:87e. The Factor of Nine 7:87f. Past Service Pension Adjustment 7:88g. Pension Adjustment Reversals 7:89

2. Planning Considerations 7:90a. Alternative to Pension Plans 7:90b. Early and Excess Contributions 7:90c. Spousal RRSPs 7:90d. Group RRSPs 7:91e. Children’s RRSP Deduction Room 7:91

C. Registered Pension Plans 7:911. Registration 7:912. Pension Plans for Significant Shareholders 7:923. Designated Plans 7:924. RPP Contribution Limits 7:945. Maximum Retirement Benefits 7:966. Early Retirement 7:977. Past Service Contributions 7:978. Individual Pension Plans Versus RRSPs 7:989. Advantages of an IPP 7:99

a. More Tax Sheltering 7:99b. Protection if Plan Does Not Perform 7:99c. Creditor Proofing 7:99d. Suitability for Owner-Managers 7:99e. Maximum Benefits 7:100

10. Advantages of an RRSP 7:100a. Ability To Split Income 7:100b. Locking In 7:100

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c. Flexibility in Retirement Options 7:100d. Administration 7:100e. Early Termination 7:100f. Plan Surpluses 7:101g. Simplicity 7:101h. Flexibility in Annual Contributions 7:101

D. Deferred Profit-Sharing Plans 7:1011. Eligibility 7:1022. Contribution Limits 7:1023. Effect on RRSP Contributions 7:1034. Allocations and Vesting 7:1035. Taxation of Withdrawals 7:1046. Qualified Investments 7:105

E. Salary Deferral Arrangements 7:106F. Retirement Compensation Arrangements 7:107G. Employee Benefit Plans 7:110

Chapter 8 Income Splitting and TOSI

I. Introduction 8:2II. Attribution Rules 8:4

A. Core Rules: Attribution of Income from Property and of Capital Gains 8:41. Sections 74.1, 74.2, 74.3, and 74.5 8:42. Subsection 75(2) 8:83. Anti-Avoidance Rules 8:10

a. Subsection 56(2) 8:10b. Subsection 56(4): Transfers of Rights to Income 8:15c. Subsection 56(4.1): Non-Arm’s-Length Loans 8:15

B. Imputation of Income: Section 74.4 Transfers and Loans to Corporations 8:16III. The Distinction Between Income from Business and Income from Property 8:17

A. The Leading Case: Canadian Marconi 8:17B. Investment Funds 8:18C. Rental Business Income 8:19

1. Income from Business 8:192. Income from Property 8:20

D. Interest Income 8:211. Income from Business 8:212. Income from Property 8:22

E. Partnership Income 8:23F. Royalties 8:24

IV. The Tax on Split Income 8:24A. Background 8:24B. TOSI Rules: Legislative Changes Prior to 2018 8:25C. Framework of the TOSI Rules as They Applied in 2017 8:25

1. Fundamental Concepts 8:26a. Specified Individual 8:26b. Split Income 8:26c. Exclusions from Split Income 8:28

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2. Other TOSI Rules 8:28a. Non-Arm’s-Length Capital Gains 8:28b. Joint and Several, or Solidary, Liability 8:29

D. Planning Not Restricted by the Pre-2018 TOSI Rules 8:29E. TOSI Rules: Legislative Changes After 2017 8:31F. Framework of the Post-2017 TOSI Rules 8:32

1. Fundamental Concepts 8:33a. Who Is a Specified Individual? 8:33b. Who Is a Source Individual? 8:33c. What Is Split Income? 8:34d. What Is a Related Business? 8:37

2. Exclusions from Split Income 8:40a. How Do the Exclusions Apply? 8:40b. Overview of Available Exclusions 8:41c. Details of Exclusions 8:41

3. Other Post-2017 TOSI Rules 8:62a. Non-Arm’s-Length Capital Gains for Minors 8:62b. Interpreting “Derived Directly or Indirectly” 8:63c. Joint and Several, or Solidary, Liability 8:63

G. Examples of the Application of TOSI and the Exclusions 8:641. Scenario 1: Non-Service Operating Company 8:64

a. Facts 8:64b. Issue 8:65c. Analysis of Exclusions 8:65d. Conclusion on the Application of TOSI 8:67

2. Scenario 2: Holdco-Opco 8:67a. Facts 8:67b. Issue 8:68c. Analysis of Exclusions and TOSI Conclusion 8:68

3. Scenario 3: Investment Holding Company 8:72a. Facts 8:72b. Issue 8:72c. Analysis of Exclusions and TOSI Conclusion 8:72

H. General Considerations: Uncertainties, Planning, and Concerns 8:75

Chapter 9 Dividend Taxation and the Passive Income RulesI. Introduction 9:2II. Dividend Taxation 9:4

A. Impact of the Eligible Dividend Regime on Shareholders 9:41. Federal Tax Treatment 9:42. Provincial and Territorial Tax Rates 9:4

B. Impact of the Eligible Dividend Regime on Corporations 9:71. Eligible Dividends 9:7

a. Definition of “Eligible Dividend” 9:7b. Designation Requirement 9:8c. Administrative Guidance 9:8

2. Part III.1 Tax and the EEDD 9:9a. Tax and Designation 9:9

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b. Status of Corporation 9:10c. Calculation of Tax 9:10d. Anti-Avoidance 9:10e. Shareholder Liability 9:11f. Election for Separate Dividend 9:12g. Corporate Filing Obligation 9:12

3. GRIP 9:134. LRIP 9:14

C. Examples 9:151. GRIP 9:152. LRIP 9:17

D. Implications in Selected Situations of Interest 9:191. Basics of the Opening GRIP Calculation: Transitional Relief 9:192. Asset Sale Versus Share Sale 9:213. Non-Resident Shareholders 9:234. Subsection 55(2) and GRIP 9:245. CCPC Status Changes 9:24

a. GRIP of a New CCPC 9:25b. LRIP of a New Non-CCPC 9:25

6. Impact of Losses 9:257. Election Not To Be a CCPC 9:268. Selected Observations About CCPCs 9:26

III. Passive Income Rules 9:27A. Limiting Access to the Small Business Tax Rate 9:28

1. Examples 9:30a. AAII Earned Inside a Corporation and Reduction of Business Limit 9:30b. Integration: Impact of AAII Earned Inside a Corporation—Reduction of Business

Limit and Taxation of Distributions to Individual Shareholders 9:312. Integration Anomaly for Provinces Not Mirroring the New Passive Income

Reduction Rules 9:323. Situations That Are Not Affected by the New Passive Income Reduction Rules 9:344. The Significance of the $50,000 AAII Threshold 9:355. Adjusted Aggregate Investment Income 9:356. Associated Corporations 9:37

a. Associated Corporations with Differing Year-Ends 9:387. Anti-Avoidance Rules 9:398. Ways To Minimize the Impact of the New Passive Income Reduction Rules 9:39

a. Timing of Recognition of Gains 9:39b. Change the Mix of the Portfolio Investments 9:40c. Reduce the AAII 9:40

9. Summary 9:41B. Limiting Access to Refundable Taxes 9:41

1. The Old RDTOH Rules 9:412. The New RDTOH Rules 9:423. RDTOH Transitional Rules 9:43

C. Numerical Example of the New Passive Income Reduction Rules and the New RDTOH Rules 9:44

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IV. Capital Dividends 9:45A. The Capital Dividend Account 9:45B. Payment of a Capital Dividend 9:47

V. Conclusion 9:48

Chapter 10 Section 55: Intercorporate Dividends and Related Issues

I. Introduction 10:4II. Intercorporate Dividends 10:4

A. The Use of Intercorporate Dividends To Reduce Capital Gains or Create Capital Losses 10:5

1. The Purpose Tests 10:7a. Ordinary Course Dividends 10:14b. Loss Consolidation 10:15c. Creditor Proofing 10:15d. Purification Dividends 10:16

2. Significant Reduction or Increase 10:163. Safe-Income Determination Time 10:174. Part IV Exception 10:195. Effect and Timing of a Subsection 55(2) Assessment 10:22

B. The Concept of Safe Income 10:221. Definition 10:242. Income Earned or Realized 10:243. Portion of Gain Attributable to Income 10:264. Losses 10:285. Holding Period 10:296. Shares Acquired on a Rollover 10:307. Safe Income That Relates to Fixed-Value Preference Shares 10:30

a. Acquired on a Rollover 10:31b. Implications for Common Shares 10:33c. Access to Safe Income 10:33

8. Stock Options and Splits 10:349. Stub Period 10:3510. Consolidation of Safe Income 10:3511. Income Earned Before 1972 10:3712. Automatic Split of Dividends 10:3713. Allocation of Safe Income to Different Shares and Discretionary Dividends 10:3714. Stock Dividends 10:39

a. Subsection 55(2.2) 10:39b. Subsection 55(2.3) and 55(2.4) 10:40c. Cost of a Stock Dividend: Paragraph 52(3)(a) 10:41

15. Additional Comments 10:42C. Series of Transactions or Events 10:44D. When Subsection 55(2) Does Not Apply 10:46

III. The Paragraph 55(3)(a) Exemption 10:47A. Unrelated Persons 10:49B. Significant Increase in Total Direct Interest 10:50C. First Type of Triggering Event: Disposition of Property to an Unrelated Person 10:53

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D. Second Type of Triggering Event: Significant Increase in the Interest of an Unrelated Person 10:56

E. Third Type of Triggering Event: Disposition of Shares of the Dividend Payer 10:571. Disposition of Shares of the Dividend Payer 10:572. Disposition of Property That Derives Its Value from Shares or Debt of the

Dividend Payer 10:58F. Fourth Type of Triggering Event: Disposition of Shares of the Dividend

Recipient 10:591. Disposition of Shares of the Dividend Recipient 10:592. Disposition of Property That Derives Its Value from Shares or Debt of the

Dividend Recipient 10:603. After the Time the Dividend Was Received 10:60

G. Fifth Type of Triggering Event: Significant Increase in the Direct Interests in the Dividend Payer 10:61

H. Interpretation Rules for Paragraph 55(3)(a) 10:63I. Paragraphs 55(3.01)(b) and (c): Windup and Amalgamation Continuity 10:63J. Presumption Under Paragraph 55(3.01)(d) 10:64K. Paragraph 55(3.01)(e): Dispositions by Non-Residents 10:64L. Temporary Share Financing Under Paragraph 55(3.01)(f ) 10:67M. Paragraph 55(3.01)(g): Specific Relieving Rule 10:67N. Paragraph 55(3.01)(h): Windup and Amalgamation—Increase in Interest in

Subsidiary 10:69O. The Clause 55(3)(a)(iii)(B) Trap 10:70

VI. Butterfly Reorganizations 10:71A. Basic Steps 10:71B. The Use of Subsection 85(1) 10:72C. The Application of Subsection 55(2) 10:73D. Failure To Comply with Paragraph 55(3)(b) 10:74

1. Capital Dividend Account 10:742. Refundable Dividend Tax on Hand 10:753. Safe Income 10:76

E. Dividends to Which Paragraph 55(3)(b) Applies 10:771. The Meaning of “Reorganization” 10:772. The Meaning of “Distribution” and “Direct or Indirect Transfer” 10:803. The Types of Butterflies and Other Requirements Under Paragraph 55(3)(b) 10:81

a. Spinoff Butterfly (Single-Winged) 10:82b. Split-Up Butterfly (Single-Winged) 10:82c. Split-Up Butterfly (Multi-Winged) 10:82

F. The Pro Rata Test 10:84G. Types of Property 10:86

1. Investments in Other Corporations 10:882. The Impact of Liabilities 10:89

H. Certain Rules That Affect Share Transactions 10:901. Transactions That Affect Shares of the Distributing Corporation Before the

Butterfly Distribution 10:90a. Reorganization of Capital 10:90b. Transfer of Shares of a Distributing Corporation to a Transferee

Corporation 10:91

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c. Redemption of Shares of a Specified Class and Permitted Exchange That Involves Shares of a Specified Class 10:93

2. Transactions That Affect Shares of the Distributing and Transferee Corporations After the Butterfly Distribution 10:95

3. Sequential Butterfly 10:97I. Application of Subsection 55(3.1) 10:98

1. Paragraph 55(3.1)(a): Acquisitions of Property in Contemplation of a Butterfly 10:99

a. The Meaning of “Property Became Property Of ” 10:99b. The Meaning of “In Contemplation Of” 10:100c. Exceptions 10:101

i. Subparagraph 55(3.1)(a)(i) 10:101ii. Problems with Subsection 251(3.1) 10:102iii. Subparagraph 55(3.1)(a)(ii) 10:103iv. Subparagraph 55(3.1)(a)(iii) 10:104v. Clause 55(3.1)(a)(iv)(A) 10:104vi. Clause 55(3.1)(a)(iv)(B) 10:105vii. Clause 55(3.1)(a)(iv)(C) 10:106

2. Paragraph 55(3.1)(b): Demise of the Purchase Butterfly 10:106a. Subparagraph 55(3.1)(b)(i) 10:109b. Subparagraph 55(3.1)(b)(ii) 10:111c. Subparagraph 55(3.1)(b)(iii) 10:112d. Paragraph 55(3.2)(h) 10:113

3. Paragraphs 55(3.1)(c) and 55(3.1)(d): Continuity of Interest in the Properties 10:114J. Other Butterfly-Related Issues 10:116

1. Part IV Tax and RDTOH 10:1162. Parts IV.1 and VI.1 10:1173. The Capital Gains Exemption 10:118

Chapter 11 Transferring Assets to a Private Corporation

I. Introduction 11:3II. Transfers Pursuant to Section 85 11:4

A. Who Can Use Section 85? 11:4B. Eligible Assets 11:4

1. Non-Resident Transferors 11:52. Real Property 11:5

C. The Elected Amount 11:61. General Limitations 11:72. Specific Limitations 11:8

D. Restrictions on the Consideration Received 11:81. Benefit-Conferral Rules: Paragraph 85(1)(e.2) 11:92. Valuation 11:113. Consideration Received: Other Issues 11:13

E. Selecting the Elected Amount 11:14F. Flowthrough of Income Tax Characteristics of Transferred Property 11:15

1. Flowthrough of Cost for Depreciable Property: Subsection 85(5) 11:152. Retention of CCA Characteristics 11:15

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3. Preserving the Tax-Free Zone: ITARs 26(5.2) and 20(1.2) 11:164. Surplus Accounts: Foreign Affiliates 11:165. Loss of Flowthrough of Tax Characteristics: The 50 Percent Rule 11:16

G. Consequences to the Transferee Corporation 11:161. CCA 11:162. Income or Capital 11:17

H. Implications of Non-Income Tax Legislation 11:181. Goods and Services Tax 11:18

a. Election Under ETA Section 167 11:19b. Election Under ETA Section 156 11:19c. Sale of Receivables 11:20d. Transfer of Real Property 11:20e. Sale of Shares 11:20

2. Provincial Sales Tax 11:213. Land Transfer Tax and Fees 11:21

I. The Stop-Loss Rules 11:211. Non-Depreciable Property 11:212. Depreciable Property 11:22

a. Application 11:22b. Effect 11:22c. Ordering 11:22

3. Anti-Avoidance Rules: Subsections 69(11) to (14) 11:23J. Form of Consideration Received 11:23

1. Extracting the Cost Base 11:232. Extent to Which Paid-Up Capital Should Be Created 11:253. The Effect of Section 84.1 11:274. Restrictions on Paid-Up Capital 11:28

a. Disposition of Shares by a Non-Resident: Section 212.1 11:28b. Amalgamations 11:28

K. Transfer from a Partnership 11:281. Cost of Non-Share Property Received 11:292. Cost of Preferred Shares Received 11:293. Cost of Common Shares 11:294. Proceeds of Partnership Interest 11:305. Disposition of Partnership Property 11:30

L. Filing Requirements 11:301. Who Files? 11:302. Filing Deadline 11:313. Mistakes 11:314. Late and Amended Elections 11:325. Valuation Problems 11:336. Description of Property 11:34

M. Section 116 Clearance Certificates 11:35N. GAAR: Section 245 11:37

III. Transfers Outside Section 85 11:38A. Claiming Reserves 11:38B. When an Election Under Section 85 May Not Be Advisable 11:39

1. Available Losses 11:392. Use of Section 85.1 11:39

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Appendix 11:40Checklist for a Subsection 85(1) Rollover 11:40

General 11:40Requirements 11:40Assets 11:41Paid-Up Capital 11:41V-Day 11:42Employees 11:42GST and Provincial Taxes 11:42Non-Residents 11:42Other Consequences of Election 11:43Election 11:43

Chapter 12 Corporate Reorganizations

I. Introduction 12:2II. Section 86: A Reorganization of Share Capital 12:2

A. Conditions for the Application of Subsection 86(1) 12:3B. Benefits to Related Persons 12:4C. PUC of the New Shares 12:5D. Other Rules 12:6

III. Section 85.1: Share-for-Share Exchange 12:6A. Conditions for the Application of Section 85.1 12:6B. Tax Treatment of the Vendor 12:7C. Tax Treatment of Acquireco 12:7D. The CRA’s Administrative Practices 12:8E. A Section 85.1 Share-for-Share Exchange Versus a Subsection 85(1) Transaction 12:9

IV. Tax-Deferred Amalgamation (Section 87) and Tax-Deferred Windup of a Wholly Owned Subsidiary (Subsection 88(1)) 12:9

A. Application 12:9B. Tax Results Generally 12:10C. Legal Feasibility 12:10D. Bumping Non-Depreciable Assets Under Subsection 88(1) 12:11E. The Meaning of “Control” When a Chain of Corporations Is Acquired 12:13F. Possible Taxable Capital Gains 12:13G. Taxation Year 12:14H. When a Property Is Treated as a Capital Property 12:15I. The Paragraph 88(1)(d) Bump and Pre-Acquisition Dividends 12:15J. Maximizing the Paragraph 88(1)(d) Bump 12:16K. Property Ineligible for the Paragraph 88(1)(d) Bump 12:16L. Preventing the Backdoor or Purchase Butterfly: Paragraph 88(1)(c.3) and Substituted

Property 12:171. Example 1 12:172. Example 2 12:183. Pre-Acquisition Planning 12:18

M. Tendering Shares of One Corporation for Shares of Another Corporation: Section 85.1 Versus Subsection 87(9) 12:19

1. Section 85.1 12:192. Subsection 87(9) 12:19

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V. Winding Up a Corporation Under Subsections 69(5), 84(2), and 88(2) 12:20A. Subsection 69(5) 12:20B. Subsection 84(2) 12:21C. Subsection 88(2) 12:21D. Adjustments to the Capital Dividend Account 12:23E. Pre-1972 CSOH 12:24F. Timing 12:25G. Additional Comments 12:25

Chapter 13 Transferring Share Ownership to Employees or Other Shareholders

I. Introduction 13:2II. Non-Tax Issues Concerning Equity Participation 13:3

A. Minority Interests 13:3B. Lack of a Secondary Market 13:3C. Financing Aspects 13:4

III. Employee Stock Option Plans 13:4A. The Advantages of Stock Option Plans 13:5B. The Income Tax Implications of Stock Option Plans 13:5

1. Application of Paragraphs 110(1)(d) and (d.1) 13:62. Transfers and Dispositions of Stock Options 13:73. Death of an Employee Who Owns a Stock Option 13:84. Application of Benefit Provisions 13:85. Cost Base Considerations 13:96. Miscellaneous Points Regarding Section 7 13:9

C. Non-Residents and Stock Options 13:13D. Stock Option Plans Granted by CCPCs 13:17E. Potential Tax Trap with Stock Options 13:18

IV. Employee Share Purchase Plans 13:19A. The Income Tax Implications of Financing Arrangements 13:19

1. Loans Received by Shareholders or Employees 13:202. When Share Values Decrease 13:23

B. Corporate-Law Considerations 13:25C. Creation of Special Shares for Employees 13:26

1. Convertible Equity and Convertible Debt 13:262. Freeze Shares 13:273. The $848,252 Capital Gains Exemption 13:27

V. Phantom Stock Purchase Plans 13:28VI. Transferring Equity Through a Reorganization 13:30

A. Corporate Joint Venture 13:301. Is It a Partnership? 13:302. The Nature of the Employee Corporation 13:31

B. Creation of a New Corporation 13:32VII. Alternative Arrangements 13:32

A. Purchase Through a Holding Corporation 13:321. Application of Subsection 7(1.1) 13:332. Application of Subsection 15(2) 13:333. Application of Section 80.4 13:34

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B. Purchase Through Family Members 13:34C. Purchase Through a Registered Retirement Savings Plan and a Deferred Profit-Sharing

Plan 13:35

Chapter 14 Alternative Buy-Sell Arrangements for Shareholders of Private Corporations

I. Introduction 14:2II. Alternative Buyout Arrangements: An Overview 14:3

A. Purchase by an Arm’s-Length Shareholder 14:3B. Purchase by the Corporation 14:4C. Purchase of Shares of a Deceased Shareholder 14:5

III. Funding a Buy-Sell Agreement 14:5A. Cash Savings of the Parties 14:5B. Sinking Fund Contributions 14:5C. External Financing of the Share Purchase 14:6D. Retarding the Growth and the Value of the Shares 14:6E. Life Insurance 14:6F. Combination of Insurance and Current Earnings 14:6G. Payment over Time 14:7H. Sale of Assets 14:7

IV. The Effect of a Shareholders’ Agreement on the Valuation of a Corporation’s Shares 14:7A. Some Basic Considerations 14:7B. Position of the Canada Revenue Agency 14:8C. The Position of the Courts 14:9D. Alternatives When the Buy-Sell Price Is Less Than FMV 14:11

1. Subsection 164(6) 14:112. Spousal Rollover 14:133. Price Adjustment Clause 14:14

E. Corporate-Owned Life Insurance 14:14V. The Capital Gains Exemption for Qualified Small Business Corporation Shares 14:16

A. QSBC Share Defined 14:17B. The Holding-Period Tests 14:19C. The Effect of Corporate-Owned Insurance on QSBC Status 14:20D. Subsection 110.6(8) 14:20

VI. Shares That Are Purchased for Cancellation 14:21A. Advantages 14:21

1. Cash Flow Savings When Insurance Funding Is Used 14:212. Mitigation of Insurance Cost Inequalities 14:213. Simplifying the Agreement 14:224. Potential Reduction of Income Tax on Death 14:225. Payment over Time 14:25

B. Potential Disadvantages and Traps 14:251. Insufficient CDA 14:252. Capital Gains Exemption Not Used 14:263. Potential Denial of Capital Losses 14:264. Timing of Share Purchase 14:275. Shares with a Low PUC and a High ACB 14:276. Last Surviving Shareholder: Left Holding the Bag? 14:277. Insurance-Related Issues 14:28

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VII. Survivor Buyout Shareholders’ Agreements 14:28A. Tax Consequences to the Deceased Shareholder and the Estate 14:28B. Tax Consequences to the Surviving Shareholders 14:29C. Tax Consequences to an Operating Corporation 14:30

VIII. Hybrid Arrangements: Combination Shareholder Buy-Sell and Purchase for Cancellation by the Corporation 14:30

IX. The Use of Holding Corporations Under Buy-Sell Arrangements 14:31A. Is the Corporate Purchase Workable in the Light of Subsection 55(2)? 14:31B. Potential for Double Taxation in Cross-Purchase 14:32

X. Implications of the Rules Governing Preferred Shares 14:33XI. Shareholders’ Agreements and the Deemed Control Provisions:

Paragraph 251(5)(b) and Subsection 256(1.4) 14:34XII. Conclusion 14:37

Chapter 15 Capital Gains Exemption and Qualified Small Business Corporation SharesI. Introduction 15:2II. Overview of the Lifetime Capital Gains Exemption 15:3

A. Mechanics of the Provision 15:3B. Taxpayers Eligible for the LCGE 15:3C. Property Eligible for the LCGE 15:4D. LCGE and Capital Gains Deduction Limits 15:4

1. LCGE Limit 15:42. Capital Gains Deduction Limit 15:6

E. Definitions Relating to the Determination of the Capital Gains Deduction Limit 15:7

1. Annual Gains Limit 15:72. Cumulative Gains Limit 15:73. Cumulative Net Investment Loss 15:8

III. Qualified Farm or Fishing Property 15:9A. Definition of “Qualified Farm or Fishing Property” 15:9B. Value of Net Income Stabilization Account 15:11C. Carrying On a Farming or Fishing Business in Canada 15:11

1. Farming or Fishing Property General Conditions 15:112. Property Last Acquired Before June 18, 1987 15:123. Implications of the 1994 Capital Gains Election 15:12

D. Interaction of the LCGE and the Intergenerational Transfer Rules 15:12IV. Qualified Small Business Corporation Shares 15:13

A. QSBC Share Defined 15:13B. The Determination Time Test 15:13

1. Small Business Corporation 15:142. CRA Interpretation of “Substantially All” and “Primarily” 15:143. Connected Corporation and Control 15:14

C. The 24-Month Holding-Period Tests 15:161. Direct Ownership 15:172. Indirect Ownership 15:17

V. Restrictions and Anti-Avoidance Provisions 15:18A. Failure To Report 15:18B. Butterfly Transactions 15:18

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C. Property Acquired for Less Than Fair Market Value 15:19D. Gain Attributable to Insufficient Dividends 15:19E. Denial of Deduction 15:21

VI. Additional Guidelines Related to the LCGE 15:21A. Miscellaneous Rules in Respect of QSBC Shares 15:22

1. First-In, First-Out Method 15:222. Paragraph 251(5)(b) Rights 15:223. Personal Trust Deeming Rule 15:234. Partnership Deeming Rules 15:235. Extended Definition of “Related” 15:236. Deemed Ownership by Unrelated Person 15:247. Death of an Individual 15:24

B. Value of Assets of Corporations 15:251. Corporate-Owned Life Insurance 15:252. Share of Capital Stock or Indebtedness 15:25

C. Meaning of Personal Trust 15:26D. Order of Deduction 15:26E. Reserve Limit 15:27

VII. LCGE Planning Strategies 15:27A. Purification Strategies 15:27

1. Taxable Strategies 15:282. Non-Taxable Strategies 15:283. Tax-Deferred Strategies 15:29

B. Crystallization Strategies 15:301. Advantages 15:302. Disadvantages 15:313. Techniques 15:31

C. Multiplication of the LCGE Through Trusts 15:32D. Purchase of Shares from Retiring Shareholders 15:33E. Safe Income 15:34

VIII. Other Considerations 15:35A. Former Subsection 245(1.1) and GAAR 15:35B. Alternative Minimum Tax 15:36C. Tax on Split Income 15:37

IX. Conclusion 15:38

Chapter 16 Tax Considerations in Buying or Selling a Business

I. Introduction 16:5A. Assets Versus Shares 16:5

1. Some Important Issues 16:52. Biases 16:6

II. Collecting the Necessary Information 16:7III. The Purchase and Sale of Shares 16:9

A. Using Holding Corporations To Make an Acquisition 16:91. Deductibility of Interest on Money Borrowed To Buy Shares 16:92. Deductibility of Interest Incurred To Redeem Shares 16:103. Interest Expense: Maximizing the Value of the Deduction 16:114. Provincial/Territorial Allocation 16:11

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B. Corporate Rollovers To Defer Tax 16:111. Introduction 16:112. Illustration of Corporate Rollovers 16:123. Some General Comments on Corporate Reorganizations 16:124. Section 85: Transfer of Property to a Corporation 16:155. Corporate Tax Instalments 16:15

a. Short Fiscal Period 16:15b. Amalgamations 16:16c. Windups 16:16d. Transfers 16:16

6. When the Vendor Is Prepared To Take Back Shares 16:167. Reducing a Capital Gain Through a Tax-Free Intercorporate Dividend 16:178. Selling Shares of a Corporation and Gaining Access to Safe Income 16:189. Pre-Sale Dividends and Safe Income 16:19

C. An Instalment Sale: Deferring Taxable Gains by the Vendor 16:19D. QSBC Shares and the Lifetime Capital Gains Exemption 16:22

1. The 24-Month Holding-Period Test 16:222. The Qualified-Assets Test 16:22

a. Direct Ownership 16:23b. Indirect Ownership 16:24

3. Planning Strategies 16:254. GAAR and QSBC Shares 16:255. The Safe-Income Exemption Versus the Capital Gains Exemption 16:266. Purchase of Shares from Retiring Shareholders 16:26

E. Capital Gains Deferral for Eligible Small Business Shares: Section 44.1 16:28F. Proper Timing of Loss Restriction Event 16:29

1. Timing of Acquisition and Disposition 16:312. Non-Arm’s-Length Transactions 16:313. ABIL in a Share Redemption 16:32

G. Why a Non-Resident Acquiror Should Consider Using a Holding Corporation To Make an Acquisition 16:33

1. Thin Capitalization 16:332. Exchangeable Shares: Exchanging Canadian Shares for Foreign Shares

on a Tax-Deferred Basis 16:353. The Death of the Purchase Butterfly 16:364. Non-Resident Share Acquisition Structuring 16:365. Unlimited Liability Corporation 16:366. Minimizing Canadian Taxes on the Disposition of a Canadian Subsidiary:

A Capital Gains Strip 16:367. Minimizing Canadian Taxes on the Disposition of a Canadian Subsidiary:

Changing Residence of Vendor 16:378. Dispositions by Non-Residents and Exposure to Provincial/Territorial Taxes and

Double Taxation 16:389. One Approach to Avoiding Problems Under Section 212.1 16:3810. Where Should a Foreign Acquiror Incur Its Financing Obligation? 16:39

H. The SBD: Financing an Acquisition Through a Reduced Tax Burden 16:401. The Saving Provision in Section 256 16:402. Financing an Acquisition Through Tax Savings 16:41

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I. Salary to the Vendor Under a Personal Services Contract: Tax Considerations 16:41J. Financing an Acquisition Through a Retiring Allowance 16:42

1. Retiring Allowance Defined 16:422. Tax Deferral 16:433. Deduction at Source 16:43

K. Upgrading of Pension Plans 16:43L. Terminated Employees and Retirement Compensation Arrangements 16:43M. Unexercised Stock Option Rights and Corporate Takeovers 16:44N. When Shares of a Target Corporation Are Held by the Target’s DPSP 16:45O. “Underwater” Loans to Employees 16:45P. Change of Control of a Loss Corporation 16:45Q. Debt Parking in Acquisition of Shares and Debt 16:45R. Reverse Takeovers: Tax Considerations 16:46S. Warranty Payments Arising Under the Purchase Agreement 16:47

IV. The Purchase and Sale of Assets 16:47A. Allocating the Purchase Price in a Bulk Asset Purchase 16:47

1. Section 68 and the Allocation of Purchase Price 16:482. Instalment Sale Reserves: How To Optimize the Purchase Allocation 16:493. Sale of Assets: PST Implications 16:50

B. Tax Consequences of Selling a Business for Instalments Carrying No Apparent Interest 16:50

C. Accounts Receivable: Making a Section 22 Election on Transfer 16:51D. Sale of Inventory 16:53

1. Instalment Sale: Allocation to Inventory 16:53E. Depreciable Property 16:53

1. Recapture of CCA 16:532. Capital Gains and Losses 16:543. Recapture of Depreciation: Is It Active Business Income? 16:544. Property Used in More Than One Business: An Increased Exposure to

Recapture 16:545. Regulation 1103(1): A Special Election To Avoid Recapture 16:556. Changes in CCA Classes 16:557. Depreciables: Impact of the Half-Year Rule 16:568. Sale of Land and Buildings 16:579. Analyzing the Real Nature of the Assets Being Purchased 16:5710. Class 13: Leasehold Interests 16:5811. The Available-for-Use Rule 16:5812. The Replacement Property Rules 16:5913. Non-Arm’s-Length Sales of Depreciable Property 16:5914. Preventing the Realization of Losses in Certain Affiliated-Party Transactions 16:59

F. Valuation of CCA Claims 16:60G. Goodwill, Intangible Property, and Class 14.1 16:61

1. Depreciable Intangibles 16:612. Class 14.1 16:613. Goodwill 16:624. Disposal of Class 14.1 Property 16:635. Recapture and Terminal Loss 16:646. Transitional Rules 16:64

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7. Incorporation Expenses 16:658. Class 14.1 and the Replacement Property Rule 16:66

H. Capital Property Other Than Depreciable Property 16:661. Capital Property Owned on December 31, 1971: The Median Rule 16:662. The FMV of Publicly Traded Securities: ITAR 26(11) 16:673. Tax Treatment of Capital Gains and Capital Losses 16:674. Instalment Sales of Capital Property 16:685. Life Insurance Policies 16:68

I. Prepaid Expenses 16:681. Administrative Practice 16:682. Deferred or Prepaid Expenses 16:683. Consistency Desired: Changes Permitted 16:69

J. Reserves, Foreign Exchange, and Settlement of Debt 16:691. Reserves and Warranties 16:692. Foreign Exchange Gains and Losses 16:703. Debtor’s Gain on Settlement of Debt 16:71

K. Deferring Taxation Through Sections 99 and 25 16:71L. Taxation-Year Planning 16:71M. The CDA: Be Very Careful 16:72

V. Other Considerations 16:73A. Dividends Versus Capital Gains: Which Should a Shareholder Choose? 16:73

1. Some General Observations 16:732. Deemed Dividends Versus Capital Gains for Shareholders of Acquired

Corporations 16:743. Squeezing Out the Minority Shareholders in a Takeover 16:744. Dissenting Shareholders: Tax Treatment 16:76

B. Price Adjustment Clauses 16:761. Purpose 16:762. Income Tax Folio S4-F3-C1, Price Adjustment Clauses 16:773. Effect of Income Tax Folio S4-F3-C1 on Price Adjustment Clauses 16:78

C. Earnouts: What and Why? 16:791. General Considerations in Structuring an Earnout 16:792. Different Approaches to an Earnout 16:80

a. Base-Period Earnout 16:80b. Increment Earnout 16:80c. Cumulative Earnout 16:81d. Reverse Earnout 16:81

3. Tax Issues 16:814. Tax Treatment of Shares Sold Subject to an Earnout Agreement 16:835. Problems Under Section 55: Tax-Free Intercorporate Dividends 16:85

D. Non-Competition Clauses 16:861. Default Income Inclusion: Subsection 56.4(2) 16:872. Non-Application of Section 56.4 16:87

a. Employment Income Exception: Paragraph 56.4(3)(a) 16:87b. Asset Sale Exception: Paragraph 56.4(3)(b) 16:88c. Share Sale Exception: Paragraph 56.4(3)(c) 16:89

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3. Reasonable Allocation of Purchase Price to Restrictive Covenant: Section 68 16:90a. Exceptions to the Application of Section 68 16:91

i. Employee-Provided Covenant Exception: Subsection 56.4(6) 16:91ii. Goodwill Amount and Disposition of Property Exceptions:

Subsections 56.4(7) and (8) 16:91iii. Application of Subsection 56.4(7) and Section 69—Special Rules 16:94

4. Treatment of the Purchaser 16:945. Anti-Avoidance Rules 16:956. Clarification Rules 16:957. Filing Prescribed Form 16:958. Restrictive Covenant Rules: Problems and Anomalies 16:96

E. Structures To Consider 16:971. Incorporating a Division: An Alternative to a Purchase and Sale 16:972. A Partnership of Corporations 16:97

F. Interest and Other Financing Costs 16:1001. Interest Expense 16:1002. Expenses of Issuing Shares and Borrowing Money 16:1043. When the Parent Borrows 16:1064. Aborted Financing 16:1065. Withholding Tax 16:1066. Purchase and Sale of Shares 16:1077. Purchase and Sale of Assets 16:1078. Appraisal Costs 16:1089. Tax Treatment of Costs Incurred in Resisting a Takeover 16:108

G. Tax Treatment of Interest on the Purchase Price 16:110H. Discounts and Premiums on Corporate Debt 16:111I. Dispositions of Capital Property by Non-Residents 16:112

1. Taxable Canadian Property 16:1122. Liability of the Purchaser in Certain Cases 16:1143. Disposition of Taxable Canadian Property by Non-Residents 16:1144. Capital Gains Incurred by Non-Residents: The Canada-US Tax Treaty 16:117

J. How To Use RRSPs To Assist in Acquiring a Business 16:118VI. Tax Clauses in Acquisition Agreements 16:118VII. Application of GST to the Purchase and Sale of a Business 16:120

A. Special Elections 16:120B. The Application and Impact of GST 16:121C. Financial Institutions and Other Exempt Users 16:121D. Application of Provincial or Retail Sales Taxes to the Purchase and Sale of a

Business 16:122VIII. Shares Versus Assets: An Example 16:122

Chapter 17 Utilization of Corporate Losses

I. Introduction 17:3A. Ordering of Deductions 17:3B. Losses: Some General Comments 17:3

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II. Non-Capital Losses 17:4A. Using Non-Capital Losses To Reduce Part IV Tax 17:5B. Using Foreign Tax Credits While Increasing Non-Capital Losses 17:5

III. Net Capital Losses 17:6IV. Allowable Business Investment Losses 17:7V. Loss Restriction Events: Impact on Losses Carried Forward 17:10

A. Introduction 17:101. Sale of Current-Year Losses 17:102. ABILs and Property Losses 17:113. Sale of Accrued but Unrealized Losses 17:11

B. When Does a Loss Restriction Event Occur? 17:11C. Changes in Ownership That Are Deemed Not To Be an Acquisition of Control 17:13

1. The Transfer of Loss Corporations Within a Related Group 17:152. Change in Executor 17:15

D. Other Circumstances in Which an Acquisition of Control Is Deemed To Occur 17:15E. Restrictions on Losses That Arise on an Acquisition of Control 17:18

1. Deemed Year-End on a Loss Restriction Event 17:182. Effect of a Loss Restriction Event on the Carryover of Net Capital Losses 17:183. Effect of a Loss Restriction Event on the Carryover of Non-Capital Losses 17:204. Reasonable Expectation of Profit 17:205. Depreciable Property 17:226. Additional Tax Implications 17:23

VI. Offsetting Profits and Losses Within a Related Group 17:23VII. Amalgamations: Flowthrough of Losses 17:24

A. General Comments 17:24B. Timing Problems: Effective Date of Amalgamation 17:24

VIII. Liquidations: Flowthrough of Losses 17:25IX. Other Loss-Consolidation Strategies 17:27

A. Group Loss-Consolidation Techniques 17:281. Transfer of Assets Within an Affiliated Group 17:282. Transfer of a Profitable Business Within an Affiliated Group 17:303. Implementation of Intercorporation Charges 17:304. Transfer of a Profitable Business to a Partnership 17:305. Preferred Share/Loan Transactions 17:31

B. Preserving Losses 17:321. Revising Discretionary Deductions 17:322. Other Loss-Preservation Strategies 17:33

X. Other Loss-Restriction Rules 17:35A. Using Third-Party Losses on Asset Sales: Subsection 69(11) 17:35B. Restrictions on Transferring CCA to a Third Party: Subsection 13(24) 17:35C. Loss-Denial Provisions 17:36

XI. Debtor’s Gain on Settlement of a Debt: Preventing Taxpayers from Avoiding a Forgiveness 17:37

A. Overview of the Debt-Forgiveness Rules 17:38B. Implications of the Debt-Forgiveness Rules 17:38C. Debt Parking 17:39

XII. When To Recognize Capital Debts Established To Be Bad Debts 17:40

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XIII. Loan Guarantees and Non-Interest-Bearing Loans: Deductibility of Debts Gone Bad 17:41

A. Capital or Income Loss 17:41B. Deductibility of Interest on Funds Borrowed To Honour a Guarantee 17:43

XIV. Nil Assessments: Confirming the Amount of Available Losses 17:45XV. Carrying Back Losses 17:47XVI. The Impact of Bankruptcy on Losses 17:48XVII. How Dividends Received May Reduce the Amount of a Loss 17:49

A. Shares That Are Capital Property 17:49B. Shares That Are Non-Capital Property 17:50

XVIII. Taxable Preferred Share Financing 17:50A. Term Preferred Shares 17:51B. Guaranteed Shares 17:52C. Collateralized Preferred Shares 17:52D. Taxable Preferred Shares 17:53E. Additional Points To Be Noted 17:54

XIX. Limited Partnership Losses 17:55XX. A Review of the Concept of Control 17:55

A. Income Tax Act Provisions 17:55B. Review of the Jurisprudence 17:57C. Control by a Group of Persons 17:67D. The CRA’s Position 17:68E. Summary of the Current Law 17:69

Chapter 18 Provincial and Territorial Taxation of the Private Corporation

I. Constitutional Power 18:4II. History of Provincial Taxation 18:4III. Differences in Provincial and Territorial Tax Rates 18:5

A. Overview 18:5B. The SBD 18:9C. Other Restrictions on the Small Business Limit 18:10

1. Restriction Based on Taxable Capital 18:102. Restriction Based on Passive Income 18:103. Quebec 18:11

a. Primary or Manufacturing Sector Test 18:12b. Remunerated-Hours Test 18:12

D. M & P Deduction 18:13E. Provincial and Territorial Tax Holidays 18:14

1. Overview 18:14a. Newfoundland and Labrador 18:14b. Nova Scotia 18:15c. Ontario 18:15d. Prince Edward Island 18:15e. Quebec 18:16f. Other Provinces 18:16

2. General Planning for Tax Holidays 18:16

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IV. Allocating Taxable Income Among Federal, Provincial, and Territorial Jurisdictions 18:17A. Significance of Permanent Establishment 18:17

1. Federal Taxation 18:172. Provincial or Territorial Taxation 18:18

B. Definition of “Permanent Establishment” Under the Federal Regulations 18:19C. The Allocation of Income to a Permanent Establishment 18:22

1. What Is Included in “Salaries and Wages Paid”? 18:232. What Is Gross Revenue? 18:253. Where Should the Gross Revenue Be Allocated? 18:264. Double Taxation 18:26

D. Allocation of Investment Income 18:26V. Provincial and Territorial Income Tax Differences: An Overview 18:29

A. Scientific Research and Experimental Development 18:29B. M & P Tax Incentives 18:29

1. Alberta 18:302. Manitoba 18:303. Newfoundland and Labrador 18:314. Nova Scotia 18:315. Ontario 18:316. Prince Edward Island 18:317. Quebec 18:318. Saskatchewan 18:329. Yukon 18:33

C. CCA 18:331. CCA in Year of Acquisition 18:332. Computation of Capital Cost 18:33

a. Alberta 18:34b. Quebec 18:34c. Other Provinces 18:35

D. Non-Residents’ Withholding Taxes 18:35E. Charitable Donations 18:35F. Political Contributions 18:36G. Availability of Non-Capital Losses 18:37

1. Alberta 18:372. Quebec 18:38

H. Planning with Non-Capital Losses 18:38I. Loss Carryforward or Carryback in the Year of Startup or Shutdown 18:38

VI. Other Provincial and Territorial Tax Credits 18:38A. Film, Television, and Media Incentives 18:39B. Venture Capital and Small Business Financing Incentives 18:39

1. Labour-Sponsored Venture Capital Corporations 18:392. Provincial Small Business Investment Programs 18:39

a. Alberta Investor Tax Credit 18:40b. British Columbia Venture Capital Tax Credit 18:40c. Manitoba Small Business Venture Capital Tax Credit 18:41d. New Brunswick 18:42e. Newfoundland and Labrador 18:42

i. Venture Capital Tax Credit 18:42ii. Direct Equity Tax Credit 18:42

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f. Nova Scotia Investor Tax Credits 18:42i. Innovation Equity Tax Credit 18:42ii. Venture Capital Tax Credit 18:43

C. Selected Other Credits by Province 18:431. British Columbia 18:43

a. Logging Tax Credit 18:43b. Mining Exploration Tax Credit 18:43c. Book-Publishing Tax Credit 18:43

2. Manitoba 18:44a. Book-Publishing Tax Credit 18:44b. Paid Work Experience Tax Credits 18:44

3. Ontario 18:45a. Cooperative Education Tax Credit 18:45b. Book-Publishing Tax Credit 18:45

4. Quebec 18:45a. Culture Tax Credit 18:46b. On-the-Job Training Tax Credit 18:46c. Design Credits 18:46d. Tax Credit for the Development of E-Business 18:47e. Refundable Tax Credit for SMEs To Foster the Retention of Experienced

Workers 18:47f. Book-Publishing Tax Credit 18:47

VII. Ontario Corporate Minimum Tax 18:48VIII. Payroll Tax 18:50

A. British Columbia 18:501. Meaning of “Employee” 18:512. Meaning of “Employer” 18:513. Meaning of “Remuneration” 18:514. BC Remuneration 18:515. “Permanent Establishment” 18:52

B. Manitoba 18:521. Meaning of “Employee,” “Employer,” and “Remuneration” 18:522. Meaning of “Permanent Establishment” 18:53

C. Newfoundland and Labrador 18:531. Meaning of “Employee” and “Employer” 18:542. “Remuneration” and “Establishment” 18:54

D. Ontario 18:551. Meaning of “Employee” 18:552. Meaning of “Employer” 18:563. “Permanent Establishment” 18:56

E. Quebec 18:581. Meaning of “Employee,” “Employer,” and “Wages” 18:582. Meaning of “Establishment” 18:583. Quebec Vocational Training Tax 18:59

F. Northwest Territories 18:591. Meaning of “Employee,” “Employer,” “Remuneration,” and

“Fixed Place of Business” 18:59G. Nunavut 18:61

IX. Elective Provisions 18:61

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X. Provincial General Anti-Avoidance Rules 18:61XI. Provincial Capital Tax 18:63XII. Provincial and Territorial Recognition of Canada’s Tax Treaties 18:63

Chapter 19 Passage of Shares of a Private Corporation on Death

I. Introduction 19:3II. Wills, Trusts, and Estates Law Considerations in Post Mortem Planning 19:3

A. The Will 19:41. The Need for a Well-Drafted Will 19:42. Dependant’s Claims and Spousal Claims 19:43. Executor’s Powers 19:64. Selection of Executors and Acting as Executor 19:65. Miscellaneous 19:7

B. Estate Administration Law 19:8C. Trust Law: In General 19:8

1. Sources of Trust Law 19:82. Basic Logic of the Fiduciary Obligation 19:93. Duty of Loyalty 19:9

a. No-Conflict Rule 19:10b. No-Profit Rule 19:10c. Duty To Act Personally 19:10d. Even-Hand Rule 19:11e. Discretion 19:11

4. Duty of Care 19:125. Trustees Powers and the Day-to-Day Administration 19:13

a. Investments 19:13b. Trustees Act with Unanimity 19:17c. Power To Lend or Guarantee 19:17d. Power To Encroach 19:18e. Power To Employ Agents 19:18f. Power To Make Elections and Designations 19:19

6. Legal Position of Trustee Vis-à-Vis Third Parties 19:197. Trustees’ Liability 19:208. Beneficiary’s Right To Compel an Accounting and Right To Obtain

Information 19:219. Legal Position of Beneficiaries Vis-à-Vis Third Parties 19:2110. Other Considerations in the Design of the Trust 19:22

a. Rule Against Perpetuities 19:22b. Rule Against Accumulations 19:22

D. Trust Law: The Estate’s Holding of Private Corporate Shares 19:231. Trustee’s Duty To Be Appointed Director 19:232. Trustee’s Duties as Trustee and as Director 19:243. Trustee’s Duties as Trustee and as Shareholder 19:244. Selection of Beneficiaries 19:255. Distribution of Corporate Earnings: Income or Capital? 19:266. Duty Not To Profit 19:307. Delegation of Administrative Powers 19:30

Detailed Contents / xxxix

III. Tax-Law Considerations in Planning for Death 19:31A. Deemed Disposition on Death 19:31

1. Spousal Rollover 19:312. Family Farm or Fishing Corporation Rollover 19:34

B. Graduated Rate Estates Rules 19:35C. Tax-Law Considerations in the Design of the Estate and Trust 19:36

1. Term of the Trust 19:362. Residence of the Trust 19:37

D. Planning Considerations Related to Shares in a Private Corporation 19:371. Loss Utilization 19:372. Bump Planning 19:373. Associated Corporations 19:384. Part VI.1 Tax 19:395. Valuation Issues 19:39

a. Life Insurance 19:39b. Skinny Voting Shares 19:39c. Shares Subject to a Buy-Sell Agreement 19:40

6. QSBC Share Exemption 19:407. Indefeasible Vesting 19:408. Donation Planning 19:42

E. Probate Planning 19:431. Joint Tenancy Planning 19:432. Dual Wills 19:45

IV. Post Mortem Planning To Address Double Taxation 19:45A. Planning Approaches 19:46B. Subsection 164(6) Election 19:47C. Pipeline Planning 19:48D. Bump Planning 19:54E. Summary of Considerations in Selecting a Post Mortem Plan 19:55

Appendix Principal Statutes in Respect of Wills, Trusts, and Estates, Common-Law Provinces and Territories 19:57

Chapter 20 Scientific Research and Experimental Development and Investment Tax Credit Incentives

I. Introduction 20:3A. History of the Program 20:3

II. The Incentives 20:4A. Deduction 20:4B. ITCs: A Two-Tiered System 20:4

III. Filing Requirement 20:5IV. Definition of SR & ED 20:6

A. Carried On in Canada 20:9B. Deduction of SR & ED Expenditures 20:10

1. Salaries and Wages of Employees 20:10a. Incurred 20:11b. Computation of Salaries and Wages Under the Traditional and Proxy

Methods 20:11c. Specified Employees 20:14

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d. Work Performed Outside Canada 20:15e. Unpaid Salaries and Wages 20:16

2. Contract Payments 20:16a. General Rules 20:16b. Whose SR & ED Is It Anyway? 20:16c. Can the Payer Claim? 20:17d. Can the Performer Claim Its Own Costs? 20:17

3. Third-Party Payments 20:194. Materials 20:195. Election for Overhead 20:21

a. Proxy Election 20:21b. Traditional Method 20:22c. Expenditures Directly Attributable to SR & ED 20:23

6. Capital Expenditures 20:23V. Concept of Pooling SR & ED Expenditures 20:25

A. Components of the SR & ED Pool 20:26B. Acquisition of Control/Loss Restriction Event 20:26

VI. ITCs for Qualifying SR & ED Expenses 20:27A. General Rules 20:27

1. Qualifying Corporations 20:282. CCPCs Other Than Qualifying Corporations 20:283. Expenditure Limit Phaseout Formula 20:29

B. Anti-Avoidance Provisions 20:30C. Qualifying Expenditures 20:30

1. General 20:302. Prescribed Proxy Amount 20:313. Prescribed Current Expenditures 20:324. Government and Non-Government Assistance 20:325. Contract Payments for ITC Purposes 20:346. Unpaid Amounts 20:35

D. Subcontracting Payments to Non-Arm’s-Length Parties 20:35E. Recapture of SR & ED Credits on the Sale or Conversion of Property 20:37

VII. Offsetting Refund Against Other Taxes 20:40VIII. Assignment of ITCs to Third Parties 20:41IX. Carryover of ITCs 20:42

A. Reorganization of Corporations Through Amalgamation and Windup 20:42B. Acquisition of Control/Loss Restriction Event 20:42

X. Partnerships and ITCs 20:42A. Filing-Due Dates 20:43B. Specified Members of a Partnership 20:44C. Allocation of Unused ITCs 20:44

XI. Provincial and Territorial Incentives 20:45A. Ontario 20:45

1. Ontario Innovation Tax Credit 20:452. Ontario Business-Research Institute Tax Credit 20:473. Ontario Research and Development Tax Credit 20:48

B. Alberta R & D Tax Credit 20:48C. British Columbia R & D Tax Credit 20:49

Detailed Contents / xli

D. Manitoba R & D Tax Credit 20:50E. New Brunswick R & D Tax Credit 20:51F. Newfoundland and Labrador R & D Tax Credit 20:51G. Nova Scotia R & D Tax Credit 20:51H. Prince Edward Island Innovation and Development Labour Rebate 20:51I. Quebec Credit for R & D Wages 20:52J. Saskatchewan R & D Tax Credit 20:53K. Yukon R & D Tax Credit 20:53

XII. Provincial Examples 20:53XIII. CRA Review Process Guidelines and SR & ED Program Policies 20:56

A. General Overview of the CRA Review Process 20:56B. Other CRA Services 20:57

1. First-Time Claimant Advisory Service 20:572. Self-Assessment Learning Tool 20:573. Pre-Claim Consultation 20:574. Pre-Claim Review 20:58

C. CRA Service Standards 20:58D. Claim Review Manuals 20:59

1. Claim Review Manual for Research and Technology Advisors 20:592. Financial Claim Review Manual—Review Procedures for Financial Reviewers 20:59

E. Policy Statements 20:59

Chapter 21 Tax Planning and Tax Avoidance

I. Introduction 21:2II. Judicial Anti-Avoidance Doctrines 21:9

A. Business Purpose Test 21:10B. Form and Substance 21:13C. Sham 21:14D. Window Dressing 21:16E. Ineffective Transactions 21:21

1. A Few Related Words About Backdating 21:24F. Illegal Transactions 21:26G. Agency 21:32H. Piercing the Corporate Veil 21:36I. Step Transactions 21:38

1. What Is a Composite Transaction? 21:432. The Step Transaction Doctrine in Canada 21:43

III. Tax System Conventions 21:49A. Purpose of the Tax System 21:49B. Certainty, Consistency, Predictability, and Fairness 21:51C. Role of the Courts 21:52D. “Scrutiny” Doctrine 21:60

IV. Specific Statutory Anti-Avoidance Tests 21:63A. The Purpose Test 21:63

1. Introduction 21:632. The Canadian Approach 21:653. “Principal Purpose” 21:704. “One of the Main Purposes” 21:72

xlii / Detailed Contents

5. “May Reasonably Be Considered” 21:736. “One of the Purposes” 21:74

B. The Reasons Test 21:76C. Principal Business 21:79D. The Reasonableness Test 21:81E. The Deeming Test 21:83F. The “Knowingly” Test 21:84

V. GAAR: Canada’s Answer to Tax Avoidance 21:87A. Introduction 21:87B. Tax Benefit Defined: Subsection 245(1) 21:90C. Avoidance Transaction Defined: Subsection 245(3) 21:95

1. Bona Fide Purpose 21:972. Meaning of “Purpose” 21:973. Primary Purpose 21:984. Non-Tax Purpose 21:995. Series of Transactions 21:99

D. Misuse or Abuse 21:1021. Background 21:1022. What Do the Terms “Misuse” and “Abuse” Mean? 21:1033. Interpretive Approach 21:104

E. Effect of Subsequent Amendments 21:107F. Tax Consequences: “Reasonable in the Circumstances” 21:110G. Abuse and Burden from Canada Trustco and Beyond 21:112

xliii

Table of Cases

2529-1915 Québec Inc. v. Canada, see Faraggi10737 Newfoundland Limited v. The Queen, 2011 TCC 346 1:1565302 British Columbia Ltd. v. Canada, [1999] 3 SCR 804 21:27, 30, 31, 51454538 Ontario Limited et al. v. MNR, 93 DTC 427 (TCC) 10:25489599 BC Ltd. v. The Queen, 2008 TCC 332 5:47, 48; 6:18; 7:18; 13:31507582 BC Ltd. et al. v. The Queen, 2008 TCC 220 21:33576315 Alberta Limited v. The Queen, 2001 DTC 776 (TCC) 8:21594710 British Columbia Ltd., Canada v., 2018 FCA 166 21:114671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59 5:42722540 Ontario Inc. v. The Queen, 2001 CanLII 939 (TCC) 21:580742443 BC Ltd. v. Canada, 2015 FCA 231 6:19, 20943963 Ontario Inc. v. The Queen, 1999 CanLII 306 (TCC) 10:201207192 Ontario Limited v. Canada, 2012 FCA 259 21:98, 1081245989 Alberta Ltd. v. Canada (Attorney General), sub nom. Wild, 2018 FCA 114 21:93, 946051944 Canada Inc. v. The Queen, 2015 TCC 180 7:21101139810 Saskatchewan Ltd. v. The Queen, 2017 TCC 3 10:12; 21:75

Aaron’s (Prince Albert) Ltd. et al. v. MNR, 66 DTC 5244 (Ex. Ct.) 17:58, 59Abbott v. Philbin (1960), 39 TC 82 (HL) 13:9ACSIS EHR (Electronic Health Record) Inc. v. The Queen, 2015 TCC 263 20:9Adams et al., The Queen v., 98 DTC 6266 (FCA) 7:39, 71Aessie v. The Queen, 2004 TCC 421 7:21AG Shield Ltd. v. The Queen, 2017 TCC 68 20:15AH Field (Holdings) Ltd v. Revenue & Customs, [2012] UKFTT 104 (TC) 21:73Air Canada v. British Columbia, [1989] 1 SCR 1161 5:22Alcatel Canada Inc. v. The Queen, 2005 TCC 149 20:11Alexander v. MNR, 70 DTC 6006 (Ex. Ct.) 5:41Allcolour Chemicals Limited et al. v. The Queen, 93 DTC 1194 (TCC); aff ’d 1997 CanLII 5029

(FCA) 20:29Alpha Forming Corporation Limited et al. v. The Queen, 83 DTC 5021 (FCTD) 6:89, 90Alpine Furniture Co. Ltd. et al. v. MNR, 68 DTC 5338 (Ex. Ct.) 6:87, 89, 90Alroy Industries Ltd., The Queen v., 76 DTC 6220 (FCTD) 6:83Ambulances BGR Inc. v. The Queen, 2004 TCC 168 7:10, 12, 21American Income Life Insurance Company v. The Queen, 2008 TCC 306 18:20American Metal Co. of Canada Ltd v. MNR, 52 DTC 1180 (Ex. Ct.) 21:80Amway Corp., R v., [1989] 1 SCR 21 1:9Anderson v. Abbott, 321 US 349 (1943) 1:11Anjaria v. The Queen, 2007 TCC 746 21:27Anjulin Farms Ltd. v. MNR, 61 DTC 1182 (Ex. Ct.) 17:45Antle v. Canada, 2009 TCC 465; aff ’d 2010 FCA 280 21:15, 16, 17, 63Apex Corporation v. Ceco Developments Ltd., 2005 ABQB 656 1:9Aquilina v. Aquilina, 2018 ONSC 3607 19:5

xliv / Table of Cases

Arbutus Gardens Apartments Corp. v. The Queen, 98 DTC 1795 (TCC) 8:19Army & Navy Department Stores Ltd. v. Minister of National Revenue, [1953] 2 SCR 496 1:2, 11;

6:43, 64Arpeg Holdings Ltd. v. Canada, 2008 FCA 31 7:49Arthill Enterprises, The Queen v., 75 DTC 5419 (FCTD) 6:89Ashton v. IRC, [1975] 1 WLR 1615 (PC) 21:64, 65Atheneon Travel Services Ltd. v. MNR, 85 DTC 91 (TCC) 7:13Atinco Paper Products Ltd. v. The Queen, 78 DTC 6387 (FCA) 21:61, 62Atkinson Estate v. MNR, 72 DTC 1290 (TRB) 7:57Atlantic Packaging Products Ltd./Atlantic Produits d’Emballage Ltée v. The Queen, 2018 TCC

183 20:11Atlas Industries Ltd. v. MNR, 86 DTC 1756 (TCC) 6:13Ator v. MNR, 99 DTC 427 (TCC) 7:34Attis v. MNR, 92 DTC 1128 (TCC) 7:64Avotus Corporation v. The Queen, 2006 TCC 505 6:49, 50Ayrshire Pullman Motor Services and Ritchie v. Inland Revenue Commissioners, [1929] 14 TC

754 21:5

B & J Music Ltd., The Queen v., 80 DTC 6219 (FCTD) 17:46Backman v. Canada, 2001 SCC 10 1:9; 21:17, 18, 19, 67BACM Industries Ltd. v. MNR, 73 DTC 90 (TRB) 16:106Baker v. Canada, 2005 FCA 185 6:19Balstone Farms Ltd. v. Minister of National Revenue, [1967] 2 Ex. CR 217 1:6Balz Estate v. MNR, 92 DTC 1472 (TCC) 15:14; 16:23Bane v. MNR, 69 DTC 249 (TAB) 7:57Bank of Montreal, The, v. The Queen, 2018 TCC 187 21:92, 93Bannerman v. MNR, 57 DTC 1249 (Ex. Ct.); aff ’d 59 DTC 1126 (SCC) 21:67, 69, 71Barbeau v. The Queen, 2006 TCC 126 7:61Barber Estate v. MNR, 66 DTC 315 (TAB) 3:27Barclays Bank, Ltd. v. IR Comrs., [1960] 2 All ER 817 (HL) 17:57Barclays Mercantile Business Finance Ltd v. HM Inspector of Taxes, see Business Finance Ltd. v. Mawson

(Inspector of Taxes)Barings v. Coopers & Lybrand, [1997] 1 BCLC 427 (CA) 1:8Barrett v. Duckett, [1995] 1 BCLC 243 (CA) 1:8Barrette v. The Queen, 2004 TCC 437 21:71Baylis v. Gregory, see Craven v. White, IRC v. Bowater Property Developments Ltd., and Baylis v. GregoryBaytrust Holdings Ltd. v. IRC, [1971] 3 All ER 76 (Ch. D.) 10:78Beament et al. v. Minister of National Revenue, [1970] SCR 680; 70 DTC 6130 2:27; 14:9, 10, 12Beaulieu v. The Queen, 2011 TCC 86 21:24Becker v. The Queen, 83 DTC 5032 (FCA); rev’g 81 DTC 5129 (FCTD) 17:43Belle-Isle c. Ministre du Revenu National, [1966] RCS 354 11:18Ben Barbary Company Limited v. MNR, 89 DTC 242 (TCC) 6:13; 8:22, 23; 21:71Ben Nevis Forestry Ventures Ltd and Ors v. Commissioner of Inland Revenue, [2008] NZSC 115 21:14Ben Raedarc Holdings Ltd. v. The Queen, 1997 CanLII 176 (TCC) 6:19Berg v. The Queen, 2012 TCC 406 21:16Bernstein v. MNR, 74 DTC 6041 (FCTD); aff ’d 77 DTC 5187 (FCA) 7:7, 8; 13:10, 21Bertomeu v. The Queen, 2006 TCC 85 7:17Bessette c. Agence du revenu du Québec, 2014 QCCQ 4329 7:17

Table of Cases / xlv

Billes, Re, 1983 CanLII 1635 (ONSC) 19:15, 16, 25Birch v. Cropper (1889), 14 App. Cas. 525 (HL) 3:17, 28Birchcliff Energy Ltd. v. R, [2013] 3 CTC 2169 (TCC) 21:113BJ Services Company Canada, the successor to Nowsco Well Service Ltd. v. The Queen, 2003 TCC

900 16:107, 110Blair v. MNR, 61 DTC 274 (TAB) 7:46Bobbie Brooks (Canada) Ltd., The Queen v., 73 DTC 5357 (FCTD) 6:89Boger Estate, The Queen v., 93 DTC 5276 (FCA) 19:33Boily v. MNR, 88 DTC 1605 (TCC) 1:7Bollinger, CIR v., 108 S. Ct. 1173 (1988) 21:35Bouchard v. The Queen, 2007 TCC 471 7:43Boulangerie St-Augustin Inc. v. The Queen, 95 DTC 164 (TCC); aff ’d 97 DTC 5012

(FCA) 16:107, 110Boutilier v. The Queen, 2007 TCC 96 5:37Bowater Canadian Ltd. v. R.L. Crain Inc. (1987), 62 OR (2d) 752 (CA) 3:18, 23; 19:26Bowater Mersey Paper Company Limited, The Queen v., 87 DTC 5382 (FCA) 17:46Bowater Property Developments Ltd., IRC v., see Craven v. White, IRC v. Bowater Property Developments

Ltd., and Baylis v. GregoryBowens v. The Queen, 94 DTC 1853 (TCC) 1:18Boyd v. Wright Environmental Management Inc., 2008 ONCA 779 21:36Bradford v. MNR, 88 DTC 1661 (TCC) 5:43Bradshaw v. The Queen, 2019 TCC 1 21:85, 86Branco v. American Home Assurance Company, 2013 SKQB 98 1:4Bray v. Ford, [1896] AC 44 (HL) 19:10Brelco Drilling Ltd., Canada v., 1999 CanLII 8151 (FCA) 10:23, 24, 29, 36Brelco Drilling Ltd. (Formerly Trimac) v. The Queen, 1998 CanLII 517 (TCC) 10:23Brent Kern Family Trust v. Canada, 2014 FCA 230 8:9Brillon v. The Queen, 2006 TCC 76 20:44British American Tobacco Co. v. IRC, [1943] 1 All ER 13 (HL) 17:57, 58British Columbia Electric Railway Co. Ltd., The King v., [1945] 3 DLR 613 (Ex. Ct.) 1:12British Columbia Power Corporation, Limited v. Minister of National Revenue, [1968] SCR

17 16:109, 110British Columbia Securities Commission v. Branch, [1995] 2 SCR 3 1:9Brizzi v. The Queen, 2007 TCC 226 21:27Bronfman, MNR v., 65 DTC 5235 (Ex. Ct.) 7:37; 8:13Bronfman Trust v. The Queen, [1987] 1 SCR 32 3:41, 42, 43; 11:24; 16:109; 21:15, 23, 24, 44,

47, 56, 57Brooklands Selangor Holdings Ltd. v. IRC, [1970] 2 All ER 76 (Ch. D.) 10:78Brownco Inc. v. The Queen, 2008 TCC 58 6:49, 89, 90; 14:37Bruce E. Morley Law Corporation v. The Queen, 2002 DTC 1547 (TCC) 5:41; 21:22Brunette v. Legault Joly Thiffault, s.e.n.c.r.l., 2018 SCC 55 1:8Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8 21:15Buccini v. Canada, 2000 CanLII 16514 (FCA) 13:13Buckerfield’s Ltd. et al. v. MNR, 64 DTC 5301 (Ex. Ct.) 6:48, 59; 17:58, 59, 60, 64, 65, 67, 69Burland v. Earle, [1902] AC 83 (PC) 8:13Burmah Oil Co. Ltd., Commissioners of Inland Revenue v., (1982), 54 TC 200 (HL) 21:39, 42,

43, 44Burns, The Queen v., 73 DTC 5219 (FCTD) 1:7

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Burri v. The Queen, 85 DTC 5287 (FCTD) 8:22Burrows et al. v. The Queen, 2007 DTC 148 (TCC) 7:17Busby v. The Queen, 86 DTC 6018 (FCTD) 13:10, 21Business Finance Ltd. v. Mawson (Inspector of Taxes), sub nom. Barclays Mercantile Business Finance

Ltd v. HM Inspector of Taxes, [2004] UKHL 51 21:41, 42Byram, The Queen v., 99 DTC 5117 (FCA); aff ’g 95 DTC 5069 (FCTD) 17:42

Cadrin v. MNR, 69 DTC 584 (TAB) 7:63Cakebread v. MNR, 68 DTC 424 (TAB) 7:43Cameco Corporation v. The Queen, 2018 TCC 195 21:14, 15, 16Campbell, R v., [1980] 2 SCR 256 5:36, 37Canada Life Insurance Company of Canada v. Canada (Attorney General), 2018 ONCA 562 21:62Canada Trust Company, The, v. Browne, 2012 ONCA 862 19:9Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54 4:11; 10:45, 46; 21:5, 12, 51, 89, 90,

91, 92, 95, 96, 98, 99, 100, 103, 104, 106, 112Canada Trustco Mortgage Company v. MNR, 91 DTC 1312 (TCC) 6:16Canada Trustco Mortgage Company v. The Queen, 2003 TCC 215 21:91Canadian Clyde Tube Forgings Limited v. The Queen, 82 DTC 6041 (FCA) 18:24Canadian Helicopters Limited v. The Queen, 2001 CanLII 510 (TCC); aff ’d 2002 FCA 30 2:28;

3:44Canadian Imperial Bank of Commerce v. Canada, 2013 FCA 122 21:27, 31Canadian Marconi v. R, [1986] 2 SCR 522 6:15, 16; 8:17, 18, 19, 22, 23Canadian Pacific Airlines Ltd. v. British Columbia, [1989] 1 SCR 1133 5:22Canadian Propane Gas & Oil Ltd. v. MNR, 73 DTC 5019 (FCTD) 21:82Canderel Ltd. v. Canada, [1998] 1 SCR 147 16:68; 17:21Canwest Broadcasting Ltd. v. The Queen, 96 DTC 1375 (TCC) 17:32Caraberis et al. v. The Queen, 98 DTC 1865 (TCC) 7:67Carlson v. The Queen, 1997 CanLII 119 (TCC) 15:18Carruthers Clinic Limited v. Herdman, [1956] OR 770 (HCJ) 5:36Cartwright v. The Queen, 94 DTC 6677 (FCTD) 7:48Central Capital, Re, (1995), 22 BLR (2d) 210 (ONGD); aff ’d (1996), 132 DLR (4th) 223

(ONCA) 1:16, 17Central Supply Co. (1972) Limited et al., The Queen v., 97 DTC 5295 (FCA) 21:7, 12, 57Champ v. The Queen, 83 DTC 5029 (FCTD) 7:31, 32; 8:11, 12Charania v. The Queen, 2015 TCC 80 7:44Charwood Investments Ltd. v. MNR, 78 DTC 1411 (TRB) 8:18, 19, 22Cheema, Canada v., 2018 FCA 45 21:33, 34Chichkov v. The Queen, 2007 TCC 337 20:9Chopp v. The Queen, 95 DTC 527 (TCC); aff ’d 98 DTC 6014 (FCA) 7:44Chow v. The Queen, 2011 TCC 263 21:27Chronis v. The Queen, 2010 TCC 218 21:27CIP Inc. v. MNR, 86 DTC 1373 (TCC); aff ’d 88 DTC 6005 (FCTD) 7:76CIT Group Securities (Canada) Inc. v. The Queen, 2016 TCC 163 21:21Citibank Canada, Canada v., 2002 FCA 128 3:6Clark G. Wood v. MNR, 88 DTC 1180 (TCC) 21:24, 25Classic’s Little Books Inc. v. The Queen, 73 DTC 5096 (FCTD) 6:88, 89, 90Clevite Development Lid. v. MNR, 61 DTC 1093 (Ex. Ct.) 8:24Cliche v. MNR, 86 DTC 1571 (TCC) 7:30, 31

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Collins & Aikman Products Co. v. The Queen, 2009 TCC 299; aff ’d 2010 FCA 251 21:88Colonial Realty Service Ltd. v. MNR, 87 DTC 259 (TCC) 8:22Colubriale v. The Queen, 2004 TCC 578 7:43Consolidated Holding Co., MNR v., [1974] SCR 419 17:59, 60; 19:38Continental Bank Leasing Corp. v. Canada, [1998] 2 SCR 298 5:37; 11:6; 17:28; 21:12, 14, 28,

29, 30, 37Continental Bank of Canada v. The Queen, 94 DTC 1858 (TCC) 21:10Continental Bank of Canada and Continental Bank Leasing Corporation v. The Queen, 94 DTC 1858

(TCC) 1:18Cook v. The Queen, 2006 TCC 344 7:44Copthorne Holdings Ltd. v. Canada, 2011 SCC 63 3:40; 10:45, 46, 100; 21:5, 88, 91, 92, 95,

100, 101, 102, 104, 105, 106Cornwall Gravel Company Limited v. The Queen, 94 DTC 1709 (TCC) 8:19Costigane v. The Queen, 2003 TCC 67 7:12, 21Coulter v. MNR, 86 DTC 1048 (TCC) 1:7Couture v. MNR, 2004 TCC 266 1:8Covertite Limited, The Queen v., 81 DTC 5353 (FCTD) 6:89; 21:68, 76, 77CPL Holdings Ltd. v. The Queen, 95 DTC 5253 (FCTD) 10:12Crabbs, The King v., [1934] SCR 523 21:7Craven v. White, IRC v. Bowater Property Developments Ltd., and Baylis v. Gregory, [1988] 3 WLR

423; [1988] 3 All ER 495 (HL) 10:44; 21:38, 40, 41, 43, 44Criterion Capital Corporation v. The Queen, 2001 DTC 921 (TCC) 5:9, 41Cronish v. City of Toronto (1984), 30 LCR 294 (OMB) 1:11Cross v. Imperial Continental Gas Association, [1923] 2 Ch. 553 (Ch. D.) 3:36, 37Crossman et al., CIR v., [1937] AC 26 (HL) 14:10, 11Crown Forest Industries Limited et al. v. The Queen, 2006 TCC 47 21:12Cumming v. MNR, 67 DTC 5312 (Ex. Ct.) 7:75Cyprus Anvil Mining Corporation, The Queen v., 90 DTC 6063 (FCA) 17:23

D & D Livestock Ltd. v. The Queen, 2013 TCC 318 10:9, 11, 39, 48D.J. MacDonald Sales Ltd. v. MNR, 56 DTC 481 (TAB) 17:41Dais v. Virvilis, 2018 BCSC 459 21:26Dale v. Canada, [1997] 3 FC 235; 97 DTC 5252 (FCA) 11:14; 21:25Danalan Investments Ltd. v. MNR, 73 DTC 5209 (FCTD) 17:59Davidson v. Davidson Manufacturing Co. (1977) Ltd., [1978] BCJ no. 60 (SC) 21:26Davidson v. The Queen, 99 DTC 933 (TCC) 7:61De Beers Consolidated Mines, Limited v. Howe, [1906] AC 455 1:12Debruth Investments Ltd. v. MNR, 75 DTC 5012 (FCA) 6:89, 90Deckelbaum v. MNR, 82 DTC 1636 (TRB) 7:61; 13:33, 34Decker Contracting Ltd. v. The Queen, 79 DTC 5001 (FCA) 6:90Deconinck v. The Queen, 90 DTC 6617 (FCA) 11:32Del Grande v. The Queen, 93 DTC 133 (TCC) 7:6Denison Mines Ltd. v. MNR, 71 DTC 5375 (FCTD); aff ’d 72 DTC 6444 (FC); aff ’d [1976] 1

SCR 245 21:38Derbecker, The Queen v., 84 DTC 6549 (FCA) 3:12Descarries v. The Queen, 2014 TCC 75 19:53; 21:106, 113Desormiers c. Lalumière, 2006 QCCS 2357 16:78, 79Deuce Holdings Limited v. The Queen, 97 DTC 921 (TCC) 10:25

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Development Company of Central and West Africa, In re, [1902] 1 Ch. 547 3:39, 40DiGiuseppe (Re), 2018 FC 1095 21:37Dillon v. Melanson, 2015 SKQB 18 1:7Diversified Holdings Ltd., Canada v., 1997 CanLII 4896 (FCA) 17:20Docherty v. MNR, 91 DTC 537 (TCC) 7:67Dominion Combing Mills Ltd., Re, 1930 CanLII 397 (ONCA) 3:27Donald Applicators Ltd. v. MNR, 71 DTC 5202 (SCC); aff ’g 69 DTC 5122 (Ex. Ct.) 17:60, 61Donovan v. The Queen, 96 DTC 6085 (FCA) 7:42Doris Trucking Co. Ltd. v. MNR, 68 DTC 5204 (Ex. Ct.) 6:87, 88, 89, 90Doug Burns Excavation Contracting Limited v. MNR, 83 DTC 528 (TCC) 7:19Douglas v. MNR, 79 DTC 375 (TRB) 7:63Dower Building Ltd. v. Minister of National Revenue, 51 DTC 399 (TAB) 6:40Downey v. Canada, 2006 FCA 353 7:43Drown v. Gaumont-British Picture Corporation Ltd., [1937] 2 All ER 609 (Ch.) 3:35, 36Dudelzak v. MNR, 87 DTC 525 (TCC) 7:46, 48Dudney, The Queen v., 2000 DTC 6169 (FCA) 18:20Duha Printers (Western) Ltd. v. Canada, [1998] 1 SCR 795 3:26; 6:48, 87; 17:56, 57, 58, 59,

60, 61, 62, 64, 65, 66, 69, 70; 21:51, 57Dumas, The Queen v., 80 DTC 6398 (FCTD) 11:5Dunham and Apollo Tours Ltd. (No. 1), Re, (1978), 20 OR (2d) 3 (HCJ) 21:26Dunstan v. Young Austen Young Ltd., [1987] STC 709 (Ch. D.) 10:78Dupuis v. MNR, 68 DTC 36 (TAB) 7:66Dupuis Frères Ltd. v. The Minister of Customs and Excise (1927), 1 DTC 104 (Ex. Ct.) 1:15, 17Duquette v. MNR, 84 DTC 1829 (TCC) 7:57Durocher v. The Queen, 2015 TCC 297; aff ’d 2016 FCA 299 16:30Duxbury v. Crook, 2018 SKQB 353 1:7Dworkin Furs (Pembroke) Ltd. et al., Minister of National Revenue v., [1967] SCR 223 17:58, 64, 69Dyck v. The Queen, 2007 TCC 458 7:44

E.V. Keith Enterprises Ltd. v. MNR, 74 DTC 1052 (TRB) 7:57Earl of Chesterfield’s Trusts, In re, (1883), 24 Ch. D. 643 19:29Easton et al. v. The Queen et al., 97 DTC 5464 (FCA) 11:5, 18Easy Way Cattle Oilers Ltd. v. Canada, 2016 FCA 301 20:5Eberle v. The Queen, 2001 DTC 158 (TCC) 7:39Ed Sinclair Construction & Supplies Ltd. et al. v. MNR, see Prosperous Investments Ltd.Edison Transportation, LLC v. The Queen, 2016 TCC 80 21:17Edmonton (Town) v. The Queen, 2015 TCC 172 21:33ELB Productions Ltd. v. MNR, 91 DTC 1466 (TCC) 21:22, 23Elbow River Marketing Limited Partnership v. Canada Clean Fuels Inc., 2012 ABQB 277 1:4Eldridge, MNR v., 64 DTC 5338 (Ex. Ct.) 21:26Ensign Tankers (Leasing) v. Stokes (HMIT), [1992] BTC 110 (HL) 21:38, 39, 40, 41, 43Ensite Ltd. v. R, [1986] 2 SCR 509 6:13, 14, 16; 8:23Envision Credit Union v. Canada, 2013 SCC 48 1:2, 11; 21:36Étoile Immobilière SA v. MNR, 92 DTC 1978 (TCC) 8:19Evans v. The Queen, 2005 TCC 684 21:99, 113Everlease (Ontario) Ltd. v. MNR, 68 DTC 180 (TAB) 7:11Export Brewing & Malting Co., Ltd. v. Dominion Bank, [1937] 2 WWR 568 (PC) 1:11Express Cable Television Ltd. v. MNR, 82 DTC 1431 (TRB) 17:68

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F.H. v. McDougall, 2008 SCR 53 21:90F.H. Jones Tobacco Sales Co. Ltd., The Queen v., 73 DTC 5577 (FCTD) 17:41Fairmont Hotels Inc., Canada (Attorney General) v., 2016 SCC 56 19:32; 21:62Fales v. Canada Permanent Trust Co., [1977] 2 SCR 302; rev’g (1974), 55 DLR (3d) 239

(BCCA) 19:12, 15, 16, 17Faraggi, sub nom. 2529-1915 Québec Inc. v. Canada, 2008 FCA 398 21:8, 10, 61Farm Credit Canada v. Canada, 2017 FCA 244 21:5Fasken v. MNR, 49 DTC 491 (Ex. Ct.) 8:12Ferlaino v. The Queen, 2016 TCC 105 13:14Ferrel, The Queen v., 99 DTC 5111 (FCA) 8:10Fiddes Estate v. MNR, 70 DTC 1117 (TAB) 2:27Fiducie financière Satoma v. Canada, 2018 FCA 74 8:9; 21:94, 95Fingold, The Queen v., 97 DTC 5449 (FCA) 7:9, 42, 48Fingold et al. v. MNR, 92 DTC 2011 (TCC) 1:15Flavor Net Inc. v. The Queen, 2017 TCC 179 20:8Fleming, Re, [1973] 3 OR 588 (HCJ) 19:27, 29Fontana v. MNR, 81 DTC 803 (TRB) 7:61Formadrain Inc. v. The Queen, 2017 TCC 42 20:8Fortino et al., The Queen v., 2000 DTC 6060 (FCA) 16:96Foss v. Harbottle (1843), 67 ER 189 (VC Ct.) 1:8Fournier v. Canada (Minister of National Revenue), [1996] TCJ no. 526 1:6Fowler v. MNR, 63 DTC 600 (TAB) 13:10Francis & Associates v. The Queen, 2014 TCC 137 17:40Fraser v. Minister of National Revenue, [1964] SCR 657 2:50Fraser v. MNR, [1963] SCR 455 11:5, 18Fraser v. The Queen, 91 DTC 5123 (FCTD); aff ’d 95 DTC 5684 (FCA) 5:57; 21:33Fraser Companies, Limited v. The Queen, 81 DTC 5051 (FCTD) 8:12Fred & Ted’s Construction Ltd. v. MNR, 84 DTC 1530 (TCC) 7:12, 20Friedberg, The Queen v., 92 DTC 6031 (FCA); aff ’d [1993] 4 SCR 285 21:62Friedland et al. v. The Queen, 89 DTC 5341 (FCTD) 7:12Fundy Settlement v. Canada, sub nom. Garron Family Trust, 2012 SCC 14 1:12; 19:37Furnasman Ltd. et al., MNR v., 73 DTC 5599 (FCTD) 6:89Furniss v. Dawson, [1984] STC 153 (HL) 21:39, 42, 43, 44, 57

Gabco Ltd. v. MNR, 68 DTC 5210 (Ex. Ct.) 7:10, 20; 21:82Galaxy Management Ltd. v. The Queen, 2005 TCC 674 5:43Gannon v. MNR, 88 DTC 1282 (TCC) 7:66Garage Montplaisir Inc. v. Canada, 2000 CanLII 15107 (FCA); aff ’g 96 DTC 6557

(FCTD) 17:21Garber v. The Queen, 2014 TCC 1 21:17Garron Family Trust, see Fundy Settlement v. Canada; see also St. Michael Trust Corp. v. CanadaGarry Bowl Ltd., The Queen v., 74 DTC 6401 (FCA) 17:45Gélinas v. MNR, 2001 CanLII 766 (TCC) 1:8Geoffrey v. MNR, 80 DTC 1139 (TRB) 7:37Geransky v. The Queen, 2001 DTC 243 (TCC) 19:53Gerber Garment Technology Inc. v. Lectra Systems Ltd., [1997] RPC 443 (CA) 1:8Gerbro Holdings Company v. Canada, 2016 TCC 173; aff ’d 2018 FCA 197 21:77, 78Gervais v. Canada, 2018 FCA 3 15:36

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Gesser Estate, The Queen v., 92 DTC 6273 (FCA) 13:12Gestion Jean-Paul Champagne Inc. v. MNR, 97 DTC 155 (TCC) 10:25, 27Ghaffari v. The Queen, 2015 TCC 62 21:61Ghassemvand v. Premium Weatherstripping Inc., 2017 BCCA 309 1:5Gibson Bros. Industries Ltd. v. MNR, 72 DTC 6190 (FCTD) 11:18Giffin et al. v. MNR, 91 DTC 421 (TCC) 7:9Gifford v. Canada, 2004 SCC 15 3:41Gillis v. The Queen, 2005 TCC 782 7:49Ginter, The Queen v., 77 DTC 5274 (FCTD) 7:40Gisborne v. Gisborne (1877), 2 AC 300 (HL) 19:18Global Equity Fund Ltd. v. The Queen, 2011 TCC 507 21:99, 114Golden et al., The Queen v., [1986] 1 SCR 209 16:48; 21:44, 49, 50Goldhar Estate v. MNR, 88 DTC 1149 (TCC) 7:19Golini v. The Queen, 2016 TCC 174 7:42Goulard v. MNR, 92 DTC 1244 (TCC) 21:26Grant v. The Queen, 74 DTC 6252 (FCTD) 13:9Grant v. The Queen, 2008 TCC 163 7:79Grant Babcock Limited et al. v. MNR, 85 DTC 518 (TCC) 7:12, 20Green Acres Fertilizers Services Ltd. v. The Queen, 79 DTC 5346 (FCTD); aff ’d 80 DTC 6365

(FCA) 7:8, 9Greenwood Estate v. The Queen, 90 DTC 6690 (FCTD) 14:13Greenwood Estate v. The Queen, 94 DTC 6190 (FCA) 19:33Gregory v. Helvering, 293 US 465 (1935) 21:10, 11Grohne v. The Queen, 89 DTC 5220 (FCTD) 13:22Groupe Honco Inc. v. Canada, 2013 FCA 128; aff ’g 2012 TCC 305 21:72, 73, 74Groupe Jean Coutu (PJC) inc., Canada (Attorney General) c., 2015 QCCA 838; aff ’d 2016 SCC

55 21:62Guaranty Properties Limited et al., The Queen v., 90 DTC 6363 (FCA) 10:103Guilder News Co. (1963) Ltd. et al. v. MNR, 73 DTC 5048 (FCA) 3:30; 16:76Gurd’s Products Company Limited, The Queen v., 85 DTC 5314 (FCA) 6:21Gwartz v. The Queen, 2013 TCC 86 21:107, 108

H.A. Fawcett & Son, Limited v. The Queen, 80 DTC 6195 (FCA) 19:38, 39Hale v. The Queen, 92 DTC 6370 (FCA); aff ’g 90 DTC 6481 (FCTD) 13:14, 15Hannem v. MNR, 80 DTC 1091 (TRB) 3:12Harvest Operations Corp. v. Attorney General of Canada, 2017 ABCA 393 21:62Hasiuk v. The Queen, 2007 TCC 724; aff ’d 2008 FCA 294 8:14Hayes v. The Queen, 2003 TCC 93; 2005 FCA 227 21:59, 60Heal v. MNR, 80 DTC 1169 (TRB) 7:61Healy Financial Corporation v. The Queen, 94 DTC 1705 (TCC) 1:7Hébert v. The Queen, 2018 TCC 48 6:12Hendriks v. MNR, 81 DTC 939 (TRB) 7:61Henley, Canada (Attorney General) v., 2007 FCA 370; aff ’g 2006 TCC 347 13:9Henry v. MNR, [1974] SCR 155; 72 DTC 6005 7:75Hercules Managements Ltd. v. Ernst & Young, [1997] 2 SCR 165 1:8Hewitt v. MNR, 89 DTC 451 (TCC) 13:16Hickman Motors Ltd. v. Canada, [1997] 2 SCR 336 11:17; 17:28, 29Highweb & Page Group Inc. v. The Queen, 2015 TCC 137 20:9

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Hill v. Permanent Trustee Co. of New South Wales, [1930] AC 720 (PC) 7:36Hillis et al. v. The Queen, 83 DTC 5365 (FCA) 19:33Hillmer v. MNR, 69 DTC 677 (TAB) 7:57Hinkson v. MNR, 88 DTC 1119 (TCC) 7:42, 46, 66Hollinger v. MNR, 73 DTC 5003 (FCTD) 8:23, 24Holmes et al. v. The Queen, 74 DTC 6143 (FCTD) 5:36; 7:17Holt Metal Sales of Manitoba Ltd. et al. v. MNR, 70 DTC 6108 (Ex. Ct.) 6:88, 89Honeywood Limited et al. v. The Queen, 81 DTC 5066 (FCTD) 21:76Hooper v. Western Counties & c. Telephone Company (1893), 68 LT 78 (Ch. D.) 10:78Houle v. Canadian National Bank, [1990] 3 SCR 122 1:8Houle, The Queen v., 83 DTC 5430 (FCTD) 7:46, 48Housen v. Nikolaisen, 2002 SCC 33 21:91Howe v. Dartmouth (Earl of ) (1802), 32 ER 56 (Ch. D.) 19:13, 25Howson v. The Queen, 2006 TCC 644 8:9Howson & Howson Ltd. et al., MNR v., 70 DTC 6055 (Ex. Ct.) 6:87, 89, 90HSC Research Development Corporation v. The Queen, 95 DTC 225 (TCC) 6:47, 48Huffman, The Queen v., 90 DTC 6405 (FCA) 13:24Hughes & Co. Holdings Limited, The Queen v., 94 DTC 6511 (FCTD) 6:17; 7:18Hughes Homes Inc. et al. v. The Queen, 98 DTC 1082 (TCC) 5:25; 6:89; 21:68, 77Hulmann et al. v. MNR, 73 DTC 94 (TRB); aff ’d 75 DTC 5193 (FCTD); aff ’d 77 DTC 5153

(FCA) 17:45, 46Hunter West Consulting Group Inc. v. 0748697 BC Ltd., 2019 BCSC 591 1:8Hurd v. MNR, 78 DTC 1282 (TRB); aff ’d 79 DTC 5369 (FCTD); aff ’d 81 DTC 5140

(FCA) 13:14, 15Hurley Mining Equipment & Services Inc. v. MNR, 89 DTC 403 (TCC) 6:13Hypercube Inc. v. The Queen, 2015 TCC 65 20:9

IBM Canada Ltd. v. Ontario (Finance), 2008 ONCA 216 18:56Iggillis Holdings Inc. v. Canada (National Revenue), 2016 FC 1352; rev’d 2018 FCA 51 21:54Ikea Ltd. v. Canada, [1998] 1 SCR 196 17:21Ilott v. The Queen, 2002 CanLII 1044 (TCC) 15:14; 16:23Imperial General Properties Ltd., The Queen v., [1985] 2 SCR 288; 85 DTC 5500 6:61; 17:61,

62, 63, 64, 70; 21:44Imperial Oil Ltd. v. C & G Holdings Ltd., 1989 CanLII 3966 (NLCA) 1:6Imperial Oil Ltd. v. Canada; Inco Ltd. v. Canada, 2006 SCC 46 16:111, 112Imperial Tobacco Canada Ltd. v. R, 2012 TCC 135 21:68Industrial Trailer Rentals Ltd. v. The Queen, 74 DTC 6577 (FCTD) 6:89, 90Ingram v. MNR, 91 DTC 939 (TCC) 21:23, 32, 33, 35Inland Development Ltd. v. MNR, 89 DTC 95 (TCC) 7:12Installations Doorcorp inc./Doorcorp Installations Inc. (Syndic d’), 2012 QCCA 702 1:5Inter-Leasing, Inc. v. Ontario (Revenue), 2014 ONCA 575 8:23International Colin Energy Corporation v. The Queen, 2002 CanLII 47015 (TCC) 16:105International Fruit Distributors Ltd. v. MNR, 55 DTC 1186 (SCC) 1:9International Iron & Metal Co. Ltd. v. MNR, 69 DTC 5445 (Ex. Ct.) 17:59International Mercantile Factors Ltd. v. The Queen, 90 DTC 6390 (FCTD); aff ’d 94 DTC 6365

(FCA) 17:63International Power Co. v. McMaster University/In re Porto Rico Power Co., [1946] SCR 178 3:17, 18Irving Oil Limited v. The Queen, 88 DTC 6138 (FCTD) 17:46

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J. Bibby & Sons, IRC v., [1945] 1 All ER 667 (HL) 17:57J.J. West Estate v. Minister of Finance for British Columbia, [1976] CTC 313 (BCSC) 14:10, 11, 12J.W. Broomhead (Vic.) Pty Ltd. (in liquidation) v. J.W. Broomhead Pty Ltd., [1985] VR 891

(SC Vic.) 19:21James v. The Queen, 99 DTC 3517; [1999] 4 CTC 2036 (TCC) 7:44, 45Jameson, Atty.-Gen. v., [1905] 2 IR 218 (KB) 14:10, 11Jencal Holdings Ltd. v. The Queen, 2019 TCC 16 6:89, 90Joel Theatrical Rigging Contractors (1980) Ltd. v. The Queen, 2017 TCC 6 20:8John v. FCT (1988), 83 ALR 606 (HC) 21:41John Barnard Photographers Ltd. v. MNR, 79 DTC 592 (TRB) 7:76John Doe v. Ontario (Finance), 2014 SCC 36 21:113Johns-Manville Canada v. R, [1985] 2 SCR 46 21:50Jordan Rugs Ltd. et al. v. MNR, 69 DTC 5290 (Ex. Ct.) 6:89

K.J. Beamish Construction Co. Limited v. MNR, 90 DTC 1584 (TCC) 1:11, 14Kaiser Petroleum Ltd., The Queen v., 90 DTC 6603 (FCA) 16:44Kates v. MNR, 84 DTC 1605 (TCC) 7:64Kazakoff v. MNR, 80 DTC 1783 (TRB) 13:14Keddy v. MNR, 62 DTC 62 (TAB) 7:63Keech v. Sanford (1726), 25 ER 223 (LC) 19:10Ken & Ray’s Collins Bay Supermarket Ltd., The Queen v., 75 DTC 5346 (FCTD) 7:22Kencar Enterprises Ltd. v. The Queen, 87 DTC 5450 (FCTD) 6:89, 90Kennedy v. MNR, 72 DTC 6357 (FCTD) 10:77, 78Kennedy v. MNR, 73 DTC 5359 (FCA) 7:40Kenora Miner and News Ltd. et al. v. MNR, 70 DTC 1228 (TAB) 7:43Kindree v. MNR, 64 DTC 5248 (Ex. Ct.) 5:36Klundert, R v., 2008 ONCA 767 1:5Knights of Columbus v. The Queen, 2008 TCC 307 5:22; 18:20Korol v. MNR, 99 DTC 418 (TCC) 7:34Kowalchuk v. The Queen, 2005 TCC 757 5:45; 7:9Krag-Hansen et al. v. The Queen, 86 DTC 6122 (FCA) 6:87; 21:68Kruco Inc., Canada v., 2003 FCA 284 10:7, 23, 24, 25, 26, 28, 29, 43Kruger Wayagamack Inc. v. The Queen, 2015 TCC 90; aff ’d 2016 FCA 192 17:65Kuhl et al., The Queen v., 74 DTC 6024 (FCTD) 1:7

La Compagnie Idéal Body Inc. v. The Queen, 88 DTC 5450 (FCTD) 7:19Lagace v. MNR, 68 DTC 5143 (Ex. Ct.) 21:35Lalande et al. v. The Queen, 89 DTC 5286 (FCA); aff ’g 84 DTC 6159 (FCTD) 17:41Laliberté v. The Queen, 2018 TCC 186 7:43Lamont Management Limited v. The Queen, 2000 DTC 6256 (FCA) 10:36Landbouwbedrijf Backx BV v. The Queen, 2018 TCC 142 1:12Landrus v. The Queen, 2008 TCC 274 21:88Langhammer v. The Queen, 2000 CanLII 473 (TCC) 8:21, 22Lau v. The Queen, 2007 TCC 718 21:33Lauger v. The Queen, 2007 TCC 650 20:44Laurence v. MNR, 87 DTC 173 (TCC) 7:42Lavoie v. The Queen, 95 DTC 673 (TCC) 7:62Learoyd v. Whiteley (1887), 12 AC 727 (HL) 19:13

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Lee v. Lee’s Air Farming Ltd., [1961] AC 12 (PC) 1:6, 7Lee v. The Queen, 2018 TCC 230 21:16Lehigh Cement Limited, Canada v., 2011 FCA 120 21:113Lehndorff Realty Developments Limited v. MNR, 82 DTC 1742 16:70Leitch v. R, [1991] TCJ no. 1034 8:22Lenco Fibre Canada Corp. v. The Queen, 79 DTC 5292 (FCTD) 5:25; 6:89Lenester Sales Ltd. v. The Queen, 2003 TCC 531; aff ’d 2004 FCA 217 6:49Lerric Investments Corp. v. The Queen, 1999 CanLII 396 (TCC) 6:18Les Entreprises Réjean Goyette Inc. v. The Queen, 2009 TCC 351 7:17; 17:30Les Installations de l’Est Inc. et al. v. The Queen, 91 DTC 5185 (FCTD) 6:89; 21:68Les Magasins Continental Ltée v. The Queen, 81 DTC 5175 (FCA) 6:90Levene v. Inland Revenue Commissioners, [1928] AC 217 (HL) 21:5Levi Strauss of Canada, Inc. v. The Queen, 82 DTC 6070 (FCA) 18:24Levitt-Safety (Eastern) Ltd. et al. v. MNR, 73 DTC 5374 (FCTD) 6:88, 90Lewis Estate v. MNR, 89 DTC 291 (TCC) 19:33Lewisporte Holdings Ltd. v. The Queen, 1998 CanLII 185 (TCC) 17:43LGL Limited v. Canada, 2000 CanLII 14931 (FCA) 20:10Liberty Watch Case Co. Ltd. v. MNR, 69 DTC 129 (TAB) 7:57Life Choice Ltd. v. The Queen, 2017 TCC 21 20:9Lingelbach v. James Tire Centres Ltd. (1994), 120 DLR (4th) 456 (Sask. CA) 1:7Lipson v. Canada, 2009 SCC 1 3:43; 7:71; 8:8; 21:5, 9, 88, 90, 110, 111Litchfield v. Dreyfus, [1906] 1 KB 584 7:56LJP Sales Agency Inc. v. The Queen, 2003 TCC 851 5:24, 25; 6:90Lloyds TSB Equipment Leasing (No 1) Ltd v. Revenue and Customs, [2012] UKFTT 47 (TC);

[2013] UKUT 0368 (TCC); [2014] EWCA Civ 1062 21:73Loewen Enterprises Ltd. v. MNR, 72 DTC 6298 (FCTD) 6:89Loman Warehousing Ltd. v. The Queen, 99 DTC 1113 (TCC); aff’d 2000 DTC 6610 (FCA) 7:57Lorenzen v. The Queen, 81 DTC 5251 (FCTD) 7:80Low v. The Queen, 93 DTC 927 (TCC) 21:33Loyens v. The Queen, 2003 TCC 214 2:50; 11:6Lucking’s Will Trusts, Re, [1967] 3 All ER 726 (Ch. D.) 19:23Ludco Enterprises Ltd. v. Canada, 2001 SCC 62 2:28; 3:42, 43, 44; 7:71; 10:13; 21:16, 18, 19,

58, 67Lusita Holdings Limited v. The Queen, 82 DTC 6297 (FCTD) 19:38Lusita Holdings Limited, The Queen v., 84 DTC 6346 (FCA) 6:75Lutheran Life Insurance Society, 91 DTC 5553 (FCTD) 21:44, 45Lyrtech RD Inc. v. The Queen, 2013 TCC 12; aff ’d 2014 FCA 267 6:50

Maan v. The Queen, 2006 TCC 548 7:44Mac & Mac Hydrodemolition v. The Queen, 2017 TCC 256 20:8MacDonald v. The Queen, 2012 TCC 123; rev’d 2013 FCA 110 19:53MacDonald, Canada v., 2013 FCA 110 19:3MacKay et al., The Queen v., 2008 FCA 105 21:99MacKay, Canada v., 2008 FCA 105 21:96Madison Pacific Properties Inc. v. Canada, 2019 FCA 19 21:113, 114Madsen Estate v. Saylor, 2007 SCC 18 19:43, 44Maduke Foods Ltd. v. The Queen, 89 DTC 5458 (FCTD) 7:12, 20Mady v. The Queen, 2017 TCC 112 8:8

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Magicuts Inc. v. Canada, 2001 FCA 332 7:66Magna Alloys & Research Pty. Ltd. v. FCT, 80 ATC 4542 (Full FC) 21:65Maintenance Euréka Ltée v. The Queen, 2011 TCC 307 21:68Malcolm D. Lennie Professional Corp. v. Target Ten Inc. (1991), 81 Alta. LR (2d) 411 (MC) 1:6Manac Inc. Corp. v. Canada, 1998 CanLII 7811 (FCA) 17:20Manchester v. The Queen, 2005 TCC 402 7:11, 20Mann Estate, Re, [1972] 5 WWR 23 (BCSC); aff ’d [1974] 2 WWR 574 (SCC) 3:27, 28Manrell v. Canada, 2003 FCA 128 16:86, 96Manufax Holdings Inc. v. The Queen, 2005 TCC 645 7:25Mariano v. The Queen, 2015 TCC 244 21:19Maritime Forwarding Ltd. et al. v. The Queen, 88 DTC 6114 (FCTD) 6:89, 90; 21:68Maritime Telegraph and Telephone Company, Limited v. The Queen, 92 DTC 6191 (FCA) 16:69Mark Resources Inc. v. The Queen, 93 DTC 1004 (TCC) 4:18; 17:32; 21:5, 47Markovzki v. The Queen, 98 DTC 2040 (TCC) 21:33Marquardt, R v., (1972), 18 CRNS 162 (BCCA) 1:11Marshall v. The Queen, 2011 TCC 497 1:15Mastronardi Estate, The Queen v., 77 DTC 5217 (FCA); aff ’g 76 DTC 6306 (FCTD) 14:14,

15, 16Matheson v. Matheson International Trucks Ltd. (1984), 4 CCEL 271 (ONHC) 1:7Mathew v. Canada, 2005 SCC 55 21:89, 105Mathieu v. The Queen, 2014 TCC 207 13:9May Estate v. MNR, 88 DTC 1189 (TCC) 6:56Mayes, HMRC v., [2011] SBTC 261 21:41, 42Mayon Investments Inc. et al. v. MNR, 91 DTC 364 (TCC) 8:22; 21:70McClain Industries of Canada Inc. v. The Queen, 78 DTC 6356 (FCTD) 7:22McClarty Family Trust v. The Queen, 2012 TCC 80 8:28, 29; 21:98McClurg v. Canada, [1990] 3 SCR 1020 1:4, 6, 11, 14, 15, 16; 7:32, 33; 8:10, 12, 13;

21:37, 44McCool Ltd., MNR v., [1950] SCR 80 7:66McCoy v. MNR, 91 DTC 903 (TCC) 7:42McCutcheon Farms Limited v. The Queen, 91 DTC 5047 (FCTD) 6:13McDonald v. The Queen, 98 DTC 2151 (TCC) 3:13; 15:14; 16:23McDougall v. The Queen, 98 DTC 1005 (TCC) 1:7McGillivray Restaurant Ltd. v. Canada, 2016 FCA 99; aff ’g 2014 TCC 357 6:50, 51McGrath v. McDermott, [1988] IR 273 (SC) 21:39McHugh et al. v. The Queen, 95 DTC 778 (TCC) 7:40McIlhargey v. The Queen, 91 DTC 5381 (FCTD) 13:24, 25McInnes v. The Queen, 2014 TCC 247 8:20McKeown v. The Queen, 2001 CanLII 589 (TCC) 20:44McKesson Canada Corporation v. The Queen, 2014 DTC 1040 (TCC) 10:46McLarty, Canada v., 2008 SCC 26 7:22; 21:60McLarty v. The Queen, 2014 TCC 30 21:16McMullen v. The Queen, 2007 TCC 16 19:53; 21:96McNeill v. The Queen, 86 DTC 6477 (FCTD) 13:15, 24McNichol et al. v. The Queen, 97 DTC 111 (TCC) 19:53; 21:92Meeuse v. MNR, 92 DTC 1549 (TCC) 7:48Meeuse v. The Queen, 94 DTC 1397 (TCC) 7:64Meinhard v. Salmon, 249 NY 458 (CA 1928) 19:9, 10

Table of Cases / lv

Mépalex Inc. et al. v. The Queen, 2004 DTC 2232 (TCC) 7:12MerBan Capital Corporation Limited, The Queen v., 89 DTC 5404 (FCA) 21:35Merchant Law Group, Canada v., 2010 FCA 206 18:21; 21:33Meredith v. Canada (Attorney General), 2002 FCA 258 1:6Meredith v. MNR, 80 DTC 1381 (TRB) 7:61Merritt v. MNR (1941), 2 DTC 513 (Ex. Ct.); rev’d [1942] SCR 269 19:53Mid-West Feed Limited et al. v. MNR, 87 DTC 394 (TCC) 1:7; 7:42Miller v. MNR, 62 DTC 1139 (Ex. Ct.) 8:14Milne Estate (Re), 2018 ONSC 4174; rev’d 2019 ONSC 579 19:45Mimetix Pharmaceuticals Inc. v. The Queen, 2001 CanLII 787 (TCC); aff ’d 2003 FCA 106 6:49,

50Moauro v. MNR, 92 DTC 1071 (TCC) 1:7Mohammad v. The Queen, 97 DTC 5503 (FCA) 21:82Moldowan v. The Queen, [1978] 1 SCR 480 2:32; 6:15; 17:20, 21Mommersteeg et al. v. The Queen, 96 DTC 1011 (TCC) 7:77Moose Jaw Flying Club Ltd. v. Minister of National Revenue, 49 DTC 655 (Ex. Ct.) 1:15Morin, Canada v., 2006 FCA 25; rev’g 2005 TCC 324 13:13MSS Inc. v. The Queen, 89 DTC 5502 (FCA) 7:12Mulder Bros. Sand & Gravel Ltd. v. MNR, 67 DTC 475 (TAB) 7:20Multiform Manufacturing Co., R v., [1990] 2 SCR 624 21:12Muncaster v. MNR, 84 DTC 1821 (TCC) 7:66Murphy v. The Queen, 80 DTC 6314 (FCTD) 8:13, 14Murray v. MNR, 87 DTC 559 (TCC) 1:7MWA Gas and Oil Ltd v. MNR, 74 DTC 6123 (FCTD) 21:80

N.M. Paterson and Sons Ltd., R v., [1980] 2 SCR 679 1:9Nadeau v. The Queen, 99 DTC 324 (TCC) 3:40Naneff v. Con-Crete Holdings Limited et al. (1995), 23 OR (3d) 481 (CA) 19:24Nassau Walnut Investments Inc., The Queen v., 97 DTC 5051 (FCA) 10:38National Bank of Wales, Limited, In re, [1899] 2 Ch. 629 3:35National Distributors Ltd., CIR v., (1989), 3 NZLR 661 (CA) 21:64Neeb v. The Queen, 97 DTC 895 (TCC) 21:31, 32Neufeld Construction Ltd. v. MNR, 63 DTC 276 (TAB) 7:20Neuman v. MNR, [1998] 1 SCR 770 3:15; 4:6; 7:31, 33, 34; 8:10, 11, 15, 24; 21:21, 37New et al. v. MNR, 75 DTC 206 (TRB) 7:63New Generation Drywall Inc. v. Ontario (Finance), 2004 CanLII 28691 (ONSC) 18:55Newburgh and North Fife Railway Co. v. North British Railway Co., [1913] SC 1166 3:37Newton Ready-Mix Ltd. v. MNR, 89 DTC 595 (TCC) 6:13Newton v. Commissioner of Taxation, [1958] AC 450 (PC) 21:64Newton v. Pyke (1908), 25 TLR 172 (KB) 7:56No. 34 v. Minister of National Revenue, 51 DTC 423 (TAB) 6:40No. 589 v. MNR, 59 DTC 41 (TAB) 7:13Nordile Holdings Ltd. v. Breckenridge and Rebiffle, [1992] 10 BCAC 290 5:57Norglen v. Reeds Rain Prudential, [1998] 1 All ER 218 (HL) 1:8Northcor Energy Ltd. v. The Queen, 97 DTC 1060 21:35Northwest Hydraulic Consultants Limited v. The Queen, 1998 CanLII 553 (TCC) 20:8Nova Scotia Pharmaceutical Society, R v., (1990), 58 CCC (3d) 161 (NSTD); aff ’d 69 CCC (3d)

136 (NSCA), sub nom. R v. Winsor; aff ’d on other grounds, [1992] 2 SCR 606 1:9

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Novopharm v. The Queen, 2001 CanLII 939 (TCC) 21:58, 59Nowegijick v. The Queen, [1983] 1 SCR 29 13:15NRB Inc. v. The Queen, 93 DTC 295 (TCC) 18:24

O’Flynn v. The Queen, 2005 TCC 230 7:8, 41Oakfield Developments (Toronto) Ltd. v. Minister of National Revenue, [1971] SCR 1032 6:61;

17:61, 62, 70Oakley v. McDougall (1987), 17 BCLR (2d) 134 (CA) 21:26Office Overload Co. Ltd. v. MNR, 65 DTC 690 (TAB) 16:52Okalta Oils Ltd. v. Minister of National Revenue, [1955] SCR 824 17:45Oke v. Canada, 2010 FCA 350 8:20, 21Ollenberger v. Canada, 2013 FCA 74 6:12Ontario Inc. v. Harold E. Ballard Ltd. (1991), 3 BLR (2d) 113 (ONDC) 19:24Ooregum Gold Mining Company of India v. Roper, [1892] AC 125 (HL) 3:27Orban v. MNR, 54 DTC 148 (TAB) 7:57Oriole Oil & Gas Limited v. The Queen, 91 DTC 5143 (FCTD); aff ’g 85 DTC 681 (TCC) 7:9OSFC Holdings Ltd. v. Canada, 2001 FCA 260 7:64; 10:44, 45; 21:103Ottawa Air Cargo Centre Ltd. v. The Queen, 2007 TCC 193; aff ’d 2008 FCA 54 10:21Otto Roofing Ltd. v. MNR, 63 DTC 174 (TAB) 7:11, 20Ounpuu v. The Queen, 2009 TCC 121 15:18Oxford Properties Group Inc. v. The Queen, 2016 TCC 204; aff’d in part 2018 FCA 30 21:88, 109,

110, 111, 112

Pallen Trust, Re, 2015 BCCA 222 21:62Parkes Estate v. MNR, 86 DTC 1214 (TCC) 14:13Parthenon Investments Limited v. MNR, 97 DTC 5343 (FCA) 6:9; 17:68Partington v. Attorney General (1869), LR 4 HL 100 21:49Patton v. Commissioner of Internal Revenue, 168 F. 2d 28 (6th Cir. 1948) 7:10Paxton, The Queen v., 97 DTC 5012 (FCA) 21:14, 22Pazner Scrap Metals Company Limited v. MNR, 91 DTC 1153 (TCC) 7:20Pearson Finance Group Ltd. v. Takla Star Resources Ltd., 2002 ABCA 84 21:26Pecore v. Pecore, 2007 SCC 17 19:43, 44Pellerin v. The Queen, 2015 TCC 130 15:23Penn West Petroleum Ltd. v. The Queen, 2007 TCC 190 17:31Perfect Fry Company Ltd., Canada v., 2008 FCA 218 6:9Perini Estate v. The Queen, 82 DTC 6080 (FCA) 16:111Perlingieri v. MNR, 93 DTC 158 (TCC) 7:62Peter Cedar Products Ltd. v. The Queen, 2009 TCC 463 5:43, 44, 45Phil Lloyd’s v. North Forty (1983), 25 Sask. R. 40 (QB) 1:7Pillsbury Holdings Ltd., MNR v., 64 DTC 5184 (Ex. Ct.) 7:5, 6, 42; 13:22Pineo v. The Queen, 86 DTC 6322 (FCTD) 3:12Pioneer Designs Corporation v. MNR, 91 DTC 293 (TCC) 7:11, 20Pitt Estate v. MNR, 59 DTC 275 (TAB) 7:37Placements Bourget Inc. v. The Queen, 87 DTC 5427 (FCTD) 8:19Placer Dome Inc., The Queen v., 92 DTC 6402 (FCA); rev’g 91 DTC 5261 (FCTD) 13:19Placer Dome Inc., The Queen v., 96 DTC 6562 (FCA) 10:11, 12, 13; 21:66, 75Plimmer v. Commissioner of Inland Revenue (1957), 11 ATD 480 (NZSC) 21:63, 64Plomberie J.C. Langlois Inc. v. Canada, 2006 FCA 113 6:50

Table of Cases / lvii

Pluri Vox Media Corp. v. Canada, 2012 FCA 295 1:6Pollock Sokoloff Holdings Corp., The Queen v., 76 DTC 6181 (FCA) 7:57Pomerleau v. Canada, 2018 FCA 129 4:30, 4:31; 21:106Port Coquitlam Building Supplies Ltd. v. 494743 BC Ltd., 2018 BCSC 2146 1:6Prepaid Funeral Services Council v. Memorial Gardens (Sask.) (1996), 141 DLR (4th) 532

(Sask. QB) 1:8Prévost Car Inc. v. The Queen, 2008 TCC 231; aff ’d 2009 FCA 57 21:37, 38Prosperous Investments Ltd., sub nom. Ed Sinclair Construction & Supplies Ltd. et al. v. MNR, 92

DTC 1163 (TCC) 8:22; 21:71Provigo Inc. v. Canada, see Tembec Inc. v. CanadaPublicité Cogem Ltée et al. v. MNR, 82 DTC 1596 (TRB) 5:4

Quantetics Corp. v. The Queen, 2000 CanLII 314 (TCC) 20:11Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours, [1994] 3 SCR 3 21:50

R.A. Jodrey Estate v. Min. of Finance (NS), [1980] CTC 437; 81 DTC 5344 (SCC) 8:16; 21:44Rachfalowski v. The Queen, 2008 TCC 258 7:75Raghavan v. The Queen, 2007 DTC 5214 (FCA) 7:12Ransom (Inspector of Taxes) v. Higgs, [1974] UKHL 5 21:51, 52Ransom v. MNR, 67 DTC 5235 (Ex. Ct.) 13:24Rao v. MNR, 99 DTC 413 (TCC) 7:34Rath v. The Queen, 82 DTC 6175 (FCA) 21:7Redclay Holdings Limited v. The Queen, 96 DTC 1207 (TCC) 16:111Reekie v. MNR, 80 DTC 1447 (TRB) 7:62Regal Wholesale Ltd. v. The Queen, 76 DTC 6146 (FCTD) 17:59Reid v. MNR, 61 DTC 263 (TAB) 7:45Reininger v. MNR, 58 DTC 608 (TAB) 7:63, 67Reluxicorp Inc. c. The Queen, 2011 TCC 336 15:14Remai, Canada v., 2009 FCA 340 6:55Rezek v. Canada, 2005 FCA 227 21:60Richardson Terminals Limited v. MNR, 71 DTC 5028 (Ex. Ct.); aff’d 72 DTC 6431 (FCA) 21:35Rio Tinto Alcan Inc., Canada v., 2018 FCA 124 16:110RIS-Christie Ltd. v. The Queen, 1998 CanLII 8876 (FCA) 20:8Riverside Builders Supplies Ltd. v. MNR, 61 DTC 189 (TAB) 6:40RMM Canadian Enterprises Inc. et al. v. The Queen, 97 DTC 302 (TCC) 19:53; 21:44, 47, 48,

49, 106Robertson v. Minister of National Revenue (1944), 2 DTC 655 (Ex. Ct.) 21:34, 35Robertson v. The Queen, 90 DTC 6070 (FCA) 13:8, 9Robertson v. The Queen, 98 DTC 6227 (FCA) 13:13Robinson v. MNR, 93 DTC 254 (TCC) 7:44Robotx Solutions Inc. v. The Queen, 2017 TCC 73 20:8Robson Leather Co. Ltd. v. MNR, 77 DTC 5106 (FCA) 6:53, 54, 55Rockmore Investments Ltd., The Queen v., 76 DTC 6156 (FCA) 6:12Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd. (1972), 27 DLR (3d) 651 (ONCA) 1:11Rodrigues v. Powell, 2007 CanLII 29343 (ONSC) 1:7Romkey and Romkey v. The Queen, 97 DTC 719 (TCC) 21:23Rose v. MNR, 73 DTC 5083 (FCA) 21:61Rosenberg v. MNR, 66 DTC 240 (TAB) 7:43

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Rosenblat v. The Queen, 75 DTC 5274 (FCTD) 13:9Rostal Sales Agency Ltd. v. The Queen, 83 DTC 5036 (FCTD) 6:75Rotary Air Force Management Inc. v. Allcock Estate, 2003 SKQB 281 1:7Rowell v. John Rowell & Sons, Limited, [1912] 2 Ch. 609 3:40Royal Winnipeg Ballet v. MNR, 2006 FCA 87 5:43Roymac Mobile Homes Ltd. v. MNR, 77 DTC 204 (TRB) 7:12, 20

S & C Ross Enterprises Limited v. The Queen, 2002 DTC 2078 (TCC) 5:41S. (R.J.), R v., [1995] 1 SCR 451 1:9S. Madill Ltd. v. MNR, 72 DTC 6027 (FCTD) 17:67, 68Sael Inspection Ltd. v. The Queen, 2010 TCC 640 7:21Safety Boss Limited v. The Queen, 2000 DTC 1767 (TCC) 7:14, 21Salaison Lévesque Inc. v. The Queen, 2014 TCC 36; aff ’d 2014 FCA 296 21:60Salaison Lévesque inc. v. The Queen, 2015 TCC 247 21:60Salomon v. Salomon & Co. Ltd., [1897] AC 22; [1896] UKHL 1 1:5, 6, 11; 5:35, 50, 51, 52;

21:36Saltzman v. MNR, 64 DTC 259 (TAB) 7:57Samuel F. Investments Limited v. MNR, 88 DTC 1106 (TCC) 7:22Sandia Mountain Holdings Inc. v. The Queen, 2006 TCC 297 7:64Sanilit Limited v. MNR, 87 DTC 450 (TCC) 6:13Santiago Mines Ltd., R v., (1947), 1 DLR 642 (BCCA) 10:78Saskatoon Drug & Stationery Co. Ltd., The Queen v., 78 DTC 6396 (FCTD) 16:57Saskatoon Real Estate Board v. Saskatoon (1988), 61 Sask. R. 215 (CA) 1:4Sass Manufacturing Limited v. MNR, 88 DTC 1363 (TCC) 20:8Satinder v. The Queen, 95 DTC 5340 (FCA) 1:15Savage, The Queen v., [1983] 2 SCR 428 13:22, 24Sazio v. MNR, 69 DTC 5001 (Ex. Ct.) 5:37, 38Scalia v. MNR, [1994] FCJ no. 798 (CA) 1:8Scott v. The Queen, 91 DTC 5268 (FCTD) 13:10Scott v. The Queen, 94 DTC 6193 (FCA) 13:22Scottish Insurance Corporation Ltd. v. Wilsons & Clyde Coal Co., [1949] AC 462 (HL) 3:18Shell Canada Ltd. v. Canada, [1999] 3 SCR 622 3:41, 42, 43, 45; 21:3, 13, 24, 50, 52, 56, 57,

58, 62Shell et al. v. MNR, 82 DTC 1369 (TRB) 7:80Sherdley v. Sherdley, [1987] 2 All ER 54 (HL); [1986] STC 266 (CA) 21:40, 45Shoppers Drug Mart Inc. v. 6470360 Canada Inc., 2014 ONCA 85 21:36, 37Shoppers Drug Mart Limited v. The Queen, 2007 TCC 636 16:44Shultz v. The Queen, 97 DTC 836 (TCC) 13:16Sie-Mac Pipeline Contractors Ltd. v. MNR, [1993] 1 SCR 895; aff ’g 92 DTC 6461 (FCA) 7:76Silden v. The Queen, 90 DTC 6576 (FCTD) 7:58Silden, The Queen v., 93 DTC 5362 (FCA) 7:54, 55; 13:23Silicon Graphics Ltd. v. Canada, 2002 FCA 260 6:48, 50; 17:66, 67Silverts, Ltd., IRC v., [1951] 1 All ER 703 (CA) 17:57Singleton v. Canada, 2001 SCC 61 3:42, 43; 7:71; 21:8, 9, 16, 19, 44, 46, 47, 59Skidmore v. Canada, 2000 CanLII 15101 (FCA) 6:14SMI Sales Inc. v. Ontario (Minister of Finance), 2005 CanLII 34356 (ONSC) 18:55Smith v. MNR, 69 DTC 192 (TAB) 13:9Smith v. The Queen, 93 DTC 5351 (FCA) 8:14

Table of Cases / lix

Smith Stone and Knight Ltd. v. Birmingham Corp., [1939] 4 All ER 116 21:38Snook v. London & West Riding Investments Ltd, [1967] 2 QB 786 (CA) 21:14Société Coopérative Agricole de Granby v. MNR, 61 DTC 1205 (SCC) 1:17Société Coopérative Agricole du Comté de Châteauguay, MNR v., 52 DTC 1129 (Ex. Ct.) 1:17Société d’Investissement Desjardins v. MNR, 91 DTC 393 3:7Société de Projets ETPA Inc. v. MNR, 93 DTC 516 (TCC) 5:43Société Foncière D’Investissement Inc. v. The Queen, [1996] 3 CTC 2537 (TCC) 6:48, 49Sommerer, Canada v., 2012 FCA 207 8:9Soper v. MNR, 87 DTC 522 (TCC) 7:46South African Supply and Cold Storage Company, Re, [1904] 2 Ch. 268 (Ch. D.) 10:78Southside Car Market Ltd. et al. v. MNR, 82 DTC 6179 (FCTD) 6:59, 60; 17:68Sparling v. Québec (Caisse de Dépôt et Placement du Québec), [1988] 2 SCR 1015 1:14, 15, 16Specht v. The Queen, 75 DTC 5069 (FCTD) 7:80Special Risk Holdings Inc. v. The Queen et al., 94 DTC 6151 1:15Special Risks Holdings Inc. v. The Queen, 86 DTC 6035 (FCA) 12:3Spicy Sports Inc. v. The Queen, 2004 TCC 463 7:8, 41Spire Freezers Ltd. v. Canada, 2001 SCC 11 21:18, 67Splane, The Queen v., 92 DTC 6021 (FCA) 13:24Spooner v. Spooner Oils Ltd., [1936] 2 DLR 634 (Alta. CA) 3:27Spruce Credit Union v. The Queen, 2012 DTC 1295 (TCC) 10:46Spruce Credit Union, Canada v., 2014 FCA 143 21:96, 97, 99, 103, 107St. Michael Trust Corp. v. Canada, 2010 FCA 309 1:12Standard Life Assurance Company of Canada v. The Queen, 2015 TCC 97; aff ’d 2017 FCA

177 21:19, 20Starky v. MNR, 61 DTC 360 (TAB) 7:42Starsky Enterprises Inc. v. MNR, 2008 TCC 194 5:43Stewart v. Canada, 2002 SCC 46 6:15, 16Strachan v. The Queen, 2000 DTC 2308 (TCC) 7:44Stubart Investments Ltd. v. The Queen, [1984] 1 SCR 536 5:53; 6:74; 21:7, 11, 12, 14, 23, 43,

44, 49, 50, 55, 56, 57, 58, 87Stursberg v. The Queen, 90 DTC 1159 (TCC); 91 DTC 5607 (FCTD) 16:98; 21:45, 46Sukloff v. A.H. Rushforth & Co. Ltd. et al., [1964] SCR 459 1:5Sun Indalex Finance, LLC v. United Steelworkers, 2013 SCC 6 21:36Sun Life Assurance Company of Canada v. The Queen, 2015 TCC 37 21:16Sun Sudan Oil Co. v. Methanex Corp. (1992), 5 Alta. LR (3d) 292 (QB) 1:6Sunbeam Corporation (Canada) Ltd. v. MNR, [1963] SCR 45 18:20, 21, 22Superior Plus Corp. v. The Queen, 2015 TCC 132; aff ’d 2015 FCA 241 21:113Supreme Theatres Limited v. The Queen, 81 DTC 5136 (FCTD) 6:13Survivance v. Canada, 2006 FCA 129 6:86; 16:29, 46Sutherland, decd., In re, see Winter and Others v. Inland Revenue CommissionersSweet v. Parsley, [1969] 1 All ER 347 (HL) 21:97Sykes v. MNR, 99 DTC 423 (TCC) 7:34Symes v. Canada, [1993] 4 SCR 695 21:53, 66, 67

Taber Solids Control (1998) Ltd. v. The Queen, 2009 TCC 527 6:89Tandon v. Trustees of Spurgeon’s Homes, [1982] 1 All ER 1086 (HL) 21:82Taylor v. MNR, 87 DTC 475 (TCC) 7:61Taylor v. MNR, 88 DTC 1571 (TCC) 13:10, 22

lx / Table of Cases

Tedmon v. MNR, 91 DTC 962 (TCC) 13:15, 16Tembec Inc. v. Canada, sub nom. Provigo Inc. v. Canada, 2008 FCA 205 16:111, 112Tennant v. The Queen, 93 DTC 5067 (FCTD); aff ’d 94 DTC 6505; rev’d on other grounds

[1996] 1 SCR 305 21:56Tercier et al. v. MNR, 84 DTC 1620 (TCC) 1:7Thibeault v. The Queen, 2015 TCC 271 8:20Thomas v. The Queen, 2005 TCC 613; aff ’d 2007 FCA 57 7:78Thomas Company (Niagara) Ltd. v. MNR, 84 DTC 1641 (TCC) 21:80Thomson v. Canada (Deputy Minister of Agriculture), [1992] 1 SCR 385 21:12Thomson v. Nelson (1913), 11 DLR 851 (BCSC) 1:5Tick v. MNR, 72 DTC 6135 (FCTD) 7:66Tigney Technology Inc., Canada v., 2000 CanLII 14892 (FCA) 20:10Tobias v. MNR, 81 DTC 126 (TRB) 7:44Tonn v. Canada, 1995 CanLII 3566 (FCA) 17:21Toronto Blue Jays Baseball Club et al. v. Ontario (Min. of Fin.), 2005 DTC 5360 (ONCA) 18:20Toronto College Park Ltd. v. Canada, [1998] 1 SCR 183 16:68; 17:21Toronto Heel Ltd. v. MNR, 80 DTC 1250 (TRB) 7:22Torres v. The Queen, 2013 TCC 380 21:86Toth v. The Queen, 2004 TCC 56 21:27Toushan v. MNR, 89 DTC 568 (TCC) 5:43Trans-Prairie Pipelines Ltd. v. MNR, 65 DTC 642 (TAB); rev’d 70 DTC 6351 (Ex. Ct.) 3:43;

7:70; 11:24Transalta Corporation v. Canada, 2012 FCA 20 16:48; 21:83Transalta Corporation v. The Queen, 2012 TCC 86 13:8, 10, 12Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 OR (3d) 423

(GD); aff ’d (1997), 74 ACWS (3d) 207 (ONCA) 21:36Transport Desgagnés Inc. v. MNR, 91 DTC 270 (TCC) 21:22, 35Travel Document Service & Ladbroke Group International v. Revenue & Customs, [2018] EWCA Civ

549 21:72Tremblay v. MNR, 79 DTC 305 (TRB) 5:10Triad Gestco Ltd. v. The Queen, 2012 FCA 258 21:111Trico Industries Limited v. MNR, 94 DTC 1740 (TCC) 10:36Trident Holdings Ltd. v. Danand Investments Ltd. (1988), 64 OR (2d) 65; 1988 CanLII 194

(CA) 5:57; 21:33Truckbase Corporation v. The Queen, 2006 TCC 215 7:9, 44

UBS AG v. Commissioners for Her Majesty’s Revenue and Customs, [2016] UKSC 13 21:42Unit Construction Co. v. Bullock, [1960] AC 351 (HL) 1:12United Color and Chemicals Limited et al. v. MNR, 92 DTC 1259 (TCC) 21:26, 35Univar Canada Ltd. v. The Queen, 2005 TCC 723; rev’d 2017 FCA 207 21:92, 107Univar Holdco Canada ULC v. Canada, 2017 FCA 207, rev’g 2016 TCC 159 16:39Uphill Holdings Ltd. et al. v. MNR, 93 DTC 148 (TCC) 7:64

Vaillancourt v. MNR, 1999 CanLII 503 (TCC) 1:7, 8Vaillancourt-Tremblay, Canada v., 2010 FCA 119 19:53Valard Construction Ltd v. Bird Construction Co., 2018 SCC 8 19:21Valeriote Electronics Limited v. MNR, 88 DTC 1034 (TCC) 7:12, 20Van Son Estate v. The Queen, 90 DTC 6183 (FCTD) 19:33

Table of Cases / lxi

Van Wielingen v. MNR, 76 DTC 1182 (TRB) 13:12Vancouver Art Metal Works Limited, The Queen v., 93 DTC 5116 (FCA) 2:52Vankerk v. The Queen, 2005 TCC 292; aff ’d 2006 FCA 96 21:17Varcoe v. The Queen, 2005 TCC 620 7:43Velcro Canada Inc v. The Queen, 2012 TCC 57 21:38Veltri & Son Limited et al. v. MNR, 91 DTC 862 (TCC) 6:90; 21:68Verner v. General and Commercial Investment Trust, [1894] 2 Ch. 239 (CA) 3:33, 34, 35Verrette, R v., [1978] 2 SCR 838 21:83VIH Logging Ltd., Canada v., 2005 FCA 36 10:17, 35Village Inn Hotel Limited v. MNR, 91 DTC 145 (TCC) 7:43Vina-Rug (Canada) Limited v. Minister of National Revenue, [1968] SCR 193 6:59; 17:67, 68Vine Estate v. The Queen, 89 DTC 5528 (FCTD) 7:44Vineland Quarries and Crushed Stone Ltd. v. MNR, 66 DTC 5092 (Ex. Ct.); aff ’d 67 DTC 5283

(SCC) 17:59VR Enterprises Ltd. v. MNR, 74 DTC 1089 (TRB); aff ’d 79 DTC 5399 (FCTD) 7:8, 13

W Roofing Ltd., Ontario (Ministry of Labour) v., 2011 ONCJ 494 1:9W.E. Roth Construction Limited v. Minister of Finance (2001), 141 OAC 366 (CA); aff ’g 99 DTC

5791 (ONSC) 18:24W.H. Enterprises Ltd. v. MNR, 71 DTC 381 (TAB) 7:57W.J. Kent and Co. Ltd. v. MNR, 72 DTC 1018 (TAB) 7:12W.T. Ramsay Ltd. v. IRC, [1981] 1 All ER 865 (HL) 21:38, 39, 40, 41, 43, 44Wain-Town Gas and Oil Co. v. MNR, 50 DTC 856 (Ex. Ct.) 16:83Waldorf Hotel (1958) Ltd. et al., The Queen v., 75 DTC 5109 (FCTD) 21:82Wallace et al. v. MNR, 86 DTC 1228 (TCC) 7:42Walsh and Micay v. MNR, 65 DTC 5293 (Ex. Ct.) 8:22Wardean Drilling Co. Ltd. v. MNR, 74 DTC 6164 (FCTD); aff ’d 78 DTC 6202 (FCA) 3:13Wargacki et al. v. The Queen, 92 DTC 6198 (FCTD) 13:12, 23Waters Estate, Re, 56 DTC 1113 (SCC) 19:26, 27, 28, 29Watts v. The Queen, 2004 TCC 535 20:11Wawang Forest Products Ltd. v. The Queen, 2001 FCA 80 7:22Weaver v. Canada, 2008 FCA 238 6:17Webb v. Earle (1875), 20 LR Eq. 556 3:21Welsh, Re, 1980 CanLII 1763 (ONSC) 19:27, 28, 29Welton v. The Queen, 2005 TCC 359 7:12, 14Wessell v. MNR, 85 DTC 206 (TCC) 21:35West Kootenay Power and Light Company Limited v. The Queen, 92 DTC 6023 (FCA) 16:69Westminster (Duke), Inland Revenue Commissioners v., [1936] AC 1 (HL) 21:5, 6, 39, 40, 49, 57,

87, 97Westsource Group Holdings Inc. v. Canada, 2018 FCA 57 20:5Whiteley, Re, (1886), 33 Ch. D. 347 (CA) 19:12, 13Wiebe Door Services Ltd. v. MNR, 87 DTC 5025 (FCA) 5:42, 43Wild, see 1245989 Alberta Ltd. v. Canada (Attorney General)Will v. United Lankat Plantations Company, Limited, [1914] AC 11 (HL) 3:17Will-Kare Paving & Contracting Ltd. v. Canada, 2000 SCC 36 1:3Winram Estate v. MNR, 72 DTC 6187 (FCTD) 2:27Winter and Others v. Inland Revenue Commissioners (sub nom. In re Sutherland, decd.), [1963] AC

235 (HL) 7:22

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Winter et al. v. The Queen, 90 DTC 6681 (FCA) 8:12Woessner v. The Queen, 1999 CanLII 468 (TCC) 6:19Wood v. MNR, 87 DTC 312 (TCC) 3:13; 6:23; 15:14; 16:23Woods v. Canada, 2011 FCA 90 7:83Woods v. MNR, 85 DTC 479 (TCC) 7:45Wotherspoon v. Canadian Pacific Ltd., [1987] 1 SCR 952 1:11WPH Mechanical Services Ltd. v. The Queen, 2006 TCC 677 7:24Wragg Limited, In re, [1897] 1 Ch. 796 (CA) 3:27Wright v. MNR, 86 DTC 1415 (TCC) 7:61; 13:33Wright, The Queen v., 81 DTC 5004 (FCTD) 7:75Wu, The Queen v., 98 DTC 6004 (FCA) 21:74, 75Wynter v. Canada, 2017 FCA 195 21:84, 85

XCO Investments Ltd. v. The Queen, 2005 TCC 655 17:31; 21:110, 111

Yaiguaje v. Chevron Corporation, 2018 ONCA 472 21:36Yardley Plastics of Canada Ltd. v. MNR, 66 DTC 5183 (Ex. Ct.) 6:59; 17:68Yonge-Eglinton Building Ltd., MNR v., 74 DTC 6180 (FCA) 16:106Youngman v. The Queen, 90 DTC 6322 (FCA) 7:42, 43, 47, 48, 49

Zacks, Re, (1984), 17 ETR 206 (ONSC) 19:28, 29Zakoor v. MNR, 64 DTC 392 (TAB) 7:12Zinkhofer et al. v. MNR, 91 DTC 643 (TCC) 6:48; 17:64

lxiii

Foreword

The first edition of Taxation of Private Corporations and Their Shareholders (TPCS), edited by Howard J. Kellough and the late Peter E. McQuillan, was published by the Canadian Tax Foundation in 1983. It soon established itself as the essential reference tool for tax practitioners dealing with private corporations. Second and third editions followed in 1992 and 1999. Each edition involved the efforts of many professionals from Fraser Milner and KPMG LLP, who prepared chapters under Howard and Peter’s careful guidance. The fourth edition was published in 2010, this time with Paul Bleiwas of Fraser Milner Casgrain LLP and John Hutson of Deloitte & Touche LLP providing editorial oversight to a large team of authors assembled from the editors’ respective firms (including, in the interests of full disclosure, yours truly).

It is important to acknowledge, as we publish a fifth edition of TPCS, all of those involved in previous editions, which reflect a consistent standard of excellence and con-stitute a solid base. This excellence, a benefit to the Canadian tax community for over three decades, is owing to the dedication of these editors and authors and to their generous donation of time and insight. I thank them on behalf of the Foundation.

Planning for a fifth edition was well underway in early 2017, in anticipation of a 2018 publication date. In July of that year, however, Finance Canada released for consultation a package of draft proposals whose scope and impact could only be described as seismic. We immediately recognized that any text on the taxation of private corporations that did not incorporate these proposals would be irrelevant. With this in mind, we decided to defer further work until the legislative direction became clear. At the same time, it was becoming apparent that the scope of work required for the fifth edition would be consider-able—not simply an update but effectively a complete revision of almost every chapter.

In 2018, new editors agreed to take on this formidable challenge. Rachel Gervais and Dave Walsh from BDO Canada LLP, and John Sorensen and David Stevens from Gowling WLG (Canada) LLP, assembled teams of authors from their firms and started work later that year. Regular status meetings of the four editors and the Foundation’s editorial team, with a virtual data room for project management, helped everyone to communicate and kept the project and its dozens of participants on track.

Given the sweeping nature of the 2018 changes to the taxation of private corporations, and the complexity and uncertainty that these changes entailed, the tax community keenly awaited the new edition of TPCS. To speed its release, we adopted an innovative approach to publication, adding individual chapters to TaxFind (the Foundation’s digital research database) as they emerged from the editing process rather than delaying publication till completion of the whole. Chapters began to be available in the fall of 2019.

I am confident that tax practitioners will find this new edition’s content, whether obtained through TaxFind or in traditional book form, a trusted, comprehensive, and invaluable resource.

lxiv / Foreword

I would like to thank the editors, Rachel, Dave, John, and David, along with their skilled colleagues who served as authors. All of these contributors are to be commended for their enthusiasm and dedication, and for the countless hours they invested in this project in service to the tax community. The generous support of BDO Canada LLP and Gowling WLG (Canada) LLP is much appreciated.

Thanks are also due to my talented colleagues at the Canadian Tax Foundation, who, under the capable leadership of Managing Editor Michael Gaughan, guided this project to successful completion.

Heather EvansExecutive Director

lxv

Authors’ Note

Thank you for your interest in Taxation of Private Corporations and Their Shareholders, 5th edition. We believe that it will be as illuminating as the first four editions—a source of guidance for the Canadian tax community for several decades. The 21 chapters of the fifth edition were completed at different times during 2019. Please note that chapter 8, a key chapter in that it deals with the new tax on split income (TOSI) rules, is current to December 31, 2019. The book does not take into account any proposed changes in the 2020 federal budget.

Rachel GervaisJohn SorensenDavid StevensDave Walsh

lxvii

Acknowledgments

The editors from BDO Canada LLP thank and congratulate our contributing authors for their outstanding work on the fifth edition of Taxation of Private Corporations and Their Shareholders, the Canadian Tax Foundation’s best-selling classic. The fifth edition provides a great resource for understanding complex tax legislation to Canadian private businesses, their shareholders, and their advisers. The updated fifth edition addresses the significant changes to the tax rules and regulations affecting private corporations in Canada over the past few years.

We acknowledge the contributors of previous editions of this book for their significant efforts in the initial creation and development of this publication. The success ful comple-tion of this new version is the result of the combined expertise, dedication, and collab-orative effort of everyone involved at the Canadian Tax Foundation and Gowling WLG (Canada) LLP, as well as BDO Canada LLP tax professionals from across Canada. We thank the Canadian Tax Foundation and Gowling WLG (Canada) LLP for their support and combined leadership in working with us on this comprehensive edition.

A tremendous amount of work went into the creation of this fifth edition, and we want to thank the following authors and contributors from BDO Canada LLP for their significant efforts and achievement: Adam Thompson, Adam Vander Duim, Audra Haber, Christina Arnold, Claudio Saverino, Cory Neil, Danielle Sideris, Danvir Roopra, Darryl Loewen, David Elrick, David McKay, David Spicer, Eric Wipf, Fred Richardson, Gavin Friedley, Gilles Roy, Greg London, Greg Weiler, Guy Buckley, Jason Williams, Jennifer Dunn, Jennifer Horner, Jesse Moore, John Wonfor, Judy Haynes, Kurt Oelschlagel, Leona Harari, Linda Woo, Marc Graham, Nick Kietaibl, Paul Walker, Peter Routly, Sheana Espiritu, and Trevor Thomson.

We hope that our contributions to this book offer a better understanding of the current Canadian private corporation tax rules and assist with the achievement of your financial and tax-planning goals.

Rachel GervaisDave Walsh

The editors from Gowling WLG (Canada) LLP are grateful for the hard work and devotion of the team that worked together to produce the fifth edition of Taxation of Private Corpor-ations and Their Shareholders, perhaps the leading resource for tax practitioners serving the private-client and high-net-wealth spaces. We would like to express our heartfelt thanks to each of the writers from our firm, Gowling WLG (Canada) LLP; to the contributors from BDO Canada LLP; and to the leadership and editorial team at the Canadian Tax Foundation for all they’ve done to bring this project to fruition.

We would be remiss if we did not recognize the brilliant foundational work of Howard J. Kellough and Peter E. McQuillan, who were responsible for the early editions of this

lxviii / Acknowledgments

book and whose writing was peerless. For this new edition, Rachel and Dave, and the entire BDO team, were excellent co-leaders and writers, and we are grateful for all of BDO’s feedback on the drafting by Gowling WLG (Canada) LLP’s authors. We also appreciate, and would like to acknowledge, the amazing efforts of the Foundation team, including Heather Evans, Michael Gaughan, Christine Escalante, Mariam Ansari, and Jim Lyons.

Although they are credited on their respective chapter(s), we would like to specifically recognize the contributors from Gowling WLG (Canada) LLP—namely, Laura Gheorghiu, Malya Amghar, Colin Green, Spencer Ebbert, Carole Chouinard, Dan Hayhurst, Brian Cohen, Mariam Al-Shikarchy, Paul Carenza, Robert Hagerman, and Anita Yuk. We are also grateful to Brent Kerr, Ash Gupta, Daniel Lacelle, and Jim Wilson for their internal review work.

John SorensenDavid Stevens

Taxation ofPrivate Corporationsand TheirShareholders