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Favourable income tax consequences did not change nature of gift

Taxpayer purported to make gift to city of ecologically sensitive property he had purchased from father. Minister assessed taxpayer under Income Tax Act (Can.), for 2009 taxation year, treating transaction as disposition of inventory and including value of land less its original cost as income from business. Taxpayer appealed. Appeal allowed. Transaction was charitable gift. Taxpayer was credible. Taxpayer did not acquire and dispose of land as part of business. No indicia of business existed. Putting land in possession of corporation and taking steps to rezone it did not make venture business. Adventure or concern that involves acquisition of land that is ultimately subject of bona fide charitable donation for no consideration is not adventure or concern in nature of trade. Land had been purchased by taxpayer’s father for no reason beyond owning land, and purchased by taxpayer as pretext to give money to father. Application for subdivision and construction of gravel road were not indication of business, but merely steps taken to protect asset. Taxpayer did not have primary intention to purchase land, and whether development of land was secondary purpose was unclear and not carried out. Favourable income tax consequences did not change nature of gift. Transaction was gift subject to capital gain deemed to be zero.
Staltari v. R. (May. 13, 2015, T.C.C. [General Procedure], John R. Owen J., File No. 2013-1038(IT)G) 252 A.C.W.S. (3d) 863.

Employment Insurance


Court not bound by terms of contract where contract did not reflect realities of situation

Minister determined that housekeeping services were insurable employment although workers were held not to be employees. Head of agency appealed from determination made by Minister that insurable employment within meaning of Employment Insurance Act (Can.), existed. Appeal allowed. Application of control test determinative. Clients were often not present when workers were doing housekeeping. Although work not specialized workers had measure of independence in how they carried it out. Court not bound by terms of contract where contract did not reflect realities of situation. Agency contribution to expenses did not occur. Burden of proof rested on Minister. Minister failed to establish that workers were under direction and control of agency.
Barbeau c. Ministre du Revenu national (May. 22, 2015, T.C.C. [Employment Insurance], Robert J. Hogan J., File No. 2012-4560(EI), 2013-2811(EI)) 252 A.C.W.S. (3d) 736.



Auditor did not take into account fair market value of donated wine bottles on international level

Taxpayer was wine aficionado who donated bottles of wine to charities. Wine bottles were auctioned off and proceeds were donated to registered charity in Gatineau, Quebec. In 2009, taxpayer donated three bottles of wine valued at amount of $350 each. In 2010, taxpayer donated three bottles of wine valued at total amount of $1,100. In 2011, taxpayer donated seven bottles of wine valued at total amount of $8,550. Minister reduced total amount of evaluation to $328, $344, and $2,672 for 2009-2011 taxation years respectively. Taxpayer appealed Minister’s assessments. Appeal allowed. Auditor did not take into account fair market value of wine bottles on international level. Auditor erroneously calculated capital investment, custom fees, transportation, sales tax, and insurances. Taxpayer provided sufficient documentary evidence. Auditor did not contradict taxpayer’s evidence.
De Santis c. R. (Apr. 17, 2015, T.C.C. [Informal Procedure], Robert J. Hogan J., File No. 2014-670(IT)I) 251 A.C.W.S. (3d) 529.



Proposed guarantor was not required to comply with rebate conditions

Purchaser entered into agreement of purchase and sale with builder to purchase home to be built. HZ was proposed guarantor of mortgage to finance purchase of house, and signed purchase of agreement and sale for that reason, but backed out before closing. FR became guarantor, but his replacement of HZ was not reflected in agreement of purchase and sale. Minister of National Revenue denied purchaser’s claim for new housing rebate under Excise Tax Act (Can.), on ground that purchaser and HZ did not satisfy condition of having intention that property be their primary place of residence. Purchaser appealed. Appeal allowed. HZ was not “particular individual” for purposes of s. 254(2)(a) of Act and was not required to comply with rebate conditions. HZ was only acting in capacity as agent in signing agreement of purchase and sale. Agent was not “recipient” as defined in s. 123(1) of Act. At commencement of hearing, Crown raised issue of whether purchaser intended property to be used as his primary place of residence. It was not fair for Crown to raise issue at such late stage and it was not considered.
Javaid v. R. (Apr. 17, 2015, T.C.C. [Informal Procedure], Judith M. Woods J., File No. 2014-1802(GST)I) 251 A.C.W.S. (3d) 525.

Constitutional Law


Human rights did not include right not to pay tax

Corporation wholly owned by taxpayer paid taxpayer certain amounts in 2007 through 2010 taxation years. Taxpayer reported some amounts as employment income, and other amounts were reported by corporation and taxpayer as subcontract payments. Canada Revenue Agency treated difference between what was reported by taxpayer and what was paid to him by corporation as income for 2007 through 2010. Taxpayer appealed. Appeal dismissed. Human rights as advanced in Canadian Constitution, Canadian Charter of Rights and Freedoms and international human rights treaties did not extend to not paying tax and did not include right not to pay tax. Taxpayer acknowledged that if his arguments did not succeed, amounts reassessed and penalties imposed would be properly payable.
R. v. Davis (Mar. 17, 2015, T.C.C. [Informal Procedure], Patrick Boyle J., File No. 2014-3081(IT)I) 251 A.C.W.S. (3d) 170.



Amount of assessments reduced to amount of relevant Federal Court certificates

Director was controlling mind of three companies who did engineering work for developer. Developer did not pay its bills on timely basis, resulting in three companies taking collection actions, and eventually executing lien. Minister of National Revenue assessed director under s. 323 of Excise Tax Act (Can.), for Goods and Services Tax (GST) that company TE Inc. failed to remit and $86,222.48 in GST that company 306 Canada Inc. (TM) failed to remit. Director appealed. Appeals allowed in part. Amount of assessments reduced to amount of relevant Federal Court certificates. Certificate that Minister registered with Federal Court of Canada for TM’s unremitted net GST was $11,896.19 less than amount assessed. Section 323(2)(a) of Act provided that Minister may not assess amount in excess of amount of Federal Court certificate. Director knew that three companies were facing significant cash flow issues due to developer failing to pay invoices and chose not to make remittances, believing that developer would eventually pay and remittances could be made in future. Director took no steps to prevent failure by three companies to make remittances. Failure to make remittances in belief that failure could be corrected in future did not constitute defence under s. 323(3) of Act. While director may not have been able to foresee events that occurred with respect to developer’s contract, he was person who made decision not to pay certain of three companies’ accounts payable, including remittances. Director was not entitled to rely upon due diligence defence in s. 323(3) of Act.
Maxwell v. R. (Mar. 25, 2015, T.C.C. [General Procedure], Steven K. D’Arcy J., File No. 2011-2668(IT)G, 2011-2669(GST)G, 2011-2687(IT)G, 2011-2688(GST)G) 250 A.C.W.S. (3d) 711



Written separation agreement was required to permit principal residence designation

Taxpayer passed away in 2005. Taxpayer purchased property in Whistler in 1976. Taxpayer transferred property to husband in 1991 for one dollar, but did not report disposition. Husband sold property in 2003 for $350,000. Gain of property was attributed to taxpayer. For 2003 tax return, taxpayer had not claimed property as her principal residence. Husband passed away in 2011, and had other property designated as principal residence from 1992 until his death. Assessment for 2003 was completed in 2013 and Minister refused to designate Whistler property as taxpayer’s principal residence for reason that another family member had made principal residence designation in respect of another property for same time period. Minister calculated capital gain of $243,009 was made in disposition and was attributed to taxpayer pursuant to s. 74.1(1) of Income Tax Act (Can.). Trustee testified that taxpayer and her husband separated in 1983, and son stated that taxpayer did not live at property and that property was family vacation property. No written separation agreement was found. Estate appealed. Appeal dismissed. Written separation agreement was required by Act and was requirement in circumstance. If taxpayer was still married only one of taxpayer and spouse could designate property as principal residence except if taxpayer and spouse were separated under written separation agreement pursuant to s. 54(c) of Act.
Balanko Estate v. R. (Mar. 19, 2015, T.C.C. [Informal Procedure], Gerald J. Rip J., File No. 2014-3116(IT)I) 250 A.C.W.S. (3d) 526.
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