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The Tax Court held that two Wilson Avenue properties were capital property until September 16, 2011, when financing fixed the shift to inventory.
The Court held the Applicants' motions succeed in part: impugned subparagraphs that state conclusions of law or conclusions of mixed fact and law are not permissible in the assumptions paragraph and must be struck or redrafted; such matters belong in the reasons portion of the Reply. The Respondent must file amended Replies within 30 days reflecting these changes; Applicants may file amended Answers within 30 days of service; costs in the cause.
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The appeals are allowed: although the subsidiaries’ cash/receivable (the Property) was indirectly transferred through WTC and ultimately supplied value to the appellants, at the precise time the transfers were completed (Dec 31, 2006) the appellants had ceased to control the subsidiaries (deemed under s.256(9) to have relinquished control at start of day) and were dealing at arm’s length with the subsidiaries; accordingly subsection 160(1) does not apply to make the appellants liable. The Minister also failed to establish via admissible evidence that the subsidiaries could rely on the claimed…
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The Cancellation Agreement effecting contractual set-off was a distinct transfer event at which the transferee's valuable promissory note was surrendered in exchange for forgiveness of a largely valueless note; measured at that time the FMV of consideration was deficient relative to the FMV of the transferred assets and s.160 therefore applied. Appeal dismissed.
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On the facts the Court concluded 1361 Paris was inventory: it had been written down as inventory in 1998, remained on the appellant's inventory listing at Feb 28, 2001, the Offer to Lease was assigned and the final lease was with Prime, and the property was conveyed to Prime; these facts negated any demonstrated change of intention and rendered the s.85(1) election inapplicable, so the CRA reassessment was upheld.
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The Tax Court found as a matter of fact that certain vehicles (Lincoln Town Cars and Windstar) were used exclusively for business so no benefit arose; the Ford Explorers were used one‑third for business and two‑thirds personal, triggering the full standby charge under the statutory formula; the repairs and maintenance were ordinary upkeep and did not create a taxable benefit, particularly where rent valuation already reflects market upkeep; the market rent appraisal was accepted over the appellant's unsubstantiated assertions, producing specified rental benefit amounts; and the subsection 85(…
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Appellant failed to prove that the s.85(1) rollover occurred because there was no evidence of transfer to the holding company and no issuance of shares by it; the Tax Court lacks jurisdiction to review the Minister's discretionary refusal to accept a late T2057 (judicial review lies with Federal Court); because the corporation repurchased its Class A shares and appellant still held them at that time s.84(3) created a deemed dividend; appeal dismissed.
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The correct approach to s.55(2) is purposive: 'reasonably be attributable' requires allocation based on the particular circumstances to counter the mischief targeted by the provision, not automatic pro rata proration on a partial s.85(1) rollover; on these facts the appellants' allocation was reasonable, s.112(1) deduction applied to the identified safe income, and s.55(2) did not recharacterize the dividends.
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