In the recent decision of Collins v. The Queen, the Federal Court of Appeal clarifies the meaning of “an amount payable in respect of the year” – one of the requirements for interest deductibility under paragraph 20(1)(c) of the Income Tax Act (the “Act”).  Specifically, in order for interest to be deductible under paragraph 20(1)(c) of the Act, there must be: 

On December 14, 2009 the Minister of Finance issued a News Release and Backgrounder setting out the Government of Canada’s response to an April 2009 court decision on the application of GST to certain investment management fees.

Income tax is complicated.  As such, mistakes in transactions are liable to occur from time to time, especially when professional advisors do not consult tax specialists prior to undertaking transactions.  The Court of Queen’s Bench of Alberta (“QBA”) has added another arrow to taxpayers’ quivers when mistakes lead to unintended tax consequences.  In Stone’s Jewellery Ltd. v. Arora 2009 ABQB 656, a well thought out and structured judgment by Madam Justice Strekaf, the taxpayer sought an order to rectify or rescind two transactions involving the transfer of land that resulted in the unanticipated assessment of more than $6 million in taxes.  The Canada Revenue Agency (“CRA”) opposed the taxpayer’s action. 

For many years, accountants for Canadian-controlled private corporations (“CCPCs”) have followed the old adage of advising their clients to “bonus down” to the Small Business Limit (the amount of active business income earned in Canada that is subject to the lowest corporate tax rate), as it generally provided the owner-manager/shareholder with higher after-tax cash than the alternative of paying tax in the corporation, and then ultimately paying dividends to the owner-manager/shareholder. This is because corporate income subject to the general tax rate was poorly integrated when such income was eventually paid as a dividend to the owner-manager/shareholder. Table 1 roughly displays the lack of integration for a corporation earning $1,000,000 of taxable income in the late 1990’s.