Digests

Income tax

Income calculation

Deductions

Appeal from decision (2008 TCC 532) by Tax Court of Canada (T.C.C.) vacating assessments against respondent reducing or disallowing deductions claimed under Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 125(1), because respondent associated with two other corporations, thereby sharing amount of limit under s. 125(1) (“business limit”) with corporations—During period at issue, all voting shares in respondent’s capital stock held by 9059-3179 Québec Inc. (9059), held in turn by Fiducie Propep, with 9059 as first-ranking beneficiary, Pierre-Marc Paquette as second-ranking beneficiary—T.C.C. finding respondent not associated with two other corporations, therefore not having to share limit—T.C.C. ruling Act, s. 256(1.2)(f)(ii) (deeming Pierre-Marc Paquette owner of trust property to extent Mr. Paquette’s share of accumulating income or capital from trust depended on exercise by trustees of any discretionary power), not applying because trustees not having discretion to benefit Pierre-Marc Paquette—T.C.C. losing sight of fact trustees could, in exercising discretion and at time of own choosing, wind up 9059, thereby giving rise to Pierre-Marc Paquette’s right as sole beneficiary—Thus, during relevant period, trustees could benefit Pierre-Marc Paquette in exercising discretion—T.C.C. failing to consider income interest in trust, even when subject to condition, regarded as absolute right for purposes of Act—Conclusion following from definition of “income interest” in Act, s. 108(1)—T.C.C. also failing to consider expression “beneficially interested” in Act, s. 248(25)—Person with contingent right to trust capital or income “beneficially interested” for purposes of Act—Appeal allowed.

Propep Inc. v. Canada (A-546-08, 2009 FCA 274, Noël J.A., judgment dated September 24, 2009, 12 pp.)