step 18th national conference · life interest trusts january 15, 2016, proposals •...
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Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 1
STEP 18th NATIONAL CONFERENCE
JUNE 9-10, 2016
Tax Update July 2015 to June 2016
David Stevens
Gowling WLG
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 2
TOPICS
Legislative Developments:
•July 31, 2015 Legislative Proposals (Budget 2015; died with election call)
•December 7, 2015 NWMM - Bill C-2
•January 15, 2016 Legislative Proposals
•March 22, 2016 Budget
•April 16, 2016 Legislative Proposals
•April 18, 2016 NWMM – Bill C-15
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 3
TOPICS
Case Law Developments:
•Residence of a trust – Discovery Trust v Canada (NLTDG) and Boettger Trust v Quebec (QCCQ)
•110.6 – Pellerin v The Queen (TCC)
•Control and associated corporations – Kruger Wayagamack Inc v The Queen (TCC)
•Principal residence exemption and separated spouses – Balanko Estate v The Queen (TCC)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 4
TOPICS
Case Law Developments: (cont’d)
•RDTOH and late filed returns – Presidential MSH Corp v The Queen (TCC) and Nanica Holdings Ltd v The Queen (TCC)
•Registered Charities – Public Television Association of Quebec v MNR (FCA)
•Charitable gifts –Glover v The Queen (TCC), Mariano v The Queen (TCC), Moshurchak v The Queen (TCC)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 5
TOPICS
Case Law Developments: (cont’d)
•Privilege – Zeldap Corporation v The Queen (TCC) and MNR v BP Energy (TCC)
•Privilege – AG of Canada (CRA) v. Chambre des notaires du Quebec (SCC); MNR v Duncan Thompson (SCC)
•Section 160 – Kuchta v The Queen (TCC)
•Rectification – Canada Life v Canada (ONSC)
•Registered plans – Olympia Trust Co v The Queen (TCC)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 6
TOPICS
Case Law Developments: (cont’d)
•Rescission – JAFT Corp v Jones (Man CA)
•Advisor penalties – Guindon v The Queen (SCC)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 7
LEGISLATIVE DEVELOPMENTS
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 8
LEGISLATIVE DEVELOPMENTS
July 31, 2015, Proposals
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 9
Gifts Involving Private Company Shares
or Real Estate
• Exemption from capital gains tax for certain dispositions involving private corporation shares or real estate where cash proceeds are donated to a registered charity within thirty days (38, 38.3, 38.4)
• Now see Budget 2016 – Liberal government is not going forward with this proposal
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 10
Registered Charity Ownership of LP Units
• 253.1 amended to permit registered charity to own LP units subject to several conditions, including limit on concentration (no more than 20%) and arm’s length with GP
• 149.1 amended to make excess corporate holdings rules applicable on an LP ‘look-through’ basis
• This amendment is now included in Bill C-15
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 11
Amendments to section 55
• Now included in Bill C-15, largely unchanged
• Discussed in more detail below under Bill C-15
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 12
Withholding for Non-resident Employees
• 153 withholding exception for payments by a qualifying non-resident employer to a qualifying non-resident employee
• Employees who work in Canada for less than 45 days in the calendar year or who are present in Canada for less than 90 days in any 12-month period
• Employers can be certified by Minister
• This measure is now included in Bill C-15, unchanged
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 13
LEGISLATIVE DEVELOPMENTS
December 7, 2015 Proposals
Bill C-2
(third reading 19 May 2016)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 14
Tax Rates for Individuals
• New federal bracket for taxable income over $200,000
• Applicable rate is 33% (117(2))
• Reduction of rate for second tier ($45,282 to $90,563) from 22% to 20.5%
• Consequential amendments to
– Donation tax credit – 33% for top rate payers (118.1(3)) (now see Bill C-15)
– Tax on split income – 33% (120)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 15
Tax Rates for Trusts
• Trust tax rate increased to 33% (122) (now see Bill C-15)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 16
Tax Rates for CCPC’s
• Additional Part I tax on aggregate investment income increased from 6 2/3% to 10 2/3% (123.3)
• Consequential amendments to RDTOH rules
– Amount added to RDTOH increased from 26 2/3% to 30 2/3% of aggregate investment income
– Dividend refund rate increased from 1/3 to 38 2/3% of dividend (129)
• Part IV tax increased from 33 1/3% to 38 1/3% (186)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 17
TFSA Limits
• TFSA limits reduced from $10,000 to $5,500
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 18
LEGISLATIVE DEVELOPMENTS
January 15, 2016, Proposals
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Life Interest Trusts
Background
•Bill C-43, enacted Dec. 2015, effective January 1, 2016, modified rules governing taxation of life interest trusts (i.e., trusts that have deemed disposition on death of the life interest beneficiary (spousal, partner, alter ego, self-benefit trusts))
•New 104(13.4) – on death of life interest beneficiary
– trust has a deemed year end at end of day
– all income, including the capital gain arising because of the deemed disposition on death, is deemed payable to the life interest beneficiary
•A surprising legislative change giving rise to inappropriate results in most cases
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 20
Life Interest Trusts
Background (cont’d)
•New 160(1.4) makes trust and estate of life interest beneficiary jointly and severally liable for taxes
•Explanatory notes of October 29, 2014 (for Bill – C43) suggest that Minister would apply 160(2) as though trust were primarily liable
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 21
Life Interest Trusts
January 15, 2016, Proposals
• 104(13.4)(1)(b.1) – 104(13.4)(b) does not apply unless
– the trust is a testamentary spousal/partner trust created under a will of an individual who died before 2017
– the trust and the estate of the life interest beneficiary elect
– the life interest beneficiary is resident in Canada
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 22
Life Interest Trusts
January 15, 2016, Proposals (cont’d)
•Deemed year end still applies
•110.6(12), which gave CGE to deceased spouse and which was repealed in Bill C-43, not re-introduced.
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 23
Charitable Gifts By Will
Background
• Bill C-43 enacted new 118.1(4.1),(5), (5.1) and (5.2),effective after 2015
•Deems gift by will, designation and insurance to be made by estate at date of transfer – fmv determined then
•Allows gifts by will, designations and insurance to be allocated by the estate to the last 2 years of the deceased, the estate’s taxation year or any prior taxation year of the estate IF estate is a GRE
•Estate/trust can carry forward unused credit for 5 years
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 24
Charitable Gifts By Will
January 15, 2016, Proposals
•Provisions amended so that estate can make gift after 36 months but before 60 when it no longer is a GRE
•Amendments do not allow a carry back to prior year of estate if estate is no longer a GRE
•Provisions also amended to permit life interest trust to use donation credit in year of life interest beneficiary’s death if gift made by filing due date
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 25
LEGISLATIVE DEVELOPMENTS
March 22, 2016, Budget
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 26
Personal Tax Measures
Canada Child Benefit
•CCB regime to replace Canada child tax benefit and universal child care benefit, to start July 2016
•Maximum benefit of $6,400 per child under 6 and $5,400 per child over 6 and under 17; not taxable; phased out with increased income
•Now see Bill C-15 (122.6 and other amendments)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 27
Personal Tax Measures
Income Splitting Credit
•Couples with at least 1 child under 18 can split $50,000 of income giving rise to credit of $2,000
•Eliminated in Budget 2016
•Now see Bill C-15
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 28
Personal Tax Measures
Consequential Amendments to Rate Changes
•Increase to 33% donation credit for trusts (118.1(3))
•Increase to 33% for tax on excess contributions to employee profit sharing plan (207.8(2))
•Increase to 38% tax in respect of a PSB (123.5)
•Increase Part XII.2 tax to 40% (210.2(1) and (2))
•Now see Bill C-15
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 29
Small Business Taxation - Small Business
Tax Rate
Background
•Small business rate is 10.5% compared to generally applicable rate of 15%
•Small business rate applies to first $500,000 of income
•$500,000 “business limit” shared by associated corporations
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 30
Small Business Taxation - Small Business
Tax Rate
Background (cont’d)
•Business limit phased out on a straight-line basis for CCPC’s (and associated corporations) with taxable capital between $10M and $15M
•Budget 2015 proposed to reduce small business rate from 11 percent to 9 percent between 2015 and 2019
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 31
Small Business Taxation - Small Business
Tax Rate
Budget 2016
•Small business rate to remain at 10.5% post 2016 – no further reductions
•Gross-up factor and dividend tax credit to remain at 17% and 21/29, respectively (i.e., DTC will remain at 10.5% of dividend)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 32
Small Business Taxation - Multiplication
of the Small Business Deduction
Background
•“Specified partnership income” rules eliminate multiplication of the SBD among non-associated CCPCs that are partners in a partnership
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 33
Small Business Taxation - Multiplication
of the Small Business Deduction
Background (cont’d)
•SPI rules limit the SBD of the CCPC partners in respect of partnership income to their pro rata share of the “SPI limit” i.e., the lower of the partner’s share of the partnership’s ABI and the partner’s share of the partnership’s $500,000 business limit
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 34
Small Business Taxation - Multiplication
of the Small Business Deduction
Background (cont’d)
•These rules do not address the following structure
– Kerry and Chris are married
– Kerry and Leslie (unrelated) are the only partners of LLP, an accounting firm
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 35
Small Business Taxation - Multiplication
of the Small Business Deduction
Background (cont’d)
•Kerryco (CCPC wholly-owned by Kerry) and Chrisco (CCPC wholly-owned by Chris) provide accounting services to LLP for fees
•Since Kerryco and Chrisco are not partners of the LLP, the SPI rules do not apply in respect of their ABI from services provided to LLP
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 36
Small Business Taxation - Multiplication
of the Small Business Deduction
Budget 2016
•Kerryco and Chrisco deemed to be partners of LLP so that SPI rules apply to their ABI
•SPI limit of the deemed partners is NIL but an actual non arm’s length (NAL) partner may assign its SPI limit to the deemed partner and, where actual partner is an individual, individual deemed to be a corporation for this purpose
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 37
Small Business Taxation - Multiplication
of the Small Business Deduction
Budget 2016 (cont’d)
•Rule applies when CCPC
– Is not otherwise a member of the partnership
– It provides services or property to the partnership
– A partner does not deal at arm’s length with the CCPC or a shareholder of the CCPC
– It does not earn all or substantially all of its ABI from providing services to arm’s length persons
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 38
Small Business Taxation - Multiplication
of the Small Business Deduction
Budget 2016 (cont’d)
•Example
– Leslie – taxable on $100,000 of partnership income
– Kerry – taxable on $100,000 of partnership income
– Kerryco – deemed to be a partner; Kerry can assign “his” SPI limit of $250,000 to Kerryco (or Chrisco)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 39
Small Business Taxation - Multiplication
of the Small Business Deduction
Budget 2016 (cont’d)
•Chrisco – deemed to be a partner; Chrisco pays tax at general corporate rate of 15%
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 40
Small Business Taxation - Multiplication
of the Small Business Deduction
Budget 2016 (cont’d)
•Similar rule to apply where Kerryco (or Chrisco) supply services to an unassociated private corporation
– if Kerryco, one of its shareholders or a NAL person to the shareholder has direct or indirect interest in the private corporation, Kerryco is ineligible for SBD
– BUT the private corp that is a CCPC can assign its unused business limit to Kerryco
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 41
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 42
Small Business Taxation - Avoidance of
Business Limit and Taxable Capital Limit
Background
•Pursuant to 256(2) 2 corporations that are not otherwise associated will be associated if each is associated with the same third corporation
•This rule is not applicable if third corporation is not a CCPC or if it elects not to be associated and opts out of SBD
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 43
Small Business Taxation - Avoidance of
Business Limit and Taxable Capital Limit
Background (cont’d)
•Where two corporations earn investment income from a third associated corporation, 129(6) treats the investment income as ABI if paid from ABI of third corporation
•256(2) applies only for the purposes of 125, not 129(6), so if third corporation elects not to be associated under 256(2), it will still be associated for purposes of 129(6)!
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 44
Small Business Taxation - Avoidance of
Business Limit and Taxable Capital Limit
Background (cont’d)
•Further, if third corporation is not a CCPC or elects not to be associated, its taxable capital is not relevant to the calculation of the business limit of the two corporations!
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 45
Small Business Taxation - Avoidance of
Business Limit and Taxable Capital Limit
Budget 2016
•Where exception in 256(2) applies
– The two corporations will not be associated with third corporation for purposes of 129(6)
– The two corporations will be associated with third for purposes of applying the taxable capital limit
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 46
Small Business Taxation - Consultation
on Active Versus Investment Business
Background
•Dept of Finance consultation on active versus investment income ended August 31, 2015
•Question was whether concept “specified investment income” – income from property business with fewer than 5 full time employees – deemed not to be ABI
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 47
Small Business Taxation - Consultation
on Active Versus Investment Business
Budget 2016
•Consultation is over and there will be no rule changes
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 48
Life Insurance – Distribution of Proceeds
Background
•Under current rules, policy proceeds in excess of policy ACB added to the CDA
•In a simple case, ACB is equal to the cumulative premiums paid for the policy minus the net cost of pure insurance (the pure mortality cost of the policy)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 49
Life Insurance – Distribution of Proceeds
Background (cont’d)
•Similar results obtain where policy is owned by a partnership: the policy proceeds net of the ACB of the policy are added to the ACB of the partnership interests and can be paid to partners free of tax
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 50
Life Insurance – Distribution of Proceeds
Background (cont’d)
•If a policy is owned by one corporation and the beneficiary of the policy is another corporation, when the proceeds under the policy are paid to the beneficiary corporation there is no 'grind' to the CDA since the beneficiary corporation has no ACB in the policy. Similar results obtain in the case of insurance policies owned by partnership
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 51
Life Insurance – Distribution of Proceeds
Budget 2016
•Limits addition to CDA and ACB of partnership interest to the policy proceeds net of the policy ACB, regardless of whether the corporation or partnership that receives the policy proceeds owns the policy
•Applies in respect of deaths occurring on or after March 22, 2016
•Information reporting requirements applicable to corporations or partnerships receiving policy proceeds
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 52
Life Insurance – Transfers of Policies
Background
•Where life insurance policy is transferred to a non-arm's length party, the transfer is deemed to occur at the policy's cash surrender value even though the cash surrender value may be considerably lower than the fair market value and even though the actual proceeds received are equal to the fair market value
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 53
Life Insurance – Transfers of Polices
Background (cont’d)
•Under current rules, transfers to non-arm's length corporations can be used to extract the surplus of the transferee corporation on a tax free basis and, when the insurance proceeds are paid to the transferee corporation, proceeds (net of the ACB of the policy) can be paid out tax free to shareholders as a capital dividend
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 54
Life Insurance – Transfers of Polices
Budget 2016
•Budget 2016 introduces measures to require the recognition of any proceeds or increase in PUC actually received on such transfers
•New measures apply to transfers that occur on or after March 22, 2016
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 55
Eligible Capital Property
Background
•Budget 2014 proposed consultation on change in ECP regime to treat ECP as depreciable property and gain on ECP as capital gain
•Budget 2016 proposes to implement the new regime
•Consequence: deferral of tax on gain in ECP – goodwill, chiefly - will no longer be available
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 56
Eligible Capital Property
Budget 2016
•New class of depreciable property for ECE
•100% of expenditure included in UCC
•Other CCA rules will apply – half year rule
•CCA rate of 5%
•Complicated transitional rules
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 57
Tax Compliance
Increased Resources
•Targeting tax evasion and avoidance
•Hiring specialists and auditors
•Spending $44.4 million over 5 years to raise an estimated $2.6 billion
• Increasing infrastructure
• Increasing number of audits and investigations
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 58
International Measures
• Automatic exchange of financial account info – signatory of Multilateral Competent Authority Agreement in June 2015
• Commitment to BEPS action plan
• Back to back rules extended to rents ad royalties
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 59
LEGISLATIVE DEVELOPMENTS
April 15, 2016, Legislative Proposals
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 60
Common Reporting Standard (CRS) – s270
to 280
• Consultation draft legislation to implement CRS developed by OECD
• Canada 1 of 90 jurisdictions to commit to adopting CRS
• Starting July 1, 2019, Canadian financial institutions required to have procedures in place to identify accounts held by non-residents and to report to CRA on a reciprocal bilateral basis
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 61
Common Reporting Standard – s270 to 280
(Cont…)
• Concepts very similar to FATCA reporting under Part XVIII (263-269)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 62
LEGISLATIVE DEVELOPMENTS
April 18, 2016, NWMM Bill C-15
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 63
Bill C-15 compared to Budget 2016 No rules on
•Life insurance proposals
•ECP proposals
Rules on
•s 55
•Consequential rate changes
•153
•253.1, 149.1(11)
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 64
Section 55
STEP Canada Submission to Finance Sept 2015
“The main area of continuing concern to the members of STEP Canada are the provisions contained in the Proposals that restrict the ability to move funds within a corporate group on a tax-free basis. The proposed amendments of concern are contained in proposed subparagraph 55(2.1)(b)(ii), paragraph 55(2.1)(c) and paragraph 55(3)(a). These provisions define the ‘related party exception’ and the ‘safe income exception’ to the anti-avoidance rule in subsection 55(2).”
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 65
Section 55
STEP Canada Submission to Finance Sept 2015 (cont’d)
“In the view of STEP Canada, the combined effect of these provisions represents a change in tax policy that will have a significant negative impact on Canadian businesses organized in related groups of corporations by (i) restricting the ability to move funds within the corporate group on a tax-free basis and (ii) making the movement of funds within the corporate group more complicated and therefore more costly.”
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 66
CASE LAW DEVELOPMENTS
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 67
Residence of a Trust – Discovery Trust v Canada
(NLTDG)
• Fact-based decision whether trust was resident in province where trustee was resident or province where beneficiaries/settlor were resident
• Discovery Trust finds trust resident in jurisdiction where trustee resides – Alberta
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 68
Residence of a trust - Boettger Trust v Quebec
(QCCQ)
• Fact-based decision whether trust was resident in province where trustee was resident or province where beneficiaries/settlor were resident
• Boettger finds trust resident in jurisdiction where settlor and beneficiary reside – Quebec
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 69
110.6 – Pellerin v The Queen (TCC)
• Unborn child born alive satisfies 2-year CGE hold period
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 70
Control and Associated Corporations –
Kruger Wayagamack Inc v The Queen (TCC)
• Fact-based decision on control involving a USA
• 51% s/h did not have de fact or de jure control due to USA
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 71
Principal Residence Exemption and Separated
Spouses – Balanko Estate v The Queen (TCC)
• t/p’s estate sought to claim principal residence
exemption in respect of property purchased after
separation, but since no separation agreement was
ever signed, she shared exemption with husband,
even though they had lived separate and apart for
over 25 years
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 72
RDTOH and Late Filed Returns – Presidential MSH Corp v The
Queen (TCC) and Nanica Holdings Ltd v The Queen (TCC)
• separately decided cases both holding that where claim for refund of
RDTOH is denied because the claim was late–filed, RDTOH is not
reduced
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 73
Registered Charities – Public Television
Association of Quebec v MNR (FCA)
• Charitable registration revoked because of lack of direction and control
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 74
Charitable gifts –Glover v The Queen (TCC), Mariano
v The Queen (TCC), Moshurchak v The Queen (TCC)
• “Donative intent” is required and can be missing in gifting arrnagments
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 75
Privilege - Zeldap Corporation v. The Queen 2015
DTC 1108 (TCC)
• No privilege just because lawyer was present
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 76
Privilege - MNR v BP Canada Energy 2015 DTC 5077
CFC
• “Issues list” not privileged
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 77
MNR v Duncan Thompson; and, Attorney
General of Canada (CRA) v. Chambre des
notaires du Quebéc and Barreau du Québec
(SCC)
• Privilege is rule of substance and fundamental justice
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 78
Section 160 – Kuchta v The Queen (TCC)
• Section 160 applies to property transferred under will to spouse
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 79
Registered plans – Olympia Trust Co v
The Queen (TCC)
• t/p as trustee under a self-directed RRSP was owner
of property and therefore liable as purchaser of TCP
from a non-resident under s.116
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 80
Rectification – Canada Life v Canada
• Court can rectify transactions where parties intended
transactions to have different tax effect.
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 81
Rescission – JAFT Corp v Jones (Man CA)
• No rescission since Tax Court seized of matter and had full and ample jurisdiction to address issues
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 82
Rescission – JAFT Corp v Jones (Man CA)
• Man QB Judge declined to exercise jurisdiction to
grant relief
– “it would be inappropriate to allow a parallel running of
litigation with respect to these matters. This is particularly so
when rescission, if granted, would serve to alter the essence
of the litigation before the TCC and, hence in appropriately
interfere with the jurisdiction assigned to a specialized
tribunal”
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 83
Rescission – JAFT Corp v Jones (Man CA)
• Manitoba CA refused the appeal:
• “… [W]hile the Tax Court cannot grant an order of rescission
that will be effective for all purposes, it can rule on the validity
of employment contracts… as part of its role in determining
whether the tax assignments are correct
• Man CA considered that rectification– correcting a contract – is
qualitatively different from rescinding a contract
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 84
Guindon v. The Queen 2015 DTC 5086 (SCC)
• “subsection 163.2(4) (advisor’s penalty) is not criminal in nature
and therefore does not attract section 11 Charter rights protection
Society of Trust and Estate Practitioners (Canada) 18th National Conference Page 85
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