Canada: Federal Court Of Appeal Dismisses Taxpayer’s Appeal In Morguard: Trial Judge Made No Error In Concluding That A "Break Fee" Was Income

The Federal Court of Appeal has dismissed the taxpayer's appeal in  Morguard Corporation v The Queen.

(See our previous posts on the case  here, here and here.)

Justice Sharlow wrote for the panel which also included Justice Evans and Justice Stratas.  She agreed with the reasoning of the trial judge that Ikea Ltd. v. Canada is indeed the leading case on the characterization of extraordinary or unusual receipts in the business context, and found that his application of the principles stated by the Supreme Court of Canada in Ikea was correct. The court noted that Ikea was not based on a particular factual finding, but "involved consideration of a number of factors, including the commercial purpose of the payment and its relationship to the business operations of the recipient."

The Court of Appeal found that the trial judge made no error in concluding, on the facts of the case, that the break fee received by Morguard as the result of a failed takeover bid was income and not capital. The appeal was dismissed with costs.

For more information, visit our Canadian Tax Litigation blog at www.canadiantaxlitigation.com

About Fraser Milner Casgrain LLP (FMC)

FMC is one of Canada's leading business and litigation law firms with more than 500 lawyers in six full-service offices located in the country's key business centres. We focus on providing outstanding service and value to our clients, and we strive to excel as a workplace of choice for our people. Regardless of where you choose to do business in Canada, our strong team of professionals possess knowledge and expertise on regional, national and cross-border matters. FMC's well-earned reputation for consistently delivering the highest quality legal services and counsel to our clients is complemented by an ongoing commitment to diversity and inclusion to broaden our insight and perspective on our clients' needs. Visit: www.fmc-law.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.