Earlier today, the Supreme Court of Canada (The Chief Justice,
Justice Rothstein and Justice Moldaver) dismissed an application
for leave to appeal by Imperial Tobacco dealing with the classic
distinction between deductible corporate expenditures on income
account and non-deductible corporate expenditures on capital
In brief, the taxpayer made a payment to extinguish an employee
stock option plan (suggesting that the payment was made on income
account) but made the payment during the course of a corporate
reorganization (suggesting that the payment was made on capital
Tax Court of Canada and
Federal Court of Appeal followed the reasoning of the Federal
Court of Appeal in Kaiser and sided with the Crown, holding that
the payment was on capital account. The decision of the Federal
Court of Appeal is now final and binding.
For a brief description of the reasoning of the Federal Court of
Appeal, see our earlier
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