Recent cases

May 29, 2019 2 MIN READ

1.  Total Energy Services Inc. v. The Queen, 2019 TCC 112; Discovery; GAAR; SR&ED; Argued by Bennett Jones

Pursuant to transactions pursuant to the Companies’ Creditors Arrangement Act, the taxpayer utilized certain tax attributes relating to capital and non-capital losses, input tax credits and SR&ED expenditures in 2010 and 2011 taxation years.  The Minister applied the GAAR to the  transactions at issue and in assessing the taxpayer for the 2010 and 2011 taxation years, disallowed certain non-capital losses, net capital losses and SR&ED expenditures.

In course of proceedings, representative of Minister refused to provide certain documents in discovery.  The taxpayer claimed it was entitled to production of refused documents in order to probe whether they are relevant to establishing general policy behind GAAR provisions under examination and the taxpayer brought a motion to compel production of documents.

In dismissing the motion, Visser J. held that:

  • the majority of the refused documents which the taxpayer sought were the same as the ones that were dealt with in other cases, but were not necessarily relevant in case at bar
  • there was no evidence that the refused documents had any connection with taxpayer’s audit and could not help determining what policy was applied by the Minister or lead to train of inquiry which could help it advance its case
  • the request for certain documents was a fishing expedition and the request was overly broad in certain respects
  • settlement privilege applied to certain documents
  • some documents related to another taxpayer and some documents were irrelevant

2.  Renaud v. The Queen, 2019 CAF 154; Whether taxpayer’s part time law practice constituted a “source” of income justifying the business loss deductions claimed by her; ITA: 3, 9(1), 18(1)(a)

The taxpayer was a member of the Quebec Bar and worked full-time as a lawyer with Transport Canada. She was also given responsibility for law courses at the University of Ottawa, in addition to carrying on a private practice. From 2011 to 2014 she reported gross revenues from that practice ranging from $850 to $3,850, and losses ranging from $4,014 to $12,613.

In dismissing the taxpayer’s appeal from the Minister’s assessments disallowing those losses (2017 CCI 88), the TCC applied the principles set out in Stewart v. The Queen, 2002 SCC 46, and concluded that the taxpayer’s private practice did not constitute a source of income. In dismissing the taxpayer’s further appeal, the FCA concluded that the TCC did not err in finding that the taxpayer’s private practice was not being carried on with a view to making a profit. As a result, no appellate intervention was required.