S & D International Group Inc. v. Canada[1] is another recent case on rectification which represents a significant win for taxpayers.[2] In S&D International Group Inc., the Court broadly interpreted its equitable jurisdiction to allow taxpayers to correct transactions producing unintended tax consequences and granted a rectification order despite scant evidence of intent to avoid tax, and despite the fact that the taxpayers were under no misapprehension about the basic nature of the transaction (share repurchase).

Most tax practitioners are familiar with CRA’s attempts to obtain their clients information by way of sections 231.2 of the Income Tax Act (the “Act”).  This provision allows the CRA to require that any person provide any information or any documents for the purpose of administering or enforcing the Act.  What practitioners may not be familiar with is a recent Quebec Superior Court decision which declares this provision (and connected provisions) unconstitutional and without effect by virtue of sections 52 of the Canadian Charter of Rights and Freedoms!  This decision is Chambre des Notaires du Quebec c. Canada [2010] R.J.Q. 2069.  So, why have you not heard of this decision?  Most likely because it has only been released in French – the English translation is no doubt pending.

By Kim G C Moody CA, TEP and Marissa L Halil LLB, BCL

The Supreme Court of Canada released its long awaited decision in Lipson v. Canada¹ yesterday. The facts in Lipson were, very generally, as follows:

On May 22, 2008, the Supreme Court of Canada released its decision in the McLarty matter. The issue before the Court was whether Mr. McLarty’s liability under a promissory note that was owing by him upon the acquisition of a certain oil and gas property was an absolute as opposed to a contingent liability. To the extent that the promissory note was a contingent liability, no deduction would be allowed by Mr. McLarty for such portion of the otherwise oil and gas expense deduction. The other matter before the Court was whether or not McLarty was dealing at arm’s length with the vendor when he acquired the property. To the extent that he was not dealing in an arm’s length fashion with the vendor then the acquisition of such property would be required to be made at fair market value which the CRA had argued was much less than its original acquisition price.