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Report of Proceedings

of the

SIXTY-FOURTH

TAX CONFERENCE

convened by the

CANADIAN TAX FOUNDATION

at Calgary TELUS Convention Centre, Calgary

November 25-27, 2012

f TC CANADIAN ^1 mr I r TAX FOUNDATION 4M E/^E FONDATION CANADIENNE

DE FISCAUTÉ Leading tax thought Maitre à penser en fiscaiité

Contents

Opening Address 1:1 Marcel R. Coutu, "Keynote Address"

Recent Developments 2:1 Patrick Lindsay, Kim G.C. Moody, Robert Nearing, and Deen Olsen, "Current

Cases" 3:1 Jim Samuel and Timothy Wach, "Significant Aspects of the 2012 Technical Bill"

Legislative and Administrative Developments 4:1 Brian McCauley, Darcy Moch, Richard Montray, and Angelo Toselli, "The

CRA's Approach to Auditing" 5:1 Mickey Sarazin, "The Income Tax Rulings Directorate and Its Interaction with

Practitioners" 6:1 Scott Wilkie, Rapporteur, "International Tax: Joint Audits and Other

Compliance Developments" 7:1 Albert Baker and Alan Schwartz, "Risk Management Issues for Tax Practitioners" 8:1 Bob McCue and Greg Johnson, "Current Transactions: Cross-Border Income

Trusts/Foreign Asset Investment Trusts" 9:1 Murray J. Lee, "Cross-Border Trusts: US Tax Issues" 10:1 Jocelyn Blanchet, "The Impact of the 2012 Budget on Transactions Involving

Interests in Partnerships" 11:1 [Reserved for Michael J. Flatters] 12:1 Robert Kepes, Robert Kopstein, and Corinne MacCarthy, "The Meaning and

Effect of the Copthome Decision on 'Series of Transactions' for the Non-GAAR Provisions of the Income Tax Act"

13:1 Ron Durand and Lindsay Gwyer, "Surplus Stripping and Domestic Private Corporations"

14:1 Monica Biringer, "Surplus Stripping After Copthome: Non-Resident Corporations"

15:1 Greg Lindsey and Warren Pashkowich, "Anti-Deferral Rules for Partnership Income: Update and Selected Issues"

16:1 Albert De Luca, Geoff Hill, and Christy MacDonald, "The New SR & ED Regime: Evolution Rather Than Revolution"

17:1 Paul Lamarre, "Critical Issues in the Determination of Cost Under the Income Tax Act"

18:1 Charles T. Ormrod and John Bain, "Taxation Aspects of Cloud Computing"

International Taxation 19:1 Grace Perez-Navarro, "The OECD Tax Agenda" 20:1 Barry D. Home and Bill P. Nakano, "OECD Report on Hybrid Mismatch

Arrangements: The Canadian Response" 21:1 Terry McDowell, Sabrina Wong, and John Giakoumakis, "Upstream Loans,

Hybrid Surplus, and Other Technical Changes Affecting the Taxation of Foreign Affiliates"

ix

X COATßVTS

22:1 Paul Seraganian and Timothy Devetski, "Recent Developments in US Tax Law" 23:1 Sue Murray and John Oatway, "The Competent Authority Function in Canada" 24:1 Thomas B. Akin and Brandon Siegal, "GlaxoSmithKline: Study of a Supreme

Court Decision" 25:1 Mitch Sherman and Carrie Smit, "Thin Cap Gains Weight" 26:1 Angelo Nikolakakis and Penelope Woolford, "Foreign Affiliate Dumping" 27:1 Patrick Marley and Sandra Slaats, "Foreign Affiliate Reorganizations—Recent

Amendments to the Rules" 28:1 Drew Morier and Raj Juneja, "Foreign Affiliates: An Updated Primer" 29:1 Brian J. Arnold, Elinore J. Richardson, and Geoffrey Walker, "Judicial

Approaches to Treaty Interpretation—A Global Perspective" 30:1 Olivier Labelle, Benjamin Cubides, and Aaron Chai, "Tax Considerations for

Canadians Investing in Brazil and Colombia"

Other Specialist Areas 31:1 Hon. Eugene Rossiter, Hon. Wyman Webb, Ken Skingle, and Jehad Haymour,

"Tax Litigation: Current Topics" 32:1 Brian Moul, Heather Weber, and David Douglas Robertson, "Indirect Tax

Update, 2012" 33:1 Gerald Grenon and Daniel Sandler, "The Use of Access to Information

Processes in Tax Disputes" 34:1 Bruce Ball and Jillian Welch, "Update on the Prohibited Investment and

Advantage Rules Applicable to RRSPs, RRIFs, TPS As, and RCAs" 35:1 Anu Nijhawan and Anne Montgomery, "Cross-Border Employment Issues:

Ensuring a Successful Assignment to Canada" 36:1 Craig Maurice and Domenico Baruffaldi, "Resource Taxation Developments

and Trends" 37:1 Randy Bella and William Fowlis, "The Final Word on Trust Residence?

Thoughts on the Implications of the Garron Case" 38:1 Thomas Boddez and Gregory DelBigio, "Criminal Tax Evasion: Review and

Update" 39:1 Nadja Ibrahim, Abraham D. Piontnica, and Thomas M. Stephens, "Canadians

Purchasing US Real Estate"

Detailed Contents

OPENING ADDRESS Keynote Address, Marcel R. Coutu 1:1 Our National Aspirations 1:1 Oil Sands 101 1:2 Environmental Impact 1:2 Economic Impact 1:4 Technology 1:4 Community 1:5 Market Access 1:5 Summary 1:7 Notes 1:7

RECENT DEVELOPMENTS Current Cases, Patrick Lindsay, Kim G.C. Moody, Robert Nearing, and Deen Olsen 2:1 Statistics 2:2

Supreme Court of Canada 2:2 The Federal Court of Appeal 2:4

GlaxoSmithKline 2:5 Craig 2:8 Daishowa-Marubeni 2:10 Guindon 2:12 Sommerer 2:14 Triad Gestco, 1207192 Ontario Limited, and Global Equity 2:16

Avoidance Transaction: 1207192 Ontario Limited 2:16 Misuse or Abuse: Triad Gestco and 1207192 Ontario Limited 2:17 Misuse or Abuse: Global Equity 2:18

Notes 2:21

Significant Aspects of the 2012 Technical Bill, Jim Samuel and Timothy Wach 3:1 Abstract 3:1 Introduction 3:1 The Technical Bill: History and Context 3:2 Non-Resident Trusts 3:3 Foreign-Affiliate-Related Amendments: An Overview 3:4

Part 2: Foreign Affiliates—Surplus and Miscellaneous Other Rules 3:5 Part 3: Foreign Affiliates—Reorganizations, Distributions, and

Miscellaneous Rules 3:6 Upstream Loan Rules 3:7 Foreign Affiliate Distributions 3:9 Absorptive Mergers 3:10 Surplus Creation Anti-Avoidance Rule 3:10 Coming-into-Force Provisions 3:11

xi

xii DETAILED CONTENTS

Part 5: Other Foreign-Affiliate-Related Amendments 3:11 Miscellaneous 3:11 FTC Generator Rules 3:12

ATP Rules 3:14 SIFT Conversion Rules 3:14 Restrictive Covenants 3:14 The REIT Rules 3:15 The Alcatel Changes 3:15 Subsection 49(2) 3:16 Notes 3:16

LEGISLATIVE AND ADMINISTRATIVE DEVELOPMENTS The CRA's Approach to Auditing, Brian McCauley, Darcy Moch, Richard Montroy, and Angelo Toselli 4:1 Abstract 4:1 Question from the Floor 4:15

The Income Tax Rulings Directorate and Its Interaction with Practitioners, Mickey Sarazin 5:1 Increased Role for the Canadian Tax Foundation 5:3 Rulings Procedural Matters 5:3

Severing of Rulings 5:3 Rulings on Completed Transactions 5:3

GAAR Committee 5:4 The Income Tax Folio Project 5:4 Technical Capacity Building Forums 5:5 The Red Tape Reduction Commission and the CRA 5:6 Compliance Initiatives 5:7 Objections 5:9 Non-Resident Employees Attending Conferences in Canada 5:9 Related-Party Initiative in Respect of High Net Worth Individuals 5:10 Recent CRA Files of Interest 5:12

Employee Buyco Rulings 5:12 Allocation of Cross-Border Employee Stock Option Benefits 5:12

Background 5:12 OECD Commentary 5:13 Change in Domestic Position 5:13

Control in the Long Run 5:14 Surplus-Stripping Files Considered by the GAAR Committee 5:15

PUC Fabrications 5:15 Subsection 75(2) Strips 5:16

Rulings Affected by Proposed Section 212.3 5:16 Notes 5:17

International Tax: Joint Audits and Other Compliance Developments, Scott Wilkie, Rapporteur 6:1 Abstract 6:1 Globalization, Global Enterprise, and Tax Compliance:

Origins of the Joint Audit 6:2

DETAILED CONTENTS xiii

International Compliance Initiatives: Underlying Themes 6:3 The Joint Audit Concept 6:4 Joint Audit Situations 6:6 The "Audit" Part of "Joint Audit": What It Is and Is Not 6:7 Metamorphosis of a Joint Audit 6:8 Looking Forward 6:9 Notes 6:10

Risk Management Issues for Tax Practitioners, Albert Baker and Alan Schwartz 7:1 Abstract 7:1 The Accounting Firm's Perspective 7:1

Client and Firm Risk Tolerance 7:2 The Current Administrative Environment 7:3 Types and Sources of Risk 7:5

The Law Firm's Perspective 7:8 The Environment 7:9 Class Actions 7:9 Advance Income Tax Rulings 7:9 Second Opinions 7:10 Basis of Liability in Class Actions 7:10 Standard Expected of a Tax Specialist 7:11 Duty To Warn 7:11 Disclaimers 7:12 Assumptions 7:12 Level of Opinion 7:13 Recent Class Actions 7:13

Robinson v. Rochester Financial 7:13 Lipson v. Cassels Brock & Blackwell LLP 7:14 Cannon v. Funds for Canada Foundation 7:15

Notes 7:17

Current Transactions: Cross-Border Income Trusts/ Foreign Asset Investment Trusts, Bob McCue and Greg Johnson 8:1 Introduction 8:1 Historical Background 8:2

Market Conditions Before October 31, 2006 8:2 October 31, 2006 Announcement 8:3 Conversions to Corporations 8:3 Emergence of CBITs 8:4 July 20, 2011 Announcement 8:5 Summary of Completed CBITs/IPO Success Factors 8:6

CBIT Structure 8:6 SIFT Tax Basics 8:6 Basic Overview of the CBIT Structure 8:8 Mutual Fund Trust Status 8:8 Non-SIFT Status 8:9

Non-Portfolio Property 8:10 Portfolio Investment Entity 8:11

xiv DETAILED CONTENTS

Residence and Carrying-On-Business Issues Related to the CBIT Structure 8:14

CBIT Structures 8:20 Trust-on-Partnership Structure (Eagle/Parallel) 8:20 Trust-on-Corporation Structure (Argent/Crius) 8:22

Argent 8:22 Crius 8:24

Executive Compensation 8:26 Canadian Taxation of Trust Distributions 8:28 Canadian Policy Issues and Legislative Risk 8:29 Alternative Structures/Future Developments 8:31

Dundee International REIT 8:31 Conversions 8:32 Spinout Transactions 8:32

Conclusion 8:32 Notes 8:33

Cross-Border Trusts: US Tax Issues, Murray J. Lee 9:1 Abstract 9:1 Introduction 9:1 Classification of the Trust Under the US Entity Classification Regulations .... 9:2

Business Entity Test 9:2 Ordinary Trusts 9:2 Business Trusts 9:3 Investment Trusts 9:3

The Foreign Entity Test 9:4 The Inversion Rules 9:4

Acquisition of Properties 9:5 80 Percent Ownership by Original Owners 9:5

Debt Versus Equity Characterization of the Notes 9:6 Background 9:6 The Mixon Factors 9:7

Name Given to the Instrument 9:7 Presence or Absence of a Fixed Maturity Date 9:8 Source of Principal and Interest Payments 9:8 Right To Enforce Payment 9:8 Right To Participate in Management 9:9 Subordination of Creditor Agreements 9:9 Intention of the Parties 9:9 Thin Capitalization 9:9 Loans Proportional to Corporate Ownership 9:10 Ability To Obtain Loans from Outside Lending Institutions 9:10 Use of Funds 9:10 Failure To Repay on Due Date 9:10

Summary 9:10 Transfer-Pricing Rules: Adequate Interest Rate 9:11 Interest Deductions Under IRC Section 163(j) 9:12 The FIRPTA Rules 9:12

DETAILED CONTENTS xv

The Anti-Conduit Regulations 9:13 Financing Arrangement 9:13 Financing Transaction 9:14 Conduit Entity 9:14

Partnership Withholding Issues 9:15 Branch-Level Interest Tax Rules 9:16

Branch Interest Withholding Tax 9:17 Tax Paid on Excess Interest 9:17


The Impact of the 2012 Budget on Transactions Involving Interests in Partnerships, Jocelyn Blanchet 10:1 Abstract 10:1 Introduction 10:1 Application of Subsection 100(1) Prior to the Partnership Amendments 10:2

Shortcomings of the Provision 10:4 Amendments to Subsection 100(1) 10:6

Series of Transactions or Events 10:7 Application to New Classes of Transferees 10:8 Indirect Ownership of Depreciable Capital Property 10:10 Anti-Avoidance Rule 10:11

Implications of the Amendments to Subsection 100(1) 10:13 Amendments to the Bump 10:13

Anti-Stuffing Rules 10:15 Conclusion 10:16 Notes 10:17

[Reserved for Michael J. Flatters] 11:1

The Meaning and Effect of the Copthome Decision on "Series of Transactions" for the Non-GAAR Provisions of the Income Tax Act, Robert Kepes, Robert Kopstein, and Corinne MacCarthy 12:1 Abstract 12:1 Introduction 12:2 Common-Law Series 12:2

When Does a Common-Law Series Start? 12:3 When Does a Common-Law Series End? 12:3

Subsection 248(10) and the Deemed Series 12:3 Timing of the Related Transactions in Relation to the

Common-Law Series 12:4 Related Transactions That Occur Prior to the Common-Law Series .... 12:5 Related Transactions That Occur After a Common-Law Series 12:5

Nature of the Relationship Between the Common-Law Series and the Related Transactions 12:9

When Does a Deemed Series Start and End? 12:11 Predictability and Fairness 12:12 "Series" Under GAAR 12:13 "Series" in the Non-GAAR Provisions of the Act 12:16

xvi DETAILED CONTENTS

Legislative and Interpretive Solutions 12:20 CRA Policy 12:22 Statutory Interpretation 12:23 Legislative Amendment 12:27


Surplus Stripping and Domestic Private Corporations, Ron Durand and Lindsay Gwyer 13:1 Abstract 13:1 What Is the Issue? 13:2 What Is Troubling the CRA? 13:5

Subsection 75(2) Strips 13:5 PUC Fabrication 13:6 Employee Share Buybacks 13:6

What Do the Judges Think? 13:9 What Does the Act Say? 13:13

Subsection 84(2) 13:13 Section 84.1 13:14

What Is the Future for Pipeline Planning? 13:15 What Is the CRA's Biggest Challenge? 13:16 Notes 13:17

Surplus Stripping After Copthorne: Non-Resident Corporations, Monica Biringer 14:1 Abstract 14:1 Is There an Overarching Policy Against Surplus Stripping? 14:1

Before Canada Trustee 14:2 After Canada Trustco and Before Copthorne 14:2 Copthorne 14:3 The Contrasting Approaches Regarding the Relevance of Former

Subsections 247(1) and 55(1) 14:6 Surplus Stripping and Non-Residents 14:7

Section 212.1 14:7 Section 212.2 14:9 Section 212.3 14:10 Legislative Amendment and the GAAR Analysis 14:12 Prelude to Collins & Aikman and GTE Venezuela: The Limited Scope

of Section 212.1 14:16 Collins & Aikman 14:17 GTE Venezuela 14:19 Conclusions: Section 212.1 14:20

Notes 14:21

Anti-Deferral Rules for Partnership Income: Update and Selected Issues, Greg Lindsey and Warren Pashkowich 15:1 Abstract 15:1 Introduction 15:2

DETAILED CONTENTS xvii

General Scheme of the Anti-Deferral Rules 15:2 Overview 15:2 Adjusted Stub Period Accrual 15:3 Transitional Reserve 15:3 Fiscal Period-End Alignment Election 15:4 December 2012 Proposed Amendments 15:4

The Impact of the Rules 15:4 Expected and Actual Impact 15:4 Future Expectations for Deferral Partnerships 15:6

Certain Considerations for Liquidating Partnership Structures 15:6 Maintaining Transitional Reserves 15:11

Considerations for Maintaining, Forming, or Acquiring Partnerships 15:12 Flowthrough of Partnership Income and Loss 15:12 International Tax Planning 15:13 Purchase and S ale Transactions 15:13

Selected Technical Issues 15:14 Corporate Windups 15:14

ASPA 15:14 Transitional Reserve 15:15 Summary 15:17

SIFT Trust Windups 15:17 Partnership Fiscal Period-Ends 15:18 Interaction with the Successor Rules 15:19

Increasing Profitability 15:20 Acquisition Transactions 15:20 Conclusion 15:22 Notes 15:22

The New SR & ED Regime: Evolution Rather Than Revolution, Albert De Luca, Geoff Hill, and Christy MacDonald 16:1 Abstract 16:1 Introduction 16:1 Canada's Current SR & ED Incentive Program 16:3

Effectiveness of the Current SR & ED Program 16:5 SR & ED Changes in the 2012 Budget 16:5 Impact of the 2012 Proposals 16:6 Deloitte Survey on the 2012 Budget's Impact on Innovation 16:8 Direct or Indirect Funding 16:9

Global Competition for R & D Investment 16:10 United Kingdom 16:14 The Netherlands 16:14 Russia 16:15

Ways To Revolutionize the SR & ED program 16:16 Refundability 16:16

Accumulation of Pools of Earned but Unclaimed Tax Credits 16:16 Adverse US Tax Consequences 16:17 Lack of Visibility of Incentives 16:18

Patent Boxes 16:18

xviii DETAILED CONTENTS

Recent SR & ED Cases 16:20 Murray Arlin Dentistry Professional Corporation v. The Queen 16:20 Laboratoire Du-Var Inc. v. The Queen 16:20 1726437 Ontario Inc. (Airmax Technologies) v. The Queen 16:21

Conclusion 16:21 Appendix 1 16:22 Appendix 2 16:23 Notes 16:23

Critical Issues in the Determination of Cost Under the Income Tax Act, PaulLamarre 17:1 Abstract 17:1 Introduction 17:1 Basic Rules of Cost 17:2 What Expenditure, If Any? 17:2

Contingent Liabilities 17:3 "Contingent Amounts" Under Section 143.4 17:8 Asset Exchanges 17:11

Case Law 17:11 Replacement Property Rules 17:14

Issuance of Shares and Other Interests 17:15 Case Law 17:15 Section 143.3 17:17

Capital Contributions 17:20 Economic Risk 17:21

Does the Expenditure Relate to the Cost of the Asset? 17:24 General Principles 17:24 Property Rights and Restrictions 17:25 Allocation 17:26 Ownership 17:27

Notes 17:28

Taxation Aspects of Cloud Computing, Charles T. Ormrod and John Bain ... 18:1 Abstract 18:1 Introduction 18:2 Commodity Taxation in Canada 18:3

Goods and Services Tax/Harmonized Sales Tax 18:4 Place of Supply 18:6

Supply in Canada 18:6 Supply in a Province 18:7

Exported Cloud Supplies 18:8 Non-Residents Making Cloud Supplies in Canada 18:10 Quebec Sales Tax 18:11

Provincial Sales Taxes 18:11 Saskatchewan Provincial Sales Tax 18:11 Manitoba Retail Sales Tax 18:13 British Columbia Provincial Sales Tax 18:14

Conclusion 18:15

DETAILED CONTENTS xix

Income Taxation in Canada 18:16 The Meaning of "Business" 18:16 Location of a Business 18:18

Location of Conclusion of Sales Contracts 18:18 Profit Emanation 18:19 Activities Through an Agent 18:20 Statutory Extension of "Carrying On Business" 18:20

Taxes on Other Non-Resident Income 18:22 Other Income Tax Issues 18:24 Conclusion 18:25 Notes 18:25

INTERNATIONAL TAXATION The OECD Tax Agenda, Grace Perez-Navarro 19:1 The OECD: Better Policies for Better Lives 19:1 The OECD's Current Tax Agenda 19:2 The Forum on Tax Administration 19:3 International Tax and Competitiveness 19:3 Notes 19:7

OECD Report on Hybrid Mismatch Arrangements: The Canadian Response, Barry D. Home and Bill P. Nakano 20:1 Abstract 20:1 Introduction 20:1 The Hybrid Mismatch Arrangements Report 20:2

Definition of "Hybrid Mismatch Arrangements" 20:2 Policy Issues 20:3 Policy Options 20:4 Conclusions and Recommendations 20:6

Canadian Approach to Hybridity: A Historical Perspective 20:6 Non-Resident-Owned Investment Corporations 20:6 Synthetic Non-Resident-Owned Investment Corporation 20:8 Restriction on Outbound Financing Transactions 20:8 Fifth Protocol 20:10 Advisory Panel on Canada's System of International Taxation 20:11 Foreign Tax Credit Generator Rules 20:13 Inbound Debt-Dumping Rules 20:14

Organisation for Economic Co-operation and Development's Prior Analysis of Hybridity 20:15

Application of the Model Taxation Convention to Partnerships (1999) .... 20:15 Addressing Tax Risks Involving Bank Losses (2010) 20:16 Corporate Loss Utilization Through Aggressive Tax Planning (2011) 20:16 Tackling Aggressive Tax Planning Through Improved Transparency

and Disclosure (2011) 20:17 Organisation for Economic Co-operation and Development's Base

Erosion and Profit-Shifting Initiative 20:17 European Union's Response to Hybridity 20:19

XX DETAILED CONTENTS

Other Countries' Responses to Hybridity 20:20 United States 20:20

Introduction 20:20 Dual Consolidated Loss Rules 20:20 Section 894 and Availability of Treaty Benefits 20:20 Foreign Tax Credit Splitter Rules (2010) 20:21 Covered Asset Acquisitions (2010) 20:21

United Kingdom 20:22 Anti-Repo Rule in UK-US Tax Treaty (2001) 20:22 UK Arbitrage Rules (2005) 20:22

Denmark 20:23 Anti-Hybrid Legislation 20:23 Anti-Hybrid Debt Legislation 20:24 Anti-Reverse Hybrid Legislation 20:24

Information Sharing 20:24 Joint International Tax Shelter Information Centre 20:25 Aggressive Tax Planning Steering Group 20:25

Department of Finance's Response to the Hybrid Mismatch Arrangements Report 20:25

Canada Revenue Agency's Reaction to the Hybrid Mismatch Arrangements Report 20:25

Hybrids Pilot Group 20:26 Hybrids Centre of Expertise 20:26 Hybrids Information Session 20:27


Upstream Loans, Hybrid Surplus, and Other Technical Changes Affecting the Taxation of Foreign Affiliates, Terry McDowell, Sabrina Wong, and John Giakoumakis 21:1 Abstract 21:1 Introduction 21:1 The Resource Industry 21:2 The Upstream Loan Rules 21:3

Background 21:3 The Charging Provision: Proposed Subsection 90(6) 21:4

Conditions of Application 21:4 Application to Loans Made to Non-Residents (Including Non-CFAs)... 21:5

Income Inclusion 21:6 Consequences of the Application of Proposed Subsection 90(6) 21:6 Changes from the 2011 Proposals 21:6

Back-to-Back Loans 21:8 Exceptions to the Application of the Upstream Loan Rules 21:11

The Two-Year Repayment Exception 21:12 The Ordinary Course of Business Exception 21:14

Transitional Relief 21:15 Available Deduction and Reserve 21:16

Deduction Under Proposed Subsection 90(9) 21:16 Changes from the 2011 Proposals 21:18

xxii DETAILED CONTENTS

GlaxoSmithKline: Study of a Supreme Court Decision, Thomas B. Akin and Brandon Siegal 24:1 Abstract 24:1 The Long and Winding Road to the Supreme Court 24:2

Background 24:2 Tax Court 24:3 Federal Court of Appeal 24:3 Leave to Appeal to the Supreme Court of Canada 24:4 Hearing 24:5

Supreme Court Decision 24:5 Introduction (Paragraphs 1 to 3 and 17 to 19) 24:6 Just the Facts (Paragraphs 4 to 11) 24:7 Guidelines Not Law (Paragraphs 20 to 27) 24:9 Singleton and Shell Distinguished and Reaffirmed

(Paragraphs 28 to 38) 24:10 Economically Relevant Transactions To Be Considered

(Paragraphs 39 to 42) 24:11 Focus on the Licence Agreement (Paragraphs 43 to 52) 24:11 Back to the Tax Court (Paragraphs 52 and 53) 24:12 Opening the Door to Part XIII Withholding Tax (Paragraphs 55 to 60) .... 24:13 Additional Guidance (Paragraphs 61 to 65) 24:16

Reasonable Ranges 24:16 Safe Harbours 24:16 Transfer Pricing Should Not Result in a Misallocation of Earnings .... 24:17

Cross-Appeal (Paragraphs 66 to 68) 24:18 Conclusion 24:19 Notes 24:19

Thin Cap Gains Weight, Mitch Sherman and Carrie Smit 25:1 Abstract 25:1 Introduction 25:1 Proportionality 25:2 Changes to the Debt-to-Equity Ratio 25:3 Partnership as Borrower 25:4 Deemed Dividend Recharacterization 25:9

The Recharacterization Rule 25:9 Which Withholding Rate Applies? 25:10 The Partnership Rules 25:12

Upstream Loans 25:14 Conclusion 25:17 Notes 25:17

Foreign Affiliate Dumping, Angelo Nikolakakis and Penelope Woolford 26:1 Abstract 26:1 Introduction 26:1 Historical Overview 26:2

International Tax Fairness Initiative 26:3 Anti-Tax-Haven Initiative 26:4

DETAILED CONTENTS xxiii

Policy Considerations 26:5 Debt Dumping 26:5 Foreign Affiliate Dumping 26:6 Surplus Stripping 26:6

The FAD Rules: Criticisms and Suggested Explanations 26:7 Scope of the Rules 26:8

General Conditions and Exceptions 26:8 Series of Transactions 26:9 Control 26:9 Arm's-Length Transactions and Funding Sources 26:9 Indirect Investments 26:10 Investments 26:11

General 26:11 Acquisition of Shares of a Foreign Affiliate 26:11 Capital Contributions and Benefits 26:12 Indebtedness 26:14 PLOI Election 26:16 Extension of Maturity Dates 26:18 Indirect Acquisitions 26:19 Options or Interests 26:25

Effect 26:25 Subsection 212.3(2) 26:25 PUC Offset Mechanism 26:30 Dividend Substitution Election 26:35 PUC Reinstatement 26:37

Exceptions 26:40 Strategic Business Expansion 26:40 Reorganizations 26:47 PLOIs and the Exception to Subsection 15(2) 26:51

Corporate Migration 26:52 Immigration 26:53 Emigration 26:54

Acquisition Planning and Surplus Stripping 26:55 Conclusion 26:57 Notes 26:58

Foreign Affiliate Reorganizations—Recent Amendments to the Rules, Patrick Marley and Sandra Slaats 27:1 Abstract 27:1 Introduction 27:1 Mergers/Demergers of Foreign Affiliates 27:2

Foreign Mergers 27:2 Foreign Demergers 27:5

Shareholder Benefit: Prior Rules and the Amendments 27:8 Liquidations of Foreign Affiliates 27:13

Liquidation of a Top-Tier Foreign Affiliate 27:14 Subsection 88(3) and QUAD Election 27:14

DETAILED CONTENTS xxi

The Anti-Double-Counting Rules 21:19 Ultimate Repayment 21:22

GAAR Warning 21:23 Beyond Upstream Loans 21:23

FTC Generators 21:24 Hybrid Surplus 21:26 Foreign Accrual Capital Losses 21:27 Foreign Exchange 21:27


Recent Developments in US Tax Law, Paul Seraganian and Timothy Devetski 22:1 Abstract 22:1 Introduction 22:1 The Foreign Account Tax Compliance Act 22:2

General Overview of the FATCA Rules 22:2 Who Is Subject to FATCA? 22:3 Who Is Exempt from FATCA? 22:4 Impact of Failure To Comply with FATCA 22:4 Logistics of Compliance with FATCA 22:6

Recent Important FATCA Developments 22:7 Intergovernmental Agreements 22:7 The Final FATCA Regulations 22:8

Foreign Bank Account Reports 22:11 Special Rules 22:11 Signature Authority but No Financial Interest 22:12 Effective Date 22:12

Anti-Inversion Rules 22:13 Employees 22:14 Assets 22:15 Gross Income 22:15

Foreign Governmental Income Tax Exception: Section 892 22:16 Overview of Section 892 22:16 The Proposed Section 892 Regulations 22:18

The Inadvertent Commercial Activity Exception 22:18 Annual Testing for Commercial Activities 22:19 The Limited Partner Exception 22:20

Notes 22:21

The Competent Authority Function in Canada, Sue Murray and John Oatway 23:1 Abstract 23:1 Introduction 23:1 Competent Authority Responsibility 23:1 CASD Programs 23:2 APA Program 23:2 Arbitration 23:3 Conclusion 23:4 Notes 23:5

xxii DETAILED CONTENTS

GlaxoSmithKIine: Study of a Supreme Court Decision, Thomas B. Akin and Brandon Siegal 24:1 Abstract 24:1 The Long and Winding Road to the Supreme Court 24:2

Background 24:2 Tax Court 24:3 Federal Court of Appeal 24:3 Leave to Appeal to the Supreme Court of Canada 24:4 Hearing 24:5

Supreme Court Decision 24:5 Introduction (Paragraphs 1 to 3 and 17 to 19) 24:6 Just the Facts (Paragraphs 4 to 11) 24:7 Guidelines Not Law (Paragraphs 20 to 27) 24:9 Singleton and Shell Distinguished and Reaffirmed

(Paragraphs 28 to 38) 24:10 Economically Relevant Transactions To Be Considered

(Paragraphs 39 to 42) 24:11 Focus on the Licence Agreement (Paragraphs 43 to 52) 24:11 Back to the Tax Court (Paragraphs 52 and 53) 24:12 Opening the Door to Part XIII Withholding Tax (Paragraphs 55 to 60) .... 24:13 Additional Guidance (Paragraphs 61 to 65) 24:16

Reasonable Ranges 24:16 Safe Harbours 24:16 Transfer Pricing Should Not Result in a Misallocation of Earnings .... 24:17

Cross-Appeal (Paragraphs 66 to 68) 24:18 Conclusion 24:19 Notes 24:19

Thin Cap Gains Weight, Mitch Sherman and Carrie Smit 25:1 Abstract 25:1 Introduction 25:1 Proportionality 25:2 Changes to the Debt-to-Equity Ratio 25:3 Partnership as Borrower 25:4 Deemed Dividend Recharacterization 25:9

The Recharacterization Rule 25:9 Which Withholding Rate Applies? 25:10 The Partnership Rules 25:12

Upstream Loans 25:14 Conclusion 25:17 Notes 25:17

Foreign Affiliate Dumping, Angelo Nikolakakis and Penelope Woolford 26:1 Abstract 26:1 Introduction 26:1 Historical Overview 26:2

International Tax Fairness Initiative 26:3 Anti-Tax-Haven Initiative 26:4

DETAILED CONTENTS xxiii

Policy Considerations 26:5 Debt Dumping 26:5 Foreign Affiliate Dumping 26:6 Surplus Stripping 26:6

The FAD Rules: Criticisms and Suggested Explanations 26:7 Scope of the Rules 26:8

General Conditions and Exceptions 26:8 Series of Transactions 26:9 Control 26:9 Arm's-Length Transactions and Funding Sources 26:9 Indirect Investments 26:10 Investments 26:11

General 26:11 Acquisition of Shares of a Foreign Affiliate 26:11 Capital Contributions and Benefits 26:12 Indebtedness 26:14 PLOI Election 26:16 Extension of Maturity Dates 26:18 Indirect Acquisitions 26:19 Options or Interests 26:25

Effect 26:25 Subsection 212.3(2) 26:25 PUC Offset Mechanism 26:30 Dividend Substitution Election 26:35 PUC Reinstatement 26:37

Exceptions 26:40 Strategic Business Expansion 26:40 Reorganizations 26:47 PLOIs and the Exception to Subsection 15(2) 26:51

Corporate Migration 26:52 Immigration 26:53 Emigration 26:54

Acquisition Planning and Surplus Stripping 26:55 Conclusion 26:57 Notes 26:58

Foreign Affiliate Reorganizations—Recent Amendments to the Rules, Patrick Marley and Sandra Staats 27:1 Abstract 27:1 Introduction 27:1 Mergers/Demergers of Foreign Affiliates 27:2

Foreign Mergers 27:2 Foreign Demergers 27:5

Shareholder Benefit: Prior Rules and the Amendments 27:8 Liquidations of Foreign Affiliates 27:13

Liquidation of a Top-Tier Foreign Affiliate 27:14 Subsection 88(3) and QLAD Election 27:14

xxiv DETAILED CONTENTS

Suppression Election 27:17 Non-Treaty-Protected Taxable Canadian Property 27:19

Foreign Affiliate Dumping Rules 27:19 Liquidation of a Lower-Tier Foreign Affiliate 27:21


Foreign Affiliates: An Updated Primer, Drew Morier and Raj Juneja 28:1 Abstract 28:1 Introduction 28:1 Overview 28:2 Underlying Concepts 28:2 Foreign Affiliates and Controlled Foreign Affiliates 28:4 Characterization of Income Under the Foreign Affiliate System 28:6 Income from an Active Business 28:9

Subparagraph 95(2)(a)(i): Directly Related Income 28:10 Payments Between Entities: Subparagraph 95(2)(a)(ii) 28:13 Clause 95(2)(a)(ii)(D) 28:14 Income from Factoring of Trade Accounts Receivable and Loans or

Lending Assets: Subparagraphs 95(2)(a)(iii) and (iv) 28:16 Excluded Property That Is Not Capital Property:

Subparagraph 95(2)(a)(v) 28:17 Currency Hedging with Respect to Paragraph 95(2)(a) Amounts:

Subparagraph 95(2)(a)(vi) 28:17 Income from Property 28:17

Investment Business 28:17 Income from Trading or Dealing in Indebtedness: Paragraph 95(2)(1) 28:19

Income from a Business Other Than an Active Business 28:20 Paragraph 95(2)(a. 1): Income from the Sale of Property 28:20 Paragraph 95(2)(a.2): Income from the Insurance of Canadian Risks 28:23 Paragraph 95(2)(a.3): Income from Canadian Debt or Lease

Obligations 28:24 Paragraph 95(2)(a.4): Income from Debt or Lease Obligations of

a Partnership 28:26 Paragraph 95(2)(b): Income from the Provision of Services 28:28

Income from a Non-Qualifying Business 28:29 Summary of Characterization of Income 28:29 Computation of FAPI 28:30 An Introduction to the Surplus Rules 28:35

Example 1: Hybrid Surplus 28:38 Example 2: Taxable Surplus 28:39

Surplus Computation 28:40 Upstream Loans 28:42 Taxation of FAPI 28:44 Foreign Affiliate Reorganizations 28:47 Conclusion 28:48 Notes 28:48

DETAILED CONTENTS xxv

Judicial Approaches to Treaty Interpretation—A Global Perspective, Brian J. Arnold, Elinore J. Richardson, and Geoffrey Walker 29:1 Abstract 29:1 Introduction 29:2 Treaty Interpretation 29:2

Introduction 29:2 The Ben Nevis Case 29:3 General Comments on Treaty Interpretation 29:7 The Relationship Between Tax Treaties and Domestic

Anti-Avoidance Rules 29:7 Introduction 29:7 The Sommerer Case 29:8

Beneficial Ownership 29:13 Introduction—The Concept of Beneficial Ownership 29:13 Overview of Domestic Legislation 29:14 Examples of Approaches in Specific Countries 29:14

China 29:14 Korea 29.16 Denmark 29:16 Other EU Countries 29:18

Overview of the Jurisprudence on Beneficial Owner 29:19 No Beneficial Owner Terminology in Double Tax Treaty 29:22 Early Cases on Beneficial Owner 29:24 Indofood—The Watershed Decision 29:26 Canadian Cases 29:28 European Jurisprudence 29:31

Spain 29:31 France 29:34 Switzerland 29:36 Italy 29:39 Denmark 29:40

Asian Jurisprudence 29:43 Korea 29:43 India 29:46

OECD Commentaries—Revising the Meaning of "Beneficial Ownership" .... 29:52 Background 29:53

1977 Commentary 29:53 1986 and 2003 Clarifications 29:53 2011 Discussion Draft 29:54 2012 Revised Draft 29:54

Comparing the Discussion Drafts 29:55 "Full Right To Use and Enjoy" 29:55 Other Influences 29:57 Criticism of "Full Right To Use and Enjoy" 29:59 2012 Revised Draft 29:59

Autonomous Treaty Meaning 29:62 Notes 29:63

xxvi DETAILED CONTENTS

Tax Considerations for Canadians Investing in Brazil and Colombia, Olivier Labelle, Benjamin Cubides, and Aaron Chai 30:1 Abstract 30:1 Introduction 30:2 Brazil 30:2

Investment Potential 30:2 Overview of the Brazilian Tax System 30:3

Income Taxes 30:3 Revenue Taxes 30:3 Indirect Taxes 30:3 Withholding Taxes 30:4 Transfer-Pricing Regime 30:5 Treatment of Investments from Blacklist and Greylist Jurisdictions .... 30:6

Choice of Business Entity 30:7 Brazilian and Canadian Tax Considerations Related to the Transfer of

Capital and Assets 30:7 Movement of Capital 30:7 Movement of Assets 30:11

Colombia 30:12 Investment Potential 30:12 Overview of the Colombian Tax System 30:13

Income Tax 30:13 Transfer-Pricing Regime 30:14 Tax Haven List 30:14 Capital Gains Tax 30:14 Financial Transactions Tax 30:15

Choice of Business Entity 30:15 Colombian and Canadian Tax Considerations Related to the Transfer of

Capital and Assets 30:16 Movement of Capital 30:16 Movement of Assets 30:18 Intangible Property and Services 30:20 A Transaction of Interest: Colombian Escision 30:21

Notes 30:22

OTHER SPECIALIST AREAS Tax Litigation: Current Topics, Hon. Eugene Rossiter, Hon. Wyman Webb, Ken Skingle, and Jehad Hayrnour 31:1 Introduction 31:1 Recent Changes at the Tax Court 31.2 Proposed Legislative Amendments To Improve Caseload Management

of the Tax Court (June 8, 2012) 31:2 Pro Tanto Judgments: Disposing of One or More Issues Separately

(Proposed Subsections 171(2)-(4)) 31:2 A Separate Issue Judgment Under Amended Section 174 or a Section 173

Reference to the Tax Court? 31:4 Common Questions, Group Appeals, and Lead Cases

(Amended Section 174) 31:6 Increased Monetary Limits for Informal Procedure Appeals 31:8

DETAILED CONTENTS xxvii

Pre-Trial Litigation Process Conferences 31:9 Awarding Costs When a Formal Settlement Offer Has Been Made 31:12 Reopening a Hearing After Trial 31:17 Questions from the Floor 31:19 Notes 31:20

Indirect Tax Update, 2012, Brian Moul, Heather Weber, and David Douglas Robertson 32:1 Abstract 32:1 Introduction 32:1

British Columbia's "Better-Stupid" Tax 32:2 Quebec's Unique Harmonization 32:2 Prince Edward Island Sales Tax Harmonization 32:3 Manitoba PST Imposed on Insurance Premiums 32:3

British Columbia's New Provincial Sales Tax Act 32:3 Tangible Personal Property 32:5

Tax Rates 32:5 Tax on Purchase in British Columbia 32:6 Tax on Leases , 32:7 Tax on Imported Property ' 32:8 Tax on Imported Property Outside Canada 32:9 Affixed Machinery 32:9 2 Percent Exemption from Tax on Fixtures/Affixed Machinery 32:11

Real Property 32:11 Construction/Supply and Install Contracts 32:12

Software 32:13 Energy Products 32:15 Liquor 32:17 Taxable Services 32:18

Related Services (in Respect of Tangible Personal Property) 32:18 Manufacturing and Fabrication Services 32:21 Services in Relation to Affixed Machinery 32:21 Services to Real Property 32:24 Legal Services 32:24 Telecommunication Services 32:25 Accommodation 32:26 Services to Software 32:27

Gifts 32:28 Gift of Liquor from Outside Province 32:29 Gift of Used Boat Located in Province 32:29 Gift of Used Passenger Vehicle Located in Province 32:29

Registration and Collection 32:30 Direct Sellers and Independent Sales Contractors 32:32 Small Sellers 32:33 General Anti-Avoidance Rule 32:33 Deeming Rule for Non-Residents Who Carry On Business in

British Columbia 32:33 Assessments Can Increase on Appeal 32:34 Bulk Sales Certificates on Sales of Businesses 32:35

xxviii DETAILED CONTENTS

Transition Rules from HST to GST Plus PST 32:35 Changes to the Excise Tax Act Regulations 32:36 Collecting and Remitting the HST, GST, and PST2: Straddle Period .... 32:36 New Residential Housing: Transitional Rules 32:37 Improvements to Real Property 32:43 Basic Tax Content in British Columbia After April 1, 2013 32:43

Quebec "Harmonization" and the Amended Sales Tax 32:46 Removal of GST from the Tax Base 32:46 Movable Property and Services 32:47 Immovables 32:47 Input Tax Refund Restrictions for Large Businesses 32:47 Exemption of Financial Services 32:48 Federal and Provincial Governments in Quebec Agree To Pay QST 32:49

Prince Edward Island Harmonization 32:49 Transitional Rules 32:50

Real Property 32:51 Financial Institutions 32:52 Winding Down the PST 32:52

Manitoba Taxes Insurance Premiums 32:52 Taxable Insurance Contracts 32:53 Non-Taxable Insurance Contracts 32:54 Tax on Insurance Purchases 32:54 Requirement To Register and Collect Tax 32:54

Notes 32:54

The Use of Access to Information Processes in Tax Disputes, Gerald Grenon and Daniel Sandler 33:1 Abstract 33:1 Introduction 33:2

Other Means of Obtaining Information from the CRA 33:3 Applications for Information Under the AIA or the PA 33:4

Purpose of the Legislation 33:4 Application Process 33:6 Cost 33:8 Time Frame 33:8 Grounds for Refusing To Provide Information 33:10

Mandatory Class-Based Exemptions 33:10 Mandatory Injury-Based Exemptions 33:11 Discretionary Class-Based Exemptions 33:11 Discretionary Injury-Based Exemptions 33:12 Exclusions from the AIA and the PA 33:12

Dispute Resolution 33:13 Complaints to the Commissioner 33:13 Judicial Review by the Federal Court 33:15

Jurisprudence 33:18 Canadian Council of Christian Charities 33:19 N ewfoundland Power Inc 33:23 Sherman 33:24 Ontario (Finance) v. Ontario (IPC) 33:26

DETAILED CONTENTS xxix

Practical Considerations 33:29 Notes 33:31

Update on the Prohibited Investment and Advantage Rules Applicable to RRSPs, RRIFs, TPS As, and RCAs, Bruce Ball and Jillian Welch 34:1 Abstract 34:1 Extension of the TFSA Rules to RRSPs and RRIFs 34:1

Prohibited Investments 34:3 Advantages 34:4

The CRA's View on the Advantage and Prohibited Investment Rules 34:6 Reinvestment of Mutual Fund Distributions 34:6 Shares with Terms Not Indicative of an Open Market 34:6 Investments that Become Significant Interests Without the

Annuitants' Knowledge 34:7 Treatment of Swap Transactions in General 34:7 Exercise of Warrants and Other Convertible Securities Related

to a Transitional Prohibited Investment 34:7 Fair Market Value Cash Sale of a Prohibited Investment 34:7

Joint Committee and Industry Submissions on Bill C-13 34:8 Grandfathering for Existing Prohibited Investments 34:8 Investments Having Portfolio Attributes 34:9 Open Market Test Uncertainty 34:11 Uncertainty of Tax Treatment for Investments That Become

Prohibited Investments 34:12 Swap Transaction Exception for Prohibited Investments 34:12 Concerns Not Addressed by Finance 34:13

Issues Related to the Significant Interest Test 34:13 Extension of the Advantage and Prohibited Investment Rules to RCAs 34:16

The Rules as They Apply to RCAs 34:18 CRA Interpretations of RCA Changes 34:21


Cross-Border Employment Issues: Ensuring a Successful Assignment to Canada, Anu Nijhawan and Anne Montgomery 35:1 Abstract 35:1 Introduction 35:1 A Typical Example 35:2 The Basics: Right To Tax and Sourcing Rules 35:3 Services Permanent Establishment 35:5 Regulation 105 Withholding 35:7 Regulation 102 Withholding 35:8

Directors' Fees 35:8 Treaty Relief 35:9 Withholding Waivers 35:10

Social Security and Other Benefits 35:11 Tax Equalization Programs 35:12

Equalization Policy 35:12 Shadow Payroll 35:14

XXX DETAILED CONTENTS

Equity Compensation in the Cross-Border Context 35:15 Restricted Stock 35:15

Restricted Stock Trust 35:16 Restricted Stock Units 35:17

Stock Option Considerations 35:18 Common Relocation Benefits 35:19

Moving Expenses 35:19 Housing Benefits 35:20 Cost-of-Living Allowance 35:21

Other Fringe Benefits 35:22 Employer-Provided Parking 35:22 Health and Medical Benefits 35:22 Tax Return Preparation 35:22 Group Term Life Insurance 35:22


Resource Taxation Developments and TVends, Craig Maurice and Domenico Baruffaldi 36:1 Abstract 36:1 Introduction 36:1 Tax Legislation 36:2 Globalization of the Resource Sector 36:5

Inbound Investment 36:5 Capitalization 36:6 Dividend Withholding and Capital Gains 36:8 Partnerships 36:9

Outbound Investment 36:10 The Foreign Affiliate Regime 36:10 Cross-Border Income Funds 36:11

Update on Flowthrough Shares 36:12 Indemnities and the JES Investments Decision 36:12 Unit Offerings: Allocation Issues and Solutions 36:15 Subscription Receipts for Flowthrough Shares 36:17

The Renewable Energy Sector 36:18 Audit Issues Faced by Resource Companies 36:20

Audit of Expenditure Pools (CEE, CDE, and COGPE) 36:20 CRA Review of Income Trust Conversions 36:21 Documentation 36:22


The Final Word on Trust Residence? Thoughts on the Implications of the Garron Case, Randy Bella and William Fowlis 37:1 Abstract 37:1 Introduction 37:1 Case History 37:2

General Facts 37:2 The Decision of the Tax Court of Canada 37:4

DETAILED CONTENTS xxxi

The Decision of the Federal Court of Appeal 37:6 The Decision of the Supreme Court of Canada 37:7

Test and Principles to Determine Trust Residence 37:7 Case Application and Consideration 37:8 Key Factors Considered by the Courts 37:9 Important Decisions Affecting Management and Control of a Trust 37:10 Planning 37:11 Best Practices for Establishing Trust Residence 37:12

Trustee Selection 37:13 Process of Managing and Controlling a Trust 37:14 Fulfilling Fiduciary Duties 37:15 Structure of the Trust 37:15 Selecting and Dealing with Advisers 37:15 Trust Property and Investments 37:16 Beneficiary Considerations 37:17 Communications and Dealing with Beneficiaries, the Settlor,

and Others 37:17 The Power To Appoint or Remove Trustees 37:17 Trust Books, Records, and Accounts 37:18 Overall Comments on Best Practices 37:18

CRA Audit Activity 37:19 Reassessment Approach 37:20

Other Interesting Issues 37:20 "With Such Modifications As Are Appropriate" 37:20 Impact of a Protector on Trust Residence 37:22 Letter of Wishes Versus a Trustee Memorandum 37:23 Changes in Residence of a Trust 37:23


Criminal Tax Evasion: Review and Update, Thomas Boddez and Gregory DelBigio 38:1 Abstract 38:1 Introduction 38:2 The Statutory Framework: Civil Assessments, Offences, and Punishment .... 38:3

Civil Assessments 38:3 ITA Section 231.1—Audit and Inspection 38:3 ITA Section 231.2—Requirement To Provide Documents or Information ... 38:3 ITA Section 231.3—Search Warrant 38:4 Criminal Code Section 487(1)—Search Warrant 38:4 Criminal Code Sections 487.012 and 487.013—Production Orders 38:4 ITA Subsection 238(1)—Failure To File or Failure To Comply 38:4 ITA Subsection 239(1)—Tax Evasion 38:5 Punishment 38:5 Criminal Code Section 380—Fraud 38:5 Conspiracy, Counselling, Aiding, and Abetting 38:7

The Defining Features of Tax Evasion 38:7 Actus Reus: Taxability 38:8 Mens Rea: The Requisite Culpable State of Mind 38:9

xxxii DETAILED CONTENTS

The Constitutional Framework 38:11 Overview of an Investigation 38:11 Constitutional Principles 38:12 Rv. Jarvis—Crossing the Rubicon from Audit to Investigation 38:16

Misuse of Statutory Compulsion Tools 38:18 ITA Section 231.1 38:18 ITA Section 231.2 38:20

Tax Advisers with Clients Under Investigation 38:22 Purpose of the Information Request 38:23 Request or Demand with Force of Law? 38:24 Considering the Terms of the Request or Demand 38:24


Canadians Purchasing US Real Estate, Nadja Ibrahim, Abraham D. Piontnica, and Thomas M. Stephens 39:1 Abstract 39:1 Introduction 39:1

Fact Scenario 39:2 Personal Ownership by Stan 39:3

US Estate Tax Considerations 39:3 Canadian Deemed Disposition Considerations 39:4 Canadian and US Income Tax Considerations in Respect of

Rental Income 39:5 Canadian and US Income Tax Considerations on Sale 39:6 Planning Considerations 39:6

Tax Deferral 39:7 Second-To-Die Planning 39:7

Filing Considerations 39:8 Personal Ownership by Stella (the Lower-Income Spouse) 39:8

US Estate Tax Considerations 39:8 Planning Considerations 39:9 Other Considerations 39:9

Personal Ownership in Joint Tenancy 39:9 General Description 39:9 US Gift Tax Considerations 39:10 US Estate Tax Considerations 39:10 Canadian Deemed Disposition Considerations 39:11 Planning Considerations 39:11

Tenants in Common 39:11 Personal Ownership with Non-Recourse Debt 39:12

US Estate Tax Considerations 39:12 Planning Considerations 39:12

Personal Ownership with Life Insurance 39:13 US Estate Tax Considerations 39:13

Gifts of US Real Estate 39:13 US Gift Tax Exposure 39:14 Gift to Spouse 39:14

DETAILED CONTENTS xxxiii

Gift to Other Recipients 39:14 Gift Tax Summary 39:15 Double Taxation Problem 39:15 Triple Taxation Issue 39:15

Canadian Discretionary Trust 39:16 General Description 39:16 US Estate and Gift Tax Considerations 39:17 Canadian Income Tax Considerations 39:17 Canadian and US Income Tax Considerations on Sale of the Property 39:18 Filing Considerations 39:18

Partnerships 39:19 Partnership Structure—Check-the-Box Election 39:19

Election 39:20 Post Mortem Election 39:20

US Gift Tax Considerations 39:21 Canadian and US Income Tax Considerations 39:21

Consequences of US Check-the-Box Election 39:22 Corporate Ownership 39:23

Single-Purpose Canadian Corporation 39:23 US Gift Tax Considerations 39:24 US Estate Tax Considerations 39:24 Canadian and US Income Tax Considerations 39:25 Other Considerations 39:26 Corporate Investor 39:26

US Limited Liability Company 39:27 Conclusion 39:27 Appendix 39:28 Notes 39:29