In Copthorne Holdings Ltd. v. The Queen, the
Supreme Court of Canada (SCC) unanimously held that GAAR applied to
planning in which cross-border paid-up capital was duplicated and
used to make a tax-free return of capital through a share
redemption. The SCC also commented on the extended meaning of
"series of transactions" in subsection 248(10). See our
Tax memos "Reflections on Supreme Court ruling on
GAAR—Copthorne Holdings Ltd." and "New Supreme
Court of Canada ruling on GAAR— Copthorne Holdings
In Morguard Corporation v. The Queen, the Tax
Court of Canada (TCC) found that the taxpayer had received a break
fee as an integral part of, and in the ordinary course of, its
regular business operations, and that the receipt of the break fee
had no linkage to a capital purpose. The break fee was therefore
found to have been received by the taxpayer on account of income.
The taxpayer has appealed this decision to the Federal Court of
Appeal (FCA). See our Tax memo "TCC rules against
Morguard Corporation: Break fee was fully taxable as an income
Stock option payments
In Imperial Tobacco Canada Limited v. The
Queen, the FCA upheld the TCC's decision that payments
made by the taxpayer to its employees to eliminate an employee
stock option plan in the context of a going-private transaction
were capital in nature and not deductible. The SCC has dismissed
the taxpayer's application for leave to appeal. See our Tax
memo "Deduction Denied for Amounts Paid to Employees for
Stock Options in course of Going-Private Transaction (Imperial
Tobacco case)" at
In St. Michael Trust Corp. v. The Queen
(sub nom.Garron), the SCC agreed with the reasoning in the
lower courts that central management and control over the trust
property, rather than the residence of the trustees, was the
appropriate test for determining trust residence for purposes of
the Income Tax Act. See our Tax memo
"Supreme Court of Canada rules on trust residence –
St. Michael Trust Corp. v. The Queen (Garron Family Trust)" at
In Envision Credit Union v. The Queen, the FCA
upheld the TCC's decision that the tax attributes of two
predecessor corporations flowed through to the amalgamated
corporation under common law principles. The FCA also found that
section 87 of the Income Tax Act applied to the
amalgamation, even though property of the predecessor corporations
was transferred to a subsidiary simultaneously with the
amalgamation. The SCC has granted the taxpayer's application
for leave to appeal.
Requirement for information (Life insurance
In The Minister of National Revenue v. RBC Life
Insurance Company et al, the Federal Court cancelled
orders that required insurance companies to provide information on
the holders of their "10-8" life insurance plans because
the Minister failed to disclose all relevant information. The
Minister has appealed this decision to the FCA.
Non-resident and non-capital losses
In Saipem UK Limited v. The Queen, the FCA
upheld the TCC decision that the non-resident taxpayer could not
deduct the non-capital losses of its wound-up non-resident
subsidiary. The FCA was not persuaded that the TCC had made any
error that would justify its intervention, finding that the
provisions of the Income Tax Act at issue did not violate
the non-discrimination provision of the Canada-United Kingdom: 2003
Protocol [Third] Amending 1978 Tax Convention.
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