In 2022 the Federal Court of Canada ruled in favour of the Revenue Agency and dismissed Dow Chemicals’ appeal regarding the Tax Court’s jurisdiction to make a downward adjustment. The Federal Court held that the Tax Court could not overturn the Revenue Agency’s (Minister’s) opinion that a requested downward adjustment was inappropriate because the Tax Court’s jurisdiction is only to set aside, vary or remit an assessment to the Minister, whereas an opinion is not an assessment. According to the Federal Court, the jurisdiction to judicially review an opinion lies with the Federal Court. Following the Federal Court’s decision, Dow Chemicals filed an application for leave to appeal to the Supreme Court. Appellant DCC.pdf Respondent HMTK.pdf Appellant DCC.pdf Judgement of the Supreme Court In a judgment of 23 February 2023, the application for leave to appeal was granted and the question of jurisdiction will now ... Read more

This appeal and cross-appeal arise as a result of the response provided by the Tax Court of Canada to a question submitted under Rule 58 of the Tax Court of Canada Rules (General Procedure), SOR/90-688a. The question was: Where the Minister of National Revenue has exercised her discretion pursuant to subsection 247(10) of the Income Tax Act (“ITA”) to deny a taxpayer’s request for a downward transfer pricing adjustment, is that a decision falling outside the exclusive original jurisdiction granted to the Tax Court of Canada under section 12 of the Tax Court of Canada Act and section 171 of the ITA? This question arose in the context of the appeal commenced by Dow Chemical Canada ULC (Dow) in relation to the reassessment of its 2006 taxation year. The Tax Court (2020 TCC 139) provided the following answer to this question: The Court has determined ... Read more

In 1992, Loblaw Financial Holdings Inc. (“Loblaw Financial”), a Canadian corporation, incorporated a subsidiary in Barbados. The Central Bank of Barbados issued a licence for the subsidiary to operate as an offshore bank named Glenhuron Bank Ltd. (“Glenhuron”). Between 1992 and 2000, important capital investments in Glenhuron were made by Loblaw Financial and affiliated companies (“Loblaw Group”). In 2013, Glenhuron was dissolved, and its assets were liquidated. For the 2001, 2002, 2003, 2004, 2005, 2008 and 2010 taxation years, Loblaw Financial did not include income earned by Glenhuron in its Canadian tax returns as foreign accrual property income (“FAPI”). Under the FAPI regime in the Income Tax Act (“ITA”), Canadian taxpayers must include income earned by their controlled foreign affiliates (“CFAs”) in their Canadian annual tax returns on an accrual basis if this income qualifies as FAPI. However, financial institutions that meet specific requirements benefit ... Read more

ALTA Energy, a resident of Luxembourg, claimed an exemption from Canadian income tax under Article 13(5) of the Canada-Luxembourg Income Tax Treaty in respect of a large capital gain arising from the sale of shares of ALTA Canada, its wholly-owned Canadian subsidiary. At that time, Alta Canada carried on an unconventional shale oil business in the Duvernay shale oil formation situated in Northern Alberta. Alta Canada was granted the right to explore, drill and extract hydrocarbons from an area of the Duvernay formation designated under licenses granted by the government of Alberta. The Canadian tax authorities denied that the exemption applied and assessed ALTA Energy accordingly. Article 13(5) of the Canada-Luxembourg Tax Treaty is a distributive rule of last application. It applies only in the case where the capital gain is not otherwise taxable under paragraphs (1) to (4) of Article 13 of the Treaty ... Read more

In 2013 and 2014, the Canadian tax authorities conducted the Transfer Pricing Audit of Bank of Nova Scotia. Prior to issuing tax assessment letters for FY 2007, 2008, 2009 and 2010, the Bank entered into a settlement agreement with the Minister of National Revenue in respect of the Transfer Pricing Audit. The settlement agreement provided for the Minister to reassess the Bank to include certain amounts in its income as transfer pricing adjustments in its 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013 and 2014 Taxation Years. In this regard, the agreement was to result in an increase of the Bank’s taxable income for the 2006 Taxation Year of $54,916,616. The Bank then wrote to the Minister to carry back $54,000,000 of non-capital loss that arose in the Bank’s taxation year ended October 31, 2008 to its 2006 Taxation Year in order to offset the ... Read more

An employee (tax manager) of Amdocs Inc did not cooperate with the Canada Revenue Agency during several audits of the company and did not inform his superior about the audits. The audits resulted in tax reassessments for FY 2012 – 2014. The reassessment concerning FY 2012 resulted in income tax payable by $3,353,906, but by the time the employee informed his superior of the reassessment in 2019, Amdocs was time barred from objecting by virtue of the limitation periods. With respect to the assessments for FY 2013 and 2014 the limitation period for objections had not yet elapsed. Amdocs Inc filed an appeal with the court in regards of the denied access to object on the assessment for FY 2012. Judgement of the Federal Court The court dismissed the appeal of Amdocs and decided in favor of the tax authorities. Excerpts “…I find the Minister’s ... Read more

Cameco, together with its subsidiaries, is a large uranium producer and supplier of the services that convert one form of uranium into another form. Cameco had uranium mines in Saskatchewan and uranium refining and processing (conversion) facilities in Ontario. Cameco also had subsidiaries in the United States that owned uranium mines in the United States. The Canadian Revenue Agency found that transactions between Cameco Corp and the Swiss subsidiary constituted a sham arrangement resulting in improper profit shifting. Hence, a tax assessment was issued for FY 2003, 2005, and 2006. Cameco disagreed with the Agency and brought the case to the Canadian Tax Court. In 2018 the Tax Court ruled in favor of Cameco and dismissed the assessment. This decision was appealed by the tax authorities to the Federal Court of Appeal. The Federal Court of Appeal in 2020 dismissed the appeal and also ruled ... Read more

This decision is about the jurisdiction of the Tax Court of Canada, or perhaps more accurately about the scope of an appeal of an assessment. It arises in the context of an appeal by Dow Chemical Canada ULC of a reassessment of its 2006 taxation year. The reassessment increased Dow Chemical’s income under the transfer pricing provisions in section 247 of the Income Tax Act. In reassessing Dow Chemical for its 2006 and 2007 taxation years, the tax authorities had increased Dow Chemical’s income in respect of certain transactions with non-residents to which Dow Chemical is related. The authorities initially indicated that the transfer pricing provisions also would result in a downward adjustment to Dow Chemical’s income in those taxation years in respect of another transaction. However, the most recent reassessment of Dow Chemical’s 2006 taxation year did not reflect the downward adjustment, although the ... Read more

AgraCity Canada had entered into a Services Agreement with a group company, NewAgco Barbados, in connection with the sale by NewAgco Barbados directly to Canadian farmer-users of a glyphosate-based herbicide (“ClearOut”) a generic version of Bayer-Monsanto’s RoundUp. In reassessing the taxable income of AgraCity for 2007 and 2008 the Canada Revenue Agency relied upon the transfer pricing rules in paragraphs 247(2)(a) and (c) of the Income Tax Act (the “Act”) and re-allocated an amount equal to all of NewAgco Barbados’ profits from these sales activities to the income of AgraCity. According to the Canadian Revenue Agency the value created by the parties to the transactions did not align with what was credited to AgraCity and NewAgco Barbados. Hence, 100% of the net sales profits realized from the ClearOut sales by NewAgco Barbados to FNA members – according to the Revenue Agency – should have been ... Read more

Bayer Inc, is a Canadian subsidiary of Bayer AG Germany. Bayer is a multinational group of companies in the pharmaceutical and life sciences industry . Since 2016, the Canada Revenue Agency has been auditing Bayer Inc. 2013-2015 taxation years. Between December 2017 and August 2018, the CRA made a series of requests to Bayer Canada for copies of agreements that had been negotiated at arm’s length with respect to the activities that are being examined in the audit. On August 21, 2018, the CRA issued Query No 17 to Bayer Canada, in which it revised its previous requests as follows: Pursuant to our discussion on July 18, 2018, we would like to audit agreements made between any member of the Bayer Group with third party(s) in force during the 2013 and 2014 taxation years that perform some or all of the following activities in regards ... Read more

Cameco, together with its subsidiaries, is a large uranium producer and supplier of the services that convert one form of uranium into another form. Cameco had uranium mines in Saskatchewan and uranium refining and processing (conversion) facilities in Ontario. Cameco also had subsidiaries in the United States that owned uranium mines in the United States. In 1993, the United States and Russian governments executed an agreement that provided the means by which Russia could sell uranium formerly used in its nuclear arsenal. The net result of this agreement was that a certain quantity of uranium would be offered for sale in the market. Cameco initially attempted to secure this source of uranium on its own but later took the lead in negotiating an agreement for the purchase of this uranium by a consortium of companies. When the final agreement was signed in 1999, Cameco designated ... Read more

In the case of Canadian grocery chain Loblaw, the Canadian Tax Court in 2018 found that using an offshore banking affiliate in a low tax jurisdiction – Barbados – to manage the groups investments did not constitute tax avoidance. However, the Tax Court’s interpretation of a technical provision in the Canadian legislation had the consequence that Loblaw would nonetheless have to pay $368 million in taxes and penalties. This decision was later overturned by the Canadian Court of Appeal where a judgement in favor of Loblaw was delivered ... Read more

In the course of an ongoing Canadian triel concerning transfer pricing adjustments in the amounts of $3,000,000,000, the Canadian Imperical Bank of Commerce had brought a motion for leave to call in seven expert witnesses – included four transfer pricing experts. The motion was dismissed by the Court. The Federal Court Rules impose a high threshold on parties seeking to call additional expert witnesses. The fact that the appeals involved lots of money did not make them “significant to public”. Issues surrounding application of transfer pricing rules to settlement payments and relevance of accounting treatment to deductibility of expenditures within corporate group were not of broad application and need to resolve them was not particularly pressing. Expert evidence would be important in complex and technical areas of accounting and transfer pricing issues, but that alone could not support presumption that more than five transfer pricing ... Read more

Canadian mining company, Cameco Corp., sells uranium to a wholly owned trading hub, Cameco Europe Ltd., registred in low tax jurisdiction, Switzerland, which then re-sells the uranium to independent buyers. The parties had entered into a series of controlled transactions related to this activity and as a result the Swiss trading hub, Cameco Europe Ltd., was highly profitable. Following an audit, the Canadian tax authorities issued a transfer pricing tax assessment covering years 2003, 2005, 2006, and later tax assessments for subsequent tax years, adding up to a total of approximately US 1.5 bn in taxes, interest and penalties. The tax authorities first position was that the controlled purchase and sale agreements should be disregarded as a sham as all important functions and decisions were in fact made by Cameco Corp. in Canada. As a second and third position the tax authorities held that the Canadian transfer ... Read more

ALTA Energy, a resident of Luxembourg, claimed an exemption from Canadian income tax under Article 13(5) of the Canada-Luxembourg Income Tax Treaty in respect of a large capital gain arising from the sale of shares of ALTA Canada, its wholly-owned Canadian subsidiary. At that time, Alta Canada carried on an unconventional shale oil business in the Duvernay shale oil formation situated in Northern Alberta. Alta Canada was granted the right to explore, drill and extract hydrocarbons from an area of the Duvernay formation designated under licenses granted by the government of Alberta. The Canadian tax authorities denied that the exemption applied and assessed ALTA Energy accordingly. Article 13(5) of the Canada-Luxembourg Tax Treaty is a distributive rule of last application. It applies only in the case where the capital gain is not otherwise taxable under paragraphs (1) to (4) of Article 13 of the Treaty ... Read more

The Court found that section 245 (GAAR) of the Canadian Income Tax Act did not apply to the transactions in question. Subsection 245(1) defines a “tax benefit” as a reduction, avoidance or deferral of tax. The Respondent says that the tax benefit BMO received was the reduction in its tax payable as a result of subsection 112(3.1) not applying to reduce its share of the capital loss on the disposition of the common shares of NSULC. In 2005, the Bank of Montreal (“BMO”) wanted to lend a total of $1.4 billion USD to a number of its US subsidiaries referred to as the Harris Group. BMO chose to borrow those funds from third parties. Tower Structure It would not have been tax efficient for BMO to simply borrow the funds and lend them to the Harris Group. Such a structure would have resulted in BMO ... Read more

The Canada Revenue Agency had issued a reassessments related to Loblaw’s Barbadian banking subsidiary, Glenhuron, for tax years 2001 – 2010. The tax authorities had determined that Glenhuron did not meet the requirements to be considered a foreign bank under Canadian law, and therefore was not exempt from paying Canadian taxes. “Loblaw took steps to make Glenhuron look like a bank in order to avoid paying tax. Government lawyers said Glenhuron did not qualify because, among other things, it largely invested the grocery giant’s own funds and was “playing with its own money.“ Tax Court found the transactions entered into by Loblaw regarding Glenhuron did result in a tax benefit but “were entered primarily for purposes other than to obtain the tax benefit and consequently were not avoidance transactions.” The Tax Court concludes as follows: “I do not see any extending the scope of paragraph ... Read more

In the case of Univar Holdco the Canadian tax authorities had applied Canadian Anti-Avoidance Rules to a serie of transactions undertaken by the Univar Group following the acquisition of the group’s Dutch parent. The (only) purpose of these transactions was to increase the amount of retained earnings that could be taken out of Canada without incurring withholding tax. The Federal Court of Appeal overturned the prior decision of the Tax Court and came to the conclusion that it had not been proved that the transactions were abusive tax avoidance – abuse of the Act. The Court also noted that subsequent amendments and commentary to the Act do not confirm that transactions caught by the subsequent amendments are abusive before the amendments are enacted. The 2017 decision of the Federal Court of Appeal The 2016 decision of the Tax Court ... Read more

In relation to ongoing audits regarding transfer payments, the tax authorities asked the Court to order approximately 25 personnel from Cameco Corporation and its wholly owned subsidiaries to be made available for interview regarding Cameco’s 2010, 2011, and 2012 income tax years. It was confirmed in Court that Cameco has complied with all audit requests related to the relevant years except the refused request for oral interviews. Cameco has agreed to written questioning by the Minister, but not oral interviews. The Court dismissed the application. “A compliance order…can only be issued if the Minister proves that Cameco did not comply with section 231.1 of the ITA. Cameco has provided the Minister with every opportunity to inspect, audit and examine their books, records and documents and to inspect their property. The Minister confirmed that Cameco has allowed such access, save the requested oral interviews. Cameco has ... Read more

This case i about the legal requirement to submit evidence. The revenue service argues that the disputed questions are relevant to the matters in issue and that Burlington Resources Finance Company has either improperly refused to answer, or not fully answered, the questions. Burlington Resources Finance Company argues that all proper questions have been fully answered and that answers to improper questions have been correctly refused. The underlying tax assessment relates to disallowence of tax deductions for guarantee fees paid by Burlington Resources Finance Company Canada (“Burlington”) to it’s US parent, Burlington Resources Inc. (“BRI”), a resident U.S. corporation. Burlington’s business involved obtaining financing to fund the operations of affiliated Canadian companies. Specifically, Burlington was involved in borrowing funds from public markets and “on-loaning” those funds to its affiliated Canadian entities, which were conducting businesses related to crude oil and natural gas assets. BRI unconditionally ... Read more

The issue before the court was whether the Canadian revenue service had the ability to issue the second reassessments given the Canadian and US competent authorities subsequently agreed on a MAP settlement. The Tax Court found that a settlement agreed to via the competent authority precluded a subsequent tax-reassessment that attempted to further increase the taxpayer’s income ... Read more

The intercompany transactions at issue involved fees paid to the company’s wholly-owned Barbados based subsidiary during taxation years 2000 and 2001 for sales, marketing and support services. The Tax Court of Canada had determined that it was appropriate to apply the CUP method rather than the TNMM, which was advocated by the company’s expert. Canada’s Federal Court of Appeal upheld the decision by the Tax Court of Canada, which in 2014 ruled that the Canada Revenue Agency had largely been correct in reassessing the taxable income of Marzen Artistic Aluminum Ltd ... Read more

In this case the Federal Court of Appeal upheld the decision of the Canadian International Trade Tribunal in which the tribunal upheld seven decisions – one for each of the years 2005 through 2011 – of the Canada Border Services Agency under subsection 60(4) of Canada’s Customs Act. Skechers Canada, a subsidiary of Skechers USA, purchases footwear to sell in Canada from its parent at a price equal to the price paid by Skechers US to its manufacturers, the cost of shipping the foodware to the US and warehousing, and an arm’s length profit. Skechers Canada also makes payments to Skechers US pursuant to a cost sharing agreement to compensate the parent for activities associated with the development and maintenance of the Skechers brand and to the creation and sale of footwear. The Court ruled that CSA payments relating to research, design, and development (R&D) were “in respect of” the goods ... Read more

TeleTech Canada Inc.  is seeking judicial review of what it says is the continuing refusal of the Canada Revenue Agency to provide it with relief from double taxation, allegedly in breach of the CRA’s obligations under articles IX and XXVI of the Convention between Canada and the United States of America with respect to Taxes on Income and on Capital, 26 September 1980, Can. T.S.  1984 No. 15, as implemented by the Canada-United States Tax Convention Act, 1984, S.C. 1984, c. 20. In its application, TeleTech Canada seeks an order of mandamus compelling the CRA to accept its application for competent authority consideration and to provide the company with relief from double taxation under Article IX of the Treaty by submitting the matter to binding arbitration, pursuant to the provisions of Article XXVI of the Treaty. The Court concluded that there has been no “continuing ... Read more

The Canadian Supreme Court ruled in the case of GlaxoSmithKline Inc. regarding the intercompany prices established in purchases of ranitidine, the active ingredient used in the anti-ulcer drug Zantac, from a related party during years 1990 through 1993. The Supreme Court partially reversed an earlier determination by the Tax Court, upholding a determination by the Federal Court of Appeals in its conclusion that if other transactions are relevant in determining whether transfer prices are reasonable, these transactions should be taken into account. However, the Supreme Court did not determine whether the transfer pricing method used by GlaxoSmithKline Inc. was reasonable, and instead remitted the matter back to the Tax Court ... Read more

McKesson is a multinational group involved in wholesale distribution of pharmaceuticals. Its Canadian subsidiary entered into a receivables sales (factoring) agreement with its direct parent, McKesson International Holdings III Sarl in Luxembourg in 2002. Under the agreement, McKesson International Holdings III Sarl agreed to purchase the receivables for about C$460 million and committed to purchasing all the eligible receivables as they arose for the next five years. The price of the receivables was determined at a discount of 2.206 percent from the face amount. The funding to buy the receivables was borrowed in Canadian dollars from an indirect parent company of McKesson International Holdings III Sarl in Ireland and guaranteed by another indirect parent in Luxembourg. The Court didn’t recharacterize the transactions. The Court emphasized that the Canadian Income Tax Act was the only legally binding clause on appeal before the court and that the practice of the CRA under the OECD ... Read more

The Dutch company, Velcro Holdings BV (“VHBV”), licensed IP from an affiliated company in the Dutch Antilles, Velcro Industries BV (“VIBV”), and sublicensed this IP to a Canadian company, Velcro Canada Inc. (VCI). VHBV was obliged to pay 90% of the royalties received from VCI. within 30 days after receipt to VIBV. At issue was whether VHBV qualified as Beneficial Owner of the royalty payments from VCI and consequently would be entitled to a reduced withholding tax – from 25% (the Canadian domestic rate) to 10% (the rate under article 12 of the treaty between Canada and the Netherlands). The tax authorities considered that VHBV did not qualify as Beneficial Owner and denied application of the reduced withholding tax rate. Judgement of the Tax Court The court set aside the decision of the tax authorities and decided in favor of VCI. Excerpts: “VHBV obviously has ... Read more

Alberta Printed Circuits Ltd (APC, the taxpayer) was a Canadian manufacturer of custom prototype circuit boards. The manufacturing process was initially manual and later automated. In 1996, a Barbados company, APCI Inc.,  was formed via a complex ownership structure. The Barbados company provided services to Alberta Printed Circuits Ltd. by performing setup functions, software and website development, and maintenance services. APCI charged the appellant a fixed fee for the setup services and a square-inch fee for non-setup services. Alberta Printed Circuits Ltd charged the same fee for the same services to third-party customers. The tax authorities asserted that the Alberta Printed Circuits Ltd overpaid APCI $3.4 million because the terms and conditions of the agreements differed from those that would have been entered at arm’s length. Alberta Printed Circuits Ltd provided evidence of internal comparable transactions and transfer prices were determined by the comparable uncontrolled price (CUP) method. The court ... Read more

In the case of General Electric Capital, Canada, the issue was if a 1% guarantee fee  paid by General Electric Capital Canada Inc. to its AAA-rated US parent company satisfied the arm’s length test. The Canadian tax administration argued  that implicit support resulted in General Electric Canada having a AAA credit rating, so that the guarantee provided by the US parent had no value. Taxpayer argued that the 1% guarantee fee did not exceed arm’s length pricing and that implicit support from the US parent should be ignored since it stemmed from the non-arm’s length relationship. The Tax Court agreed with the tax administration that implicit support should be taken into account and applied a “yield approach,” comparing the interest rate the Canadian company would have paid with and without the guarantee. The Tax Court found that credit rating of the Canadian company – with implicit support but without the guarantee – was at most BBB-/BB+ and the 1% guarantee was arm’s length ... Read more

The Knights of Columbus, a resident United States corporation, provides life insurance to its Canadian members and relies upon Canadian agents to do so. The issue before the court was whether the Knights of Columbus is liable for tax in Canada on business profits from its insurance business. This hinges on the application of the Convention between the United States of America and Canada with respect to Taxes on Income and Capital (the Canada-U.S. Treaty), specifically a determination of whether the Knights of Columbus has a permanent establishment in Canada as a result of either: (1) carrying on its business through a fixed place of business in Canada (Article V(1) of the Canada-U.S. Treaty). (2) using agents, other than independent agents acting in the ordinary course of their business, who habitually exercise in Canada authority to conclude contracts in the name of the Knights of ... Read more

Prévost is a resident Canadian corporation who declared and paid dividends to its shareholder Prévost Holding B.V. (“PHB.V.”), a corporation resident in the Netherlands. When Prévost paid the dividends it withheld five percent in tax. The tax authorities issued an assessments against Prévost in respect of the aforementioned dividends. The tax authorities assessed on the basis that the beneficial owners of the dividends were the corporate shareholders of PHB.V., a resident of the United Kingdom and a resident of Sweden, and not PHB.V. itself. An appeal was filed with the tax court by the company. “… one does not pierce the corporate veil unless the corporation is a conduit for another person and has absolutely no discretion as to the use or application of funds put through it as conduit, or has agreed to act on someone else’s behalf pursuant to that person’s instructions without ... Read more

The issue is whether MIL (INVESTMENTS) S.A. was exempt from Canadian income tax in respect of the capital gain of $425,853,942 arising in FY 1997 on the sale of shares of Diamond Field Resources Inc. by virtue of the Canadian Income Tax Act and the Convention Between Canada and The Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital (“Treaty”). The Canadian Tax Authorities found that MIL was not exempt under local anti avoidance provisions and issued an assessment where the capital gain had been added to the taxable income. Disagreeing with the assessment, MIL (INVESTMENTS) S.A. filed an appeal with the Tax Court. The tax court allowed the appeal of MIL (INVESTMENTS) S.A. and set aside the assessment issued by the tax authorities. An appeal was then filed ... Read more

The Tax Court of Canada upheld the right of Avotus Corporation to deduct from its Canadian income losses incurred by its subsidiary in Puerto Rico. The Tax Court found that the Puerto Rican subsidiary was Avotus’s agent under a validly executed agency agreement, rejecting the CRA’s claim that the written agreement was unacceptable because the subsidiary’s conduct was inconsistent with that of an agent ... Read more

The issue is whether MIL (INVESTMENTS) S.A. was exempt from Canadian income tax in respect of the capital gain of $425,853,942 arising in its 1997 taxation year on the sale of shares of Diamond Field Resources Inc. by virtue of the Canadian Income Tax Act and the Convention Between Canada and The Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital (“Treaty”). The Canadian Tax Authorities found that MIL was not exempt under local anti avoidance provisions and issued an assessment where the capital gain had been added to the taxable income. Disagreeing with the assessment, MIL (INVESTMENTS) S.A. filed an appeal with the Tax Court. Judgement of Tax Court The court allowed the Appeal of MIL investments and set aside the assessment issued by the tax authorities. Excerpts ... Read more

The CRA had issued a six assessments for fiscal years 1995-1999 based on the principle purpose of Univar's acquisition of shares of Van Waters & Rogers (Barbadosco) Ltd. being to permit Univar to avoid, reduce or defer the payment of tax that would otherwise be payable under the Act within the meaning of paragraph 95(6), and thus deemed not to have been acquired . "ITA 95(6) Where rights or shares issued, acquired or disposed of to avoid tax – For the purposes of this subdivision (other than section 90), (b) where a person or partnership acquires or disposes of shares of the capital stock of a corporation, either directly or indirectly, and it can reasonably be considered that the principal purpose for the acquisition or disposition of the shares is to permit a person to avoid, reduce or defer the payment of tax or any ... Read more

Miron and Frères Ltd acquired a farm from one of its shareholders, Gérard Miron, at a price ($600.000) far exceeding the original cost ($90.000) one year prior to the transaction. Miron and Frères Ltd claimed a capital cost allowance based on the price paid. Considering that the purchase was not a transaction “at arm’s length” but was one between a corporation and a controlling shareholder, the tax authorities rejected the claim and based the allowance on the original cost to the shareholder. Judgement of the Supreme Court The appeal filed by Miron and Frères Ltd was dismissed with costs. “Notwithstanding that an assessment is, by virtue of s. 42(6) deemed to be valid and binding, subject to appeal, the appellant saw fit to adduce no evidence with respect to the shares or the subject matter of control apart from the share-holdings as above set out ... Read more