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Goods And Services Tax

Taxpayer’s lifestyle appeared to contradict claims of modest income Appeal by taxpayer from assessment by Minister under Income Tax Act (Can.), for 2000 to 2002 taxation years, and under Excise Tax Act (Can.), for 1998 to 2002 taxation years for unpaid GST. Taxpayer operated automobile brokerage, traded in shares of Internet business, and temporarily rented his home. Minister added income from business and rental income, and treating sale of shares as capital gain. Appeal allowed in part. Shares of Internet business may have been dealt with in manner contrary to securities commission rules. Gains from disposition of shares were capital in nature, and reassessment to make them part of ordinary income would be out of time. Payments made to internet business were not expenses but loans, and were not deductible. Loans did not have contingent obligation for repayment. Minister properly assessed revenue from automobile brokerage in 2000 and 2001 taxation years based on initial returns, and minister’s assumptions were not demolished. Home was used for car business purposes, and deduction was granted of 20 per cent of home expenses when premises were not leases. Deduction of 10 per cent suggested by minister was too low. No reliable evidence regarding use of home to meet business clients. Deposit analysis of 2002 taxation year showed deposits into bank of more than $500,000 and reported income from car business of $29,324. Certain expenses for automotive brokerage in 2002 were conceded by minister. All deposits were not likely from sale of cars, as some amounts were in American dollars and car sales were Canadian. Income from automobile brokerage reduced by $170,000. Taxpayer was not required to prove source of income to disprove minister’s assumptions. Taxpayer’s lifestyle appeared to contradict claims of modest income. Payment to law firm was not shown to be business related deduction of legal expenses. Rental income which was not reported in returns but not included in assessments could be reassessed, as taxpayer made misrepresentation regarding rental income. Deposit in amount of $10,000 could not be added to rental business as issue was not raised in pleadings. No adjustment made to GST collectible in 1998 and 1999, amount in other taxation years to be adjusted to reflect new findings regarding income tax owing. Minister did not show sufficient evidence to warrant penalties. Last v. Canada (Oct. 9, 2012, T.C.C., Woods J., File No. 2006-2525(IT)G; 2006-2902(GST)I) 220 A.C.W.S. (3d) 650.

Social Welfare


By buying tickets each week, amounts claimed did not qualify for public transit tax credit

Appeal by taxpayer from reassessment by Minister under Income Tax Act (Can.), for 2009 taxation year. Taxpayer lived in Whitby Ontario and commuted to work in downtown Toronto each day by taking train. Taxpayer purchased tickets which were valid for ten rides for $64.25 to $66.75. Taxpayer claimed those amounts under public transit tax credit as provided in s. 118.02(2) of Act. Appeal dismissed. Tickets that were purchased by taxpayer were paper tickets, not an “eligible electronic payment card” or an “eligible public transit pass” as required by Act. By buying tickets each week, amounts claimed did not qualify for public transit tax credit.
Taino v. Canada (July 25, 2012, T.C.C., Webb J., File No. 2011-3106(IT)I) 218 A.C.W.S. (3d) 228 (6 pp.).

Social Welfare


It was employees who primarily benefited from distribution of beer tickets

Appeal by employer from reassessment by Minister regarding Canada Pension Plan remittances. Employer was beer manufacturer who regularly provided employees with tickets entitling them to free cases of beer from manufacturing premises. Minister reassessed employer on basis that free beer was taxable benefit to employees such that its retail value had to be included for purposes of employer’s Canada Pension Plan remittances. Appeal dismissed. Value of beer would be subject to employee contribution and employer remittance if it was taxable benefit under s. 6(1)(a) of Income Tax Act (Can.). To fall into common law exception, free beer must have been provided primarily for benefit of employer and any personal enjoyment by employee must have been merely incidental to employer’s business purposes. Employer undoubtedly derived some benefit from both quality control and marketing perspective from its staff beer policy encouraging employees to report any problems with quality and to share free beer with non-employees. Employees had no legal obligation to cash in ticket, sample product, share it with others or report any quality control problems, and employer received few quality reports and did not even monitor employees’ use of tickets. Employer did not rebut Minister’s assumption that it was employees who primarily benefited from distribution of beer tickets, and employer who received incidental benefit. It was established law that employee benefits should be valued at fair market value, which in this case was retail value of beer rather than cost to employer of manufacturing it.
Steam Whistle Brewing Inc. v. M.N.R. (June 26, 2012, T.C.C., Pizzitelli J., File No. 2011-4037(CPP); 2011-4039(EI)) 218 A.C.W.S. (3d) 216 (15 pp.).



Unanswered questions not irrelevant, abusive or designed to embarrass or harass party

Motion by Crown for order compelling taxpayer to provide written responses to examinations for discovery queries conducted by written questions. Appeal related to determination under s. 55(2) of Income Tax Act (Can.), as to whether transaction or series of transactions was entered into for purposes of reducing amount of capital gain in taxpayer’s hands. Motion granted. On basis of pled assumptions, series of transactions were not patently unrelated nor prima facie lacking in nexus to application and operation of s. 55(2). Based upon principles established in 2004 case, it was clear that unanswered questions on face of pleadings were not patently irrelevant nor were they abusive or designed to embarrass or harass party or to delay case. Order was made that taxpayer be compelled to provide answers to unanswered questions and such responses be delivered within 30 days from date of issuance of decision and order.
D & D Livestock Ltd. v. Canada (June 12, 2012, T.C.C., Bocock J., File No. 2011-137(IT)G) 217 A.C.W.S. (3d) 722 (9 pp.).

Employment Insurance


Intermittent nature of layoffs more characteristic of family employment

Appeal from employment insurance decision ruling bar manager job as not insurable employment. Appellant worked several years as manager and waitress for bar jointly owned with husband. EI assessment determined bar manager’s employment was not insurable employment due to family run nature of business and link of dependency as family member rather than proof of employee subordination as role. Original assessment ruled lengthy unpaid tasks such as bookkeeping and upkeep of bar more characteristic of employment not insurable due to dependency of family relation. Original assessment and reviewing court held that intermittent nature of appellant’s lay-offs from bar manager role more characteristic of family employment rather than genuine labour force lay-off due to seasonal work. Reviewing court held original assessment reasonable on facts and law. Appeal dismissed.
Jacques v. M.N.R. (Mar. 29, 2012, T.C.C., Angers J., File No. 2011-1876(EI)) Reasons in French. 217 A.C.W.S. (3d) 605 (13 pp.).



Trial judge erred in misapplying parity principle

Appeal by Crown from sentence imposed on accused after she was convicted of seven counts of dangerous driving causing bodily harm. Accused and her friend encountered vehicle occupied by six males and they flirted with them. Both drivers then engaged in high-speed race on residential street that had posted speed limit of 50 kilometres per hour. Cars collided and were destroyed. Accused’s friend suffered serious injuries. Accused and driver of other vehicle and his passengers were also injured. Accused received suspended sentence and she was placed on probation for two years. She was also subject to two-year driving prohibition. Issue of parity based on sentence imposed on driver of other vehicle was considered. Driver of other vehicle was charged with same offences as accused. He pleaded guilty to one count. His sentence was suspended and he was placed on probation for 18 months. Probation included three months of house arrest. He was also subject to one-year driving prohibition. At time of collision accused was 40 and she had no criminal record. Other driver was in his 20s and he also did not have criminal record. Appeal allowed. Sentence was set aside. It was replaced by nine-month custodial sentence and by five-year driving prohibition. Probation order was set aside as there was no reason for it. Trial judge erred in misapplying parity principle. There were important differences between accused and other driver. She further erred by imposing sentence that did not adequately reflect principles of general deterrence and denunciation. These errors led judge to arrive at sentence that was demonstrably unfit.
R. v. Rawn (July 9, 2012, Ont. C.A., Epstein, Weiler and Watt JJ.A., File No. C53457) 102 W.C.B. (2d) 33 (15 pp.).

Social Welfare


Minister had statutory duty to include pensioners’ rental income

Appeal by pensioners from decision by minister. Pensioners were in receipt of Guaranteed Income Supplement (GIS) pensions. Pensioners’ income for GIS purposes was calculated by minister in accordance with base calendar year method. In calendar year 2008, pensioners earned rental income. Pensioners disposed of rental property in 2009. Minister included 2009 rental income to date of disposition of property in pensioners’ 2010-2011 income for GIS purposes after making certain adjustments for sale of pensioners’ business. Appeal dismissed. By operation of s. 14(2)(c) of Old Age Security Act (Can.), Minister had statutory duty to include pensioners’ rental income in income for GIS purposes. No exception existed to application of base calendar year method in present case.
Parrotta v. Canada (Minister of Human Resources and Skills Development) (May 18, 2012, T.C.C., Paris J., File No. 2011-2012(OAS)) 217 A.C.W.S. (3d) 221 (8 pp.).
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