CGA Lesson

1
CGA Lesson 5
This lesson contains a variety of topics such
as -incorporated or unincorporated
business -capital gains deduction -debt
forgiveness seizure of property -anti-avoidance
rules
2
Incorporated or unincorporated business
-the lesson notes start out by talking about a
sole proprietor thinking about incorporating his
business -some considersations discussed are how
to transfer the assets into the business most
logically one would use a section 85 election and
would choose to transfer at an agreed amount for
the assets that minimize tax consequences --
dont forget about off B/S goodwill -if you
rollover assets at your cost amounts that have
accrued gains on them then you are deferring
those gains and they will be realized when you
dispose of the shares that you received as
consideration- either as a future gain or a
future dividend upon redemption -when to do it?-
remember if losses are expected in the start up
years then as an individual losses are
deductible against your other sources of
income..but once incorporated losses can only
be used against profits of the corporation
3
Share Considerations
-When incorporating some consideration should be
given to the types of authorized share capital
that will be required immediately and for the
futurethink of authorizing (not necessarily
issuing) both common and preferred perhaps of
several different classes to facilitate future
freeze or crystallization transactions -Who
will be the s/hers? You, your
spouse.children.key employeesa Trust..who
will receive dividends? -shareholders agreements
once you have more than one s/her you have to
provide for certain future events and this is
best done by agreements in writing to address
such items as 1) What happens if a s/her wants
to sell- can they sell to anyone , will he be
restricted in any manner, are the other s/hers
obliged to buy him out , and at what value ?
Divorce ? Shot-gun agreement? Non-competition
clauses?
4
Shareholder Agreements continued.

• -what happens to the shares upon the death of one
  of the s/hers?
• Do you really want the deceased s/her to be able
  to bequeath his shares to anyone he wants to-
  they would then become the new s/her and you
  would now be in business with this new person
• -normally the agreement would either require
• The Estate to sell the shares to the other s/hers
  and the s/hers to buy the said shares and at
  what value? OR
• The corporation will be obliged by agreement to
  redeem the shares from the Estate.to retire them
  so to speak at what value?
• How might the corporation pay or fund the
  redemption of the shares from the ESTATE? With
  Life Insurance proceeds. The s/her or corp takes
  out life insurance policies on each s/her the
  insurance is payable to the Corp.,its taxfree
  goes into the CDA

5
Advantages of Incorporation

• Corps can be a way to split family income and
  thus lower the total tax bill- if you pay
  salaries dividends to family members the total
  taxes paid may be less than if one person had to
  pay tax on the total income
• Incorporation allows use of the capital gains
  exemption on a future sale plus if you perform a
  freeze then additional family members can utilize
  the gains exemption as well
• Corps provide certain taxfree benefits-
  disability health insurance., a 10,000 taxfree
  death benefit
• Corporate tax rates are lower.leaving more cash
  to invest.. (11 small business rate federally
  1 small bus/rate Man.)
• Corp as a regulator of income flows to the
  s/hers.
• Some provinces offer tax holidays or incentives
  for new corps
• Limited liability ????

6
Disadvantages of Incorporation
-fees legal accounting to set up plus annual
fees to file prepare T2, update minute book,
file annual returns at Manitoba Corporations
Branch -Some provinces impose a capital
Tax..federal capital tax was abolished
(Manitoba had a 2 to 4 tax with a 10million
exemption- it is all being phased out by the end
of 2010) -Must be profitable accumulate profits
in the T2 to take advantage of the lower tax
rates -If losses cannot be absorbed by the Corp
then they just sit there..they cannot flow out
to the s/hers to use -what about limited
liabilty? Is this not an advantage to
incorporation
7
Capital Gains deduction
-the capital gains deduction is available to
INDIVIDUALS (not corporations) -the current
inclusion rate for capital gains is 50 of the
capital gain a capital gain of 100,000, is
taxable _at_50 50,000 taxable capital
gain.this will be brought into income and be a
taxable event..but you may be able to offset it
with your available capital gains
deduction -there is a lifetime capital gains
exemption of your notes say 250,000 but as of
March 18, 2007 the exemption becomes
375,000 -the exemption is per individual and
can be used piecemeal as you need it but only
against Qualified Small Business Corporation
Share gains or gains from Qualified Farm Property
8
What is a QSBC share?

• 3 conditions in s.110.6 (a condensed
  interpretation)
• At the time of the sale, the shares must be
  shares of a small business corp (this is a
  defined term per s.248 which says that at that
  time all or substantially all (90) of the FMV of
  the assets are used principally in active
  businessor if the asset is a share it must be
  shares of a connected small business corp )-it
  has to be a CCPC
• Throughout 24 months prior to the sale, the
  shares must not be owned by anyone other than the
  person selling or a person related to them (some
  relief for newly incorporated proprietorship)
• Throughout 24 months prior the shares must be
  CCPC shares of which more than 50 of the assets
  were used in active business
• The first test is the hardest to meet. Note it is
  an asset testyou ignore liabilities. When a
  Holdco Opco are involved, the test is harder.

9
Other items to consider -rules to eliminate
problem of circularity when valuing assets held
by parent /sub of each other -identical shares
are deemed sold in order of their acquisition
deem oldest sold first -shares substituted for
each other upon amalgamation or received as a
stock dividend will meet the 24 month hold test
based on the original shares -proprietorships
that transfer in all or substantially all of the
business assets to a corp do not have to meet the
24 month holding period WHAT CAN make you fail
the test most commonly holding inactive assets
at the time of the sale- like too much cash or a
portfolio of investments- possible solution is to
purify the corp. This means remove the
offending assets off the books of the T2
10
Purification
-this is the act of undertaking moves to make
your corporation meet the 90 (all or
substantially all) rule for assets that are used
in active business right at the moment of sale
11
Some ways to purify

• Easy ways to purify.
• -use excess cash to pay down loans or payables
• -pay a divdidend out to s/her yes this is
  taxable but maybe you have a CDA balance
• --reduce puc pay out your puc its a free
  distribution..but it does reduce your acb of the
  share
• Harder ways to Purify
• S/her does s.85 transfer of Opcp shares (say 30)
  to Holdco. Then Opco redeems shares held by
  Holdco pay off debt with the assets the
  offending assets are now held by a different corp
• Holdoc Opco (or Parent sub)- could consider
  amalgamation or windups to end up with a
  different asset mix

12
A share transfer, redemption, pay off debt
example to purify
(to remove excess
cash off the Books of Activeco Ltd)
This is like the example in the lesson notes ex
5-5
13
Asset transfer example continued..
1st do s.85
Activeco
Newco
s.85 30 of shares
Receive share consideration
Bob
Bob
2nd Have Activeco redeem those 30 shares held
by Newco Activeco redeems its shares held
by Newco for 300,000 , this triggers a 300,000
dividend Activeco pays off the dividend with
excess cash. The dividend did not attract any
tax. The end result is that the 300,000 of cash
is off the books of Activco and on the books of
Newco..both are owned by Bob. Activeco has been
purified. but be careful of s.55(2).
14
What it looks like before the redemption
Activeco
30
Newco Assetshares of Activeco
Bob
70
Bob 100
15
Redeem the shares of Activeco held by Newco
Activeco, redeems it 30shares,pays dividend to
Newco
Return shares
Newco, gets cash dividend 300,000
Pay cash dividend
Bob 100
Bob 100
16
After the redemption
Activeco (no cash)
Newco, with 300,000 cash
Bob 100
Bob 100
Activeco has been purified ..it no longer has
an inactive asset on its Balance Sheet which
was disqualifying it from meeting the 90 or
better active business assets test for QSBS.
The cash is now sitting in Newco
17

• A variation of this transaction can be done if
  the asset you had to remove was NOT cash but
  another non-active asset.
• Using aspects of the prior example, Bob would
  still s.85 transfer 30 of his shares over to
  Newco.
• And now Activeco would s.85 transfer over to
  Newco the non active asset it was trying to
  remove from the books (instead of cash assume it
  wassay Art or public co. shares or vacant land)
• At this point each corp would own shares in each
  other and they would cross redeem them and
  trigger dividends owing to each other. The
  dividends would not attract tax. They would pay
  off the debt of the divdend payement by
  cancelling each others debt.
• The end result is that the non-active asset has
  been moved from Activeco to Newco and no tax was
  paid on the transactions. Be careful of s.55(2).
• This is explained in your notes as example 5-7

18
Purify by Windup per 88(1)
Before the windup
Not a SBC
What you are suppose to note is that the assets
of Wapiti have a FMV of 150,000 but 1/3 are from
Zest which is Not a SBC(non-active assets). This
means they do not meet the 90 test.
19
So one solution is to windup Java Ltd ..this
will bring all of Java assets onto the Balance
Sheet of Wapiti Ltd
Before the windup EXAMPLE 5-4 in your notes
Java
Zest
Assets 500,000 goodwill 50000
Asset shares 50,000 public
Active business assets
Non-active business assets
Wapiti
Java 100,000 Zest 50,000
20
After the windup of Java Ltd into Wapiti Ltd
Java is gone, wound up, its Active assets are in
Wapiti Ltd
Zest
Asset shares 50,000 public
Non-active business assets
Wapiti
Java assets 500,000 goodwill 50,000 Zest
shares 50,000
Now note that Wapiti has 600,000 of assets of
which only 50,000 or 8.33 do not qualify as
active. They now meet the 90 test.
21
This is what it looks like in your lesson notes
22
Note that example 5-4 shows you how to achieve
the 90 test using a windup or an amalgamation of
a sub and a parent but if you read read on
further in the example you will find that the
situation did not meet the 50 test for the 24
months prior. Why? .because for a holdco /opco
situation the bar is raised even higher and for
24 months (rather than just at the time of sale)
either the holdco must meet the 90 test or the
connected opcos must meet the 90 test. . This
is why the suggested solution recommends you
still wait a further 24 months before you sell
the shares.
23
CRYSTALLIZATION This refers to the selling of
your shares using section 85 to another corp or
doing an internal s.85 where you sell the shares
back to the same corp. The idea is you sell at
an Agreed Amount that triggers a gain, then you
offset the gain with your exemption ..and the
shares you receive back as consideration have an
ACB equal to the Agreed Amount . Thus the new
shares have a high acb..it was bumped by the
amount of gain you choose to use your exemption
to shield. The act of obtaining the acb bump via
use of the gain shield on a sale that is not to a
3rd party is referred to as crystallization.
24
Transferring/ selling 100 acb shares and
receiving back share with a bumped up acb of
500,100
T2057 election form
This is called crystallizing.you sell your
shares to enable you to take advantage of the
capital gains exemption but you do not sell your
shares to a 3rd party. The above 500,000 gain is
offset by the s/hers capital gains exemption
which is available for QSBS and qualified farm
property. The newly issued preference shares have
an acb of 500,100 (AA). Whats the puc?
normally s.84.1(1)a..will set the puc not
s.85(2.1) if its a shares sale
25
Qualified Farm Property
This is a big deal in the Prairies. Qualified
farm property means it qualifies for the capital
gains exemption as well.the 250,000 exemption
(currently as of March 2007 its 375,000). NOTE
it is not a further or additional 375,000 to the
share exemptionit is the same exemption
pool..so you have a total exemption of 370,000
that can be used by either or both QSBS
Qualified Farm property. CRA tracks all gains
exemption claims on their computers..if you
lose track just ask them to verify your claims
balances. Qualified Farm property refers to real
property (land buildings ) and eligible capital
property of farming (Quotas)..it does not
include the equipment used in farming. The
qualifying property must have been used by the
individual, his spouse, child or parent, family
farm corporation or family farm partnership in a
farming business in Canada
26
Two Major Classifications of Qualified Farm
Property

• Pre June 17, 1987 ownership
• If any of the parties that were previously
  mentioned owned and farmed the land in a
  continuous 5 year period prior to June
  1987then the property qualifies (this law
  gives recognition to long time farmers when the
  gains exemption laws were introduced)
• 2) Post June 17,1987 Farm Property Acquisition
• If you acquired after 1987 then there is a 24
  month income test where in an 24 month period
  your gross revenue from farming by the individual
  , or spouse or , child., parent ,must exceed his
  income from all other sources.
• The exemption is extended to shares of a family
  farm corporation and interests in a family farm
  partnerships

27
Multiplying the Farm exemption
You may transfer your farm , all or parts to your
spouse or children using inter-vivos transfer
rules .these essentially allow transfers of
properties to your spouse at your cost amount
(acb) and farm properties to your children at
your cost amount ( or you may choose an amount
anywhere between cost and FMV). If you split up
the farm property amongst the family, then each
member could use their availble 375,000 gains
exemption on an eventual sale..thus multiplying
the exemption. But if you divide up and sell
immediately thereafter CRA may take the position
that the children were just agents for the parent
and deny the exemption to them..solution is to
wait a few years to sell. -if a farm is
bequeathed to family members.the deceased uses
his available farm exemption up.. plus now each
beneficiary has their own available exemption as
well. thus multiplying the exemption
28
Some additional info related to the Capital Gains
Exemption
-qualified fishing property has recently been
added -anti-avoidance laws were introduced to
combat what finance saw as misuse of the
exemption.84.1.85(2.1) puc rules -exemption may
be denied for those who knowingly or under
circumstance of gross negligence fail to report
their capital gains initially110.6(6) -110.6(8)
looks at insufficient dividend payments on
certain preferred shares and if it is felt that
other shares increased in value because of
this.it will deny the exemption on those share
sales -Cumulative Net Investment account (which
is investment expenses that exceed investment
income), ABILS claimed and previous capital
losses all affect the available pool balance of
gains exemption. The formula uses phrases like
annual gains limit, cumulative gains limit
.thank goodness for computer programs
29
Seizure of Property
-the tax act addresses what happens to the debtor
s.79 and the creditor s.79.1 - what happens
when a mortgage creditor will take possession of
the property as repayment for a debt that the
owner (debtor) cannot discharge Debtor rules

Where the property is
surrendered by the debtor to the creditor, the
property is deemed disposed of for Proceeds equal
to a formula of (A B C) x G/H.there is
more items to the formula but not discussed
here A all amounts owing to the creditor
principal interest) .. B all amounts
extinguished to others on the property p I
C any amounts that a creditor assumes
from 3rd parties G/H is for
pro-rating over several properties
seized Essentially, the debtor has a deemed
disposition equal to the debts extinguished on
the seizure. Ex 5-14 in your lesson notes
30
Creditor Rules -when the creditor acquires the
property the tax act determines the cost of the
property for tax purposes as follows COST
specified cost of the debt x (fmv of a
prop/fmv all prop) (principal but Not
interest) PLUS total expenses
incurred on seizure
(unless
deductible elsewhere) LESS any reserve claimed
by creditor if they were also the vendor of
the property You get the property at a tax
cost for what is owed to you and any costs you
incurred to reacquire it . What about unpaid
interest.not added in but you deduct it for tax
purposes as a bad debt expense. See ex 5-15 in
your lesson notes
31
Debt Forgiveness s.80
Your lesson notes say the rules are complex but
the concepts are quite simple. -the underlying
rationale to tax the debtor is..because when the
debtor acquired the loan it allowed him to either
acquire property or make expenditures that
resulted in deductions from taxable
income. -consequently if he is no longer required
to pay off the debt (forgiven debt) then in
effect he has never really had to pay for the
expenditures he claimed as tax deductions -the
law require the debtor to make amends by reducing
tax loss pools he has, reducing cca pools ,
reducing capital cost of items ..there is list
that must be followed in order and if he has
exhausted all of these then any balance of unpaid
amount is added into income _at_50. -note no
attempt is made to trace or link the required
reductions to what the debtor may have used the
loan monies for
32
Lots of Definitions Rules
There are quite a few definitions rules in this
section, most of them are detailed in pages 6-9
of the lesson notes Some I would like to
highlight are 80(2)(a) a debt is considered
settled or forgiven when the creditor advises it
has been extinguished ( other than forgiveness on
death) -s,80(3) to 80(13) are the rules of
applying the tax reductions and they are to be
followed in that numerical order. 80(2)(k) if a
loan was given in foreign currency.the debt
forgiveness amount is calculated using the
exchange rate at the time of issue of the debt-
it is not the current rate -these rules only
apply to commercial obligations- which are debts
that the interest owing on are tax deductible or
would have been if there was interest stipulated
on the debt
33
Order of Application of the Debt Forgiveness (
the reduction rules)

• This is my condensed version.see lesson notes p
  7-9 for details.
• The forgiven amount of debt reduces in the
  following order
• Balance of carry forward losses 1st non-capital
  losses, 2nd farm losses, 3rd restricted farm
  losses, 4th ABILs, 5th net capital losses per
  80(3) (4) -be conscious of rate when
  incurred, you use the full capital loss as a
  reduction
• Reduce UCC ( capital cost) of depreciable
  assets..you pick the class, cannot go negative
  80(5) (6)
• Reduce CEC pool balance, 4/3 is the rate to
  reduce debt 80(7)
• Resource expenditure balances 80(8)
• Reduce ACB of certain capital properties.excludin
  g shares of a related corp or interest in
  non-arms length partnerships 80(9)

34
ORDER OF APPLLICATION continued 6) Reduce ACB of
a share or debt who is not related to you
80(10) 7) Reduce acb of shares or debt to parties
that are related you 80(11) 8) Reduce Current
year capital losses 80(12) 9) Finally if there
is still a balance of forgiven amount it is added
in at 50 rate as income in the year 80(13)
The pecking order has rules so that you cannot
advance to the next level unless you have applied
previous levels reductions but there are some
limited room to choose for instance you may
choose between application of 80(5) to 80(8)
ucc/cec/ pools.but if you move beyond the
rules say to 80(9) then to advance you must have
exhausted all of 80(5) to 80(7) Examples
notes 5-16 17 shows inclusion rate
considerations
35

• Simple example
• Assume ABC LTD had a 100,000 debt that was
  forgiven. They had non capital losses of 20,000,
  net capital losses of 5,000 (that were
  calculated at a 50 rate), class 10 assets with a
  ucc of 5,000 and no other assets.
• Debt forgiveness rules would make the have
  following effect
• 
  100,000 forgiven
• Reduce the non-capital loss pool 80(3) (
  20,000)
• Reduce the net capital loss pool 80(4)
  ( 10,000) (2x 5000 to adjust for the
  50 inclusion rate)
• Reduce the capital cost ucc of class 10
  (5,000) balance
  65,000
• Add the balance into income _at_ 50 80(13)
  32,500

36
Some relief for Hardship
If an INDIVIDUAL has to add a forgiveness amount
into income under 80(13).. there is a reserve
available to him with a 40,000 threshold of
income s. 61.2 essentially allows a deferral of
the forgiven amount inclusion until the
individuals income in a year exceeds 40,000 from
other sources.. And then brings in the forgiven
amount at 20 per year see example
5-18 Corporations have two options available to
them for 80(13) income. If your are insolvent .
per the formula in 61.3(1) you may make a
deduction to offset the 80(13) income
amount..the deduction is based on 2 X your net
assets.and finally if you still have an amount
to add in there is a 5 year reserve available as
well per 61.4..see example 5-19
37
Anti-avoidance Rules s.245
The Act contains numerous specific
anti-avoidance sections for example 84.1
55(2)..(there are many others as well) but these
were all designed to address specific types of
avoidance transactions. -taxpayers prove to be
boundlessly creative and rather than patching
perceived avoidance loopholes with specific
law changes all the time.. GAAR (General
Anti-Avoidance Rules) was introduced in section
245 in 1988. GAARs intent is as it sounds it is
intended to catch all forms of tax planning that
is defined to be tax avoidance. The provision was
designed is to be broad in scope and eliminate
the need to play catch up with new innovative
sophisticated tax strategies that are always
surfacing. What does it look like?
38
Tax Avoidance falls between Tax Planning and Tax
Evasion.. It is seen by many as a hazy / grey
..not easy to determine line.
Amalgamation, bonus, RRSP, estate freeze etc.
All Legitimate Tax Planning
Tax Avoidance (civil wrong)
Business purpose
Object spirit
Tax Evasion (criminal offense)
39
Three Factors for Avoidance

• The transaction (s) have to result in a tax
  benefit- which can be a reduction or avoidance or
  deferral of tax or an increased refund, includes
  penalties interest amounts too (it is a
  generous definition of a tax benefit ) 245(1)
  
• 245(3) says a transaction should have been
  undertaken for bona fide (business/family
  planning) purposes and not for the tax benefit
  if it is NOT for bona fide reasons then its
  labeled as being undertaken for the tax benefit
• And lastly 245(4) says the transaction must be
  abusive to the ITA, its regulations or treaties.
  ( this is seen as an offence to the scope or
  intent of the legislation)

40
NOTE you have to meet all 3 criteria before the
transaction can be pursued as a tax avoidance
transaction It can also be a series of
transaction not just a transaction The court
cases indicate the onus is on the taxpayer to
refute points 1 2 and the onus is on the
Minister to prove point 3. A lot of transactions
may seem to be for bona fide purposes and yet
done to obtain a tax benefit as well the
principle objective is the determining
factor..estate freeze/ family planning the
majority of commercial activity should not be
affected Tax Consequences if Tax Avoidance
applies to your transactions -quite a wide
scope.. -adjust income, taxable income, or
amount payable, or refundable, or even adjust the
ACB or PUC of a share
41
Examples
Read I.C. 88-2 to see CRA views on what
constitutes tax avoidance and what is considered
ok tax planning. Example If a T2 sells an
asset with an accrued gain on it on a
rolloverbasis to a related T2 that has unused
losses.and then the loss T2 sells the asset and
offsets the gain with its losses- thats ok.if
it not a affiliated party related
transfer..69(11) says not ok. Example the
selling of a property would trigger a gain so
the vendor purchaser form a partnership. Vendor
rolls the asset in at acb for exchange of
partnership interest. Purchaser puts cash into
the partnership equal to the FMV of the asset for
partnership interest. Vendor withdraws the
cash.it reduces his acb likely goes negative
but thats not taxable. So vendor has his money
no tax was paid. Per CRA GAAR applies.
42
Examples
Your lesson notes refer to several Tax Avoidance
cases McNichol (1997) surplus stripping a
professional partnership owned a corporation
whose asset was the building where the
partnership practiced..however the corp sold
the building and was left with an asset of cash
only on the B/S. Normally to extract the cash
there should have been a taxable payment of a
dividend or salary to the s/hers.but instead
they found a buyer for the shares and triggered
a capital gain to the s/hers on the share sale
which they also felt could be offset with the
capital gains exemption that was available at the
time. So they used the rules of the Act to
circumvent the tax on the windup dividend. The
court found the tax avoidance applied as the tax
benefit obtained was an abuse of the scheme of
the Act.
43
OFSC Holdings Ltd 2001 transfer of losses CRA
won the case which centered on the transfer of
unrealized losses between corps using a
partnership. upheld it was not for bona fide
business purpose and it was a misuse of the
Act Canadian Pacific Ltd 2002 interest on
foreign loan CRA lost this case, judge felt it
was part of their business, not misuse of the
Act Loyens 2003 CRA lost this case
-individuals rolled farm property to their
partnership. . -then immediately
rolled their partnership interest via s.85 to a
corp then the corps sold the partnership
interest immediately to another corp at a gain
but used its available corp losses to shield the
gain. -CRA said it was not for business ..no
intention of farming ..a misuse of the Act Court
said no it was not a misuse of the Act.
44
Waters Edge Village Estates 2002 terminal loss,
CRA won Essentially a computer (situated in a
USA entity) with a historical cost of 4
million but with a current FMV of only 7,000 was
marketed to Canadian investors in a series of
transactions involving a partnership entity.
The sole purpose was to preserve its historical
capital cost and have it become the Canadian
acquisition cost. Then the Canadian partnership
sells it for 7,000 and claims the huge terminal
loss on the 4,000,000 cost and flows the loss
out to the partners. The judge agreed it was
only tax benefit motivated (not for business)
and was a misuse of the Act
45
GAAR file but not a court case -two brothers
each owned 50 of the shares of a very profitable
active business company (say transport) located
in Manitoba
-one brother
sells to his new Holdco his shares and triggers a
gain 500,000 and offsets it fully with his
capital gains exemption -unfortunately
he takes back non share consideration of 500,000
and it triggers a taxable deemed dividend of
500,000.84.1(1)(b) -the other brother is seen
as having sold his shares as well at the same
time to another corp and the initial assumption
is that he has likely triggered a deemed dividend
as well -well the other corp does show the issue
of non share consideration to the other brother,
BUT it turns out the other corp is not owned by
either brother - it is apparently arms length to
the the brothers and it runs its own Doctor
businesswhy would a professional Doctor corp ,
located in another province want a transport
business?
46
Inquiries were made..it turns out the other
corp owner insisted that he had little personal
knowledge of the events..he relied on his tax
provider / specialist and just signed what was
put in front of him -it turns out that the tax
preparer who was domiciled in Winnipeg was the
tax representative for all the parties. The
conclusion was that it was most likely his
plan..and it does appear that it was done for
the tax benefit (not to pay tax on 84.1
dividend)..CRA said it was a misuse of the Act
and GARR applied and they reassessed for the
deemed dividend The smell test theory ..Tax
Avoidance uses this phrase often when discussing
/ reviewing files Ever heard of Film Losses -
case before the courts today Prominent Manitoba
Trucking case - pre GAAR - CRA lost