Facts: L'Amiante's corporate structure
was reorganized to facilitate the departure of the taxpayer Mr.
Poulin, and to integrate Mr. Hélie into the company. Mr.
Poulin, Mr. Turgeon, and Mr. Hélie each incorporated a
corporation (Gestion Poulin Gestion Turgeon, and Gestion
Hélie respectively). Mr. Poulin sold his 450,004 Class F
Preferred shares of l'Amiante to Gesstion Turgeon, and Mr.
Turgeon sold his 388,861 Class D Preferred shares of l'Amiante
to Gestion Hélie. In denying the capital gains deductions
claimed by Mr. Poulin and Mr. Turgeon for 2007 in respect to the
sales of their shares in l'Amiante (the
"Sales"), the minister is of the opinion
that these Sales were not at arm's length and that the proceeds
of the Sales realized by each of them constituted deemed dividends
pursuant to section 84.1 of the ITA. Mr. Poulin and Mr. Turgeon
appealed to the Tax Court of Canada.
Held: Mr. Poulin's appeal was allowed while
Mr. Turgeon's appeal was dismissed.
In R. v. McClarty, 2008 SCC 26, the Supreme
Court of Canada set out the following criteria that have been
recognized by the courts in establishing a non-arm's length
a single guiding mind directs the negotiations between the two
parties to a transaction;
the parties to that transaction are acting in concert without
separate interests; and
there is an effective control in fact being exercised by one
party over the other.
Applying these criteria to Mr. Poulin's and Mr.
Turgeon's sales of their shares of l'Amiante, the
conclusions were that in the sale of Mr. Poulin's 450,004 Class
F Preferred shares of l'Amiante, the implicated parties acted
independently in their own best interests and not in concert, so
that an arm's length relationship existed amongst the parties,
and Mr. Poulin was therefore not deemed to have received any
dividend under section 84.1.
However, in the sale of Mr. Turgeon's 388,861 Class D
Preferred shares of l'Amiante, the parties acted in concert,
and were not at arm's length, so that Mr. Turgeon was deemed to
have received a dividend under section 84.1, as the minister had
contended. In fact, the reorganization and share transaction was
structured in a way to ensure that Mr. Turgeon could eventually
claim the capital gain deduction. The Court further affirmed that
Gestion Hélie had no benefits in purchasing the shares,
which values had been frozen – the only logical explanation
would be that there was a fact of control by Mr. Turgeon.
The minister's reassessment of Mr. Poulin was vacated
The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
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