Nominee of corporation was ordered to answer certain questions in discovery

Goods and Services Tax

Nominee of corporation was ordered to answer certain questions in discovery

Parties were involved in proceedings in Tax Court regarding tax treatment of proceeds of sale retirement residence, as business income or as capital gain in 2008 taxation year and disallowance of tax treatment of numbered corporation’s newer retirement residence as replacement property under s. 44 of Income Tax Act (Can.). Numbered corporation claimed it correctly reported capital gain on sale of retirement residence in its 2008 taxation year, while Minister of National Revenue maintained numbered corporation was in business of building and selling retirement residences at profit and that Minister correctly reassessed numbered corporation to include sale of residence as income from business. Nominee of numbered corporation refused to answer certain questions in discovery Minister brought motion for order that questions be answered. Motion granted in part. Numbered corporation was not the alter ego of shareholder L, but this was not end of matter as his trading history was relevant to issue of whether amount in question was capital gain. Even if shareholder L was not party to appeal, he was shareholder and president of numbered corporation. In trading cases, in order to determine intention of corporation, trading history of controlling shareholder will be taken into account. Questions relating to shareholder L’s trading history were relevant. Numbered corporation’s representative required to answer particular question only insofar as it related to part of statement regarding banking transactions. Whether particular accountant was accountant of shareholder L in 2003, related to personal affairs of L and has nothing to do with issues under appeal. Question regarding purpose of certain company was relevant, as corporation was wholly owned corporation of shareholder L that held shares in numbered corporation. Funds from disposition of another retirement residence were used to acquire land on which particular retirement residence was subsequently built, and related question might be relevant. Questions regarding sale transactions regarding other retirement residences related to trading pattern of shareholder and president of numbered corporation, and were relevant Question regarding whether shareholder L held minority interest in number of retirement residences with spouse was not relevant and did not need to be answered. Question regarding whether shareholder L was dealing with certain others at arm’s length did not need to be answered. Question regarding incorporation of companies to act as holding and operating companies was relevant and should be answered. Question regarding corporate structure should be answered in part. Question regarding controlling mind of corporation was too vague to be answered Questions regarding corporate structure and corporate searches needed only be answered to extent of addressing trading patterns of shareholder L. Questions related to mistress were of personal nature and not required to be answered.
1716790 Ontario Inc. v. R. (Aug. 31, 2016, T.C.C. [General Procedure], Johanne D’Auray J., 2014-2383(GST)G, 2014-2385(IT)G) 270 A.C.W.S. (3d) 215.