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Highlights
SERIES OF TRANSACTIONS
Federal Court of Appeal Expands Scope of Series of
Transactions: A Review of Canadian Utilities v. The Queen
Mark D. Brender
Mark Brender reviews the decision of Canadian
Utilities Limited et al. v. The Queen, in which the Federal Court of
Appeal examined the question of what constitutes a common law series in
the context of a structured disposition designed to benefit from the
Part IV tax exception to subsection 55(2) of the Income Tax Act. The
taxpayers had engaged in a capital gains strip transaction, following
which they paid normal course dividends giving rise to Part IV tax
refunds. The Court had to determine whether the normal course dividends
formed part of the same series of transactions that included the capital
gains strip transaction to which subsection 55(2) would otherwise apply.
Justice Rothstein rejected the view espoused by the Tax Court of Canada,
which had held that an independent transaction can never form part of a
common law series, and reinforces the notion that, for a series to
exist, the subsequent transaction must be determined at the time the
initial transaction is completed – whether or not it has an
independent purpose.
TAX DEFERRALS
Return of Capital of a Public Corporation: Amendments
to Subsection 84(4.1)
Gabrielle M.R. Richards
Generally, a public corporation is able to return
paid-up capital to its shareholders on a tax-free basis only if the
reduction of paid-up capital arises on (i) a redemption, acquisition or
cancellation of shares of a class; (ii) a transaction described in
subsection 84(2); or (iii) a transaction described in section 86. As a
consequence of the rules in subsection 84(4.1), the exception in (i) was
unavailable and public companies wishing to return capital had to
rely on the exceptions in (ii) or (iii). Following the issuance of
several comfort letters by the Department of Finance, proposed
amendments were published on February 27, 2004. Gabrielle Richards
discusses the amendments and their effects.
FOREIGN
SPIN-OFFS
Morasse v. The Queen – Mexican Pegs in Canadian Holes?
Christopher J. Steeves
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Board
Mark D. Brender
Editor-in-Chief
Davies Ward Phillips & Vineberg LLP
Montreal
Serge Bilodeau
KPMG LLP
Montreal
Greg C. Boehmer
Ernst & Young LLP
Toronto
K.A. Siobhan Monaghan
Davies Ward Phillips & Vineberg LLP
Toronto
Gabrielle M.R. Richards
McCarthy Tétrault LLP
Toronto
Christopher J. Steeves
Fraser Milner Casgrain LLP
Toronto
Marc N. Ton-That
KPMG LLP
Toronto
David M. Williamson
PricewaterhouseCoopers LLP
Calgary |
