[2012] 1 F.C.R. D-10
Income Tax
Income Calculation
Deductions
Appeal from Tax Court of Canada (T.C.C.) decision (2010 TCC 648) allowing reassessment of appellant’s claimed deductions for payments made to employees for surrendering options to acquire appellant’s shares—Appellant involved in “going private transaction” under which other corporation acquiring appellant’s shares—Appellant amending employee stock option plan, giving option holders right to surrender options for cash—Surrender payments deducted by appellant in determining profit for income tax, financial reporting purposes—Respondent stating that deductions employee compensation, made on account of capital, not deductible pursuant to Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 18(1)(b)—T.C.C. concluding that payments expenditures on capital account, made in context of appellant’s reorganization of capital, extinguishing obligations of appellant to issue shares—T.C.C.’s conclusion not based on error in understanding or application of relevant case law—Fact that payments coinciding with reorganization of capital; arrangements put in place to facilitate payments, capital reorganization; payments ending future obligations of appellant, pointing to conclusion that payments on capital account—Facts herein sufficiently similar with Kaiser Petroleum Ltd. v. Canada, [1990] 2 C.T.C. 439 (F.C.A.) to merit similar outcome—No reason to conclude that greater use of employee stock option plans meaning that transaction like one considered in Kaiser not on capital account—Appeal dismissed.
Imperial Tobacco Canada Limited v. Canada (A-35-11, 2011 FCA 308, Sharlow J.A., judgment dated November 10, 2011, 13 pp.)