For additional recent tax cases, see page 42 of Tax facts and figures: Canada 2012 at www.pwc.com/ca/taxfacts.

General anti-avoidance rule (GAAR)

In Copthorne Holdings Ltd. v. The Queen, the Supreme Court of Canada (SCC) unanimously held that GAAR applied to planning in which cross-border paid-up capital was duplicated and used to make a tax-free return of capital through a share redemption. The SCC also commented on the extended meaning of "series of transactions" in subsection 248(10). See our Tax memos "Reflections on Supreme Court ruling on GAAR—Copthorne Holdings Ltd." and "New Supreme Court of Canada ruling on GAAR— Copthorne Holdings Ltd." at www.pwc.com/ca/taxmemo.

Break fees

In Morguard Corporation v. The Queen, the Tax Court of Canada (TCC) found that the taxpayer had received a break fee as an integral part of, and in the ordinary course of, its regular business operations, and that the receipt of the break fee had no linkage to a capital purpose. The break fee was therefore found to have been received by the taxpayer on account of income. The taxpayer has appealed this decision to the Federal Court of Appeal (FCA). See our Tax memo "TCC rules against Morguard Corporation: Break fee was fully taxable as an income receipt" at www.pwc.com/ca/taxmemo.

Stock option payments

In Imperial Tobacco Canada Limited v. The Queen, the FCA upheld the TCC's decision that payments made by the taxpayer to its employees to eliminate an employee stock option plan in the context of a going-private transaction were capital in nature and not deductible. The SCC has dismissed the taxpayer's application for leave to appeal. See our Tax memo "Deduction Denied for Amounts Paid to Employees for Stock Options in course of Going-Private Transaction (Imperial Tobacco case)" at www.pwc.com/ca/taxmemo.

Trust residence

In St. Michael Trust Corp. v. The Queen (sub nom. Garron), the SCC agreed with the reasoning in the lower courts that central management and control over the trust property, rather than the residence of the trustees, was the appropriate test for determining trust residence for purposes of the Income Tax Act. See our Tax memo "Supreme Court of Canada rules on trust residence – St. Michael Trust Corp. v. The Queen (Garron Family Trust)" at www.pwc.com/ca/taxmemo.

Amalgamations

In Envision Credit Union v. The Queen, the FCA upheld the TCC's decision that the tax attributes of two predecessor corporations flowed through to the amalgamated corporation under common law principles. The FCA also found that section 87 of the Income Tax Act applied to the amalgamation, even though property of the predecessor corporations was transferred to a subsidiary simultaneously with the amalgamation. The SCC has granted the taxpayer's application for leave to appeal.

Requirement for information (Life insurance "10-8" plans)

In The Minister of National Revenue v. RBC Life Insurance Company et al, the Federal Court cancelled orders that required insurance companies to provide information on the holders of their "10-8" life insurance plans because the Minister failed to disclose all relevant information. The Minister has appealed this decision to the FCA.

Non-resident and non-capital losses

In Saipem UK Limited v. The Queen, the FCA upheld the TCC decision that the non-resident taxpayer could not deduct the non-capital losses of its wound-up non-resident subsidiary. The FCA was not persuaded that the TCC had made any error that would justify its intervention, finding that the provisions of the Income Tax Act at issue did not violate the non-discrimination provision of the Canada-United Kingdom: 2003 Protocol [Third] Amending 1978 Tax Convention.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.