News of Note
Asadi – Tax Court of Canada finds that an adventure is not a business for ETA purposes, and that CRA issuance of a registration number did not entail retroactive registration
Email this ContentAfter finding that the taxpayer’s sale of the new home, which she had constructed, was the result of an adventure in the nature of trade and a taxable supply, Friedlander J then addressed the issue of whether the taxpayer was entitled to an ITC for HST on the commission charged to her on the sale, notwithstanding that she had not registered for HST purposes.
Friedlander J noted that the definition of “commercial activity” in s. 123(1) distinguished between a business carried on by a person and an adventure or concern in the nature of trade, and found that the taxpayer was not required by s. 240(1) to be registered as a result of her taxable supply by way of sale of the property given the exception in s. 240(1)(b) from that requirement where the sale was “otherwise than in the course of a business.” Thus, the taxpayer did not satisfy the “person who … is required to be registered” branch of the “registrant” definition in s. 123(1).
The taxpayer nonetheless argued that she was a registrant because, in assessing her, the Minister had unilaterally issued a business number to her with the RT0002 suffix. In finding that this did not establish that the taxpayer was a registrant at the time she incurred the commission, Friedlander J stated:
[T]here was no evidence presented to show that the Minister had sent a notice of intent pursuant to subsection 241(1.3). Further, the Notice of (Re)Assessment did not reference registration, nor an effective date of registration. Accordingly, the Appellant has not adduced sufficient evidence to show that the Appellant was registered by the CRA for GST/HST purposes. In addition, as noted above, any such registration would have to have had retroactive effect in order to allow the Appellant to claim ITCs. In this case there is no evidence [of this].
Neal Armstrong. Summaries of Asadi v. The King, 2026 TCC 147 under ETA s. 123(1) – builder – (f), – registrant, and basic tax content.
STC Steel – Tax Court finds that Cdn.$ NCLs of a sub were converted at the spot rate for the most recent completed tax year end when wound up into a USD functional currency parent
A subsidiary of the taxpayer incurred non-capital losses in its 2009 to 2011 taxation years. The subsidiary was wound up into the taxpayer, and dissolved, on December 2, 2020. Unlike the subsidiary, the taxpayer had elected, for all relevant taxation years, to have the US dollar as its functional currency.
The taxpayer took the position that the quantum of the non-capital losses, expressed in its functional currency, should be converted at the exchange rate applicable at the end of each taxation year in which the losses were incurred; whereas the Minister considered that they should be converted at the spot rate applicable at the end of the subsidiary’s last Canadian currency year, i.e., December 31, 2019.
The taxpayer argued that the subsidiary did not have a taxation year ending after the commencement of the winding-up on December 2, 2020 as its final taxation year ended on that day, so that s. 261(16) did not apply as it had no taxation year ending after the commencement of the winding-up. In rejecting this submission, Clark J noted that the use in s. 261(16) of “commencement time” rather than “commencement day” contemplated a sequencing of events on the winding-up day, that the year end did not occur until dissolution, and that the commencement time (of the winding-up) “must occur before the year end, even if both occur on the same day.”.
She further stated:
Subsection 88(1.1) deems the subsidiary’s property to have been disposed of for proceeds of disposition equal to the cost amount to the subsidiary of that property. This deemed disposition takes place in the moment before wind‑up and is consistent with understanding subsection 261(16) to require conversion into the elected functional currency in the moment before wind‑up.
As a result, s. 261(16)(a)(i) provided that s. 261(5) was deemed to apply to the taxation year that included the commencement time, which was the taxation year that ended on December 2, 2020.
Neal Armstrong. Summary of STC Steel Technologies Canada, Ltd. v. The King, 2026 TCC 149 under s. 261(16) and Interpretation Act, s. 11.
CRA rules on a post-mortem pipeline where there was a change in the business of the subject corporation while in the hands of the estate
CRA ruled on post-mortem pipeline transactions where, following preliminary transactions to fully utilize the ERDTOH, NERDTOH, and CDA balances of the Opco held by the estate of the deceased, the estate will transfer its remaining common shares of Opco to the Newco in consideration mostly for a promissory note of Newco, Newco and Opco will amalgamate to form Amalco after the passage of at least one year, and the note will then be repaid on a quarterly basis.
A somewhat unusual fact is that, after the death of the deceased, Opco ceased to carry on a professional services business and only carried on an investment business focused on high-growth investing.
Neal Armstrong. Summary of 2024 Ruling 2024-1037251R3 F under s. 84(2).
CRA notes that an individual can continue contributing to an FHSA after acquiring an owner-occupied home
The taxpayer acquired a qualifying home as principal place of residence and was thus regarded as having an “owner-occupied home” – which adversely affected the ability to make a “qualifying withdrawal”. However, CRA noted that such acquisition would not cause the “maximum participation period” as defined in s. 146.6(1) (being the first to occur of the 14th anniversary of entering into the qualifying arrangement, attaining age 70, and making a qualifying withdrawal) to terminate. Indeed, the individual could continue to contribute to the FHSA during that maximum participation period subject to the “annual FHSA limit”.
Before the end of the maximum participation period, the amounts held in the FHSA (to the extent not an “excess FHSA amount”) could be transferred by direct transfer to an RRSP or RRIF of the individual pursuant to ss. 146.6(7) and (8).
Neal Armstrong. Summary of 14 May 2026 External T.I. 2025-1054171E5 F under s. 146.6(1) – annual FHSA limit – (c).
CRA indicates that the introduction of the “solid biofuel” definition resulted in wood pellets made from wood waste no longer qualifying as wood waste
CRA indicated that the introduction of the definition of "solid biofuel" in Reg. 1104(13), which relevantly refers to fuel produced substantially from specified waste material that has undergone densification into pellets, resulted in pellets so produced from wood waste no longer qualifying as wood waste (contrary to 2012-0444401E5 and 2005-0151611E5 ). This change in position will apply prospectively to wood pellets derived from wood waste after September 30, 2026.
Neal Armstrong. Summary of 29 July 2026 External T.I. 2026-1095401E5 under Reg. 1104(13) – wood waste.
Income Tax Severed Letters 12 August 2026
This morning's release of four severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Kruivitsky – Tax Court of Canada finds that s. 60(o)(i) does not permit a deduction for costs of another’s tax dispute and that tax dispute costs are deductible from related business income
The taxpayer represented a relative in his objection to the CRA and appeal to the Tax Court, and paid approximately $6,200 in fees and disbursements for his appeal to the Federal Court of Appeal.
Before finding that the taxpayer could not deduct such expenses pursuant to s. 60(o)(i) in computing her income, Ezri J first indicated that the actual text of s. 60(o)(i) did not limit the deduction to an expense of the taxpayer whose assessment was disputed. However, the context suggested that Parliament has expressly so stated when it permitted a deduction to be taken by a taxpayer for others’ affairs, for example, transfers to parents of tuition tax credits or to spouses of charitable donation credits.
Furthermore, interpreting the provision as permitting the deduction by someone other than the one assessed would create an anomalous mismatch with s. 56(1)(l). For example, if the taxpayer had been awarded costs on the appeal to the Federal Court of Appeal, such an award would have been included in the income of her relative under s. 56(1)(l), even with her having taken the deduction under s. 60(o)(i).
Ezri J also indicated that, absent s. 60(o)(i), “[p]ersons earning income from business or property could deduct the costs in computing income in the usual way, pursuant to Premium Iron Ores”.
Neal Armstrong. Summaries of Kruivitsky v. The King, 2026 TCC 141 under s. 60(o)(i) and s. 18(1)(a) – legal fees.
CRA rules on a PUC-reduction (to access CDA) similar to ATR-54
The taxpayer held high-PUC preferred shares of a family corporation. To increase the deemed dividends that would arise on the redemption of preferred shares following the taxpayer's death so as to better access the corporation’s capital dividend account (CDA), it was proposed that the PUC of two classes of preferred shares be reduced and that those preferred shares be converted by the taxpayer under s. 51(1) into redeemable retractable preferred shares of a third class.
CRA ruled that this PUC reduction would not give rise to a disposition, or an ACB grind under s. 53(2)(a)(ii), and that s. 245(2) would not be applied as a result of these transactions. It indicated in its summary that these transactions were similar to ATR-54. ATR-54 noted that there was no avoidance of s. 83(2.1) since the CDA arose a number of years subsequent to the issuance of the high-PUC shares in question and that the reduction of their PUC did not give rise to an acquisition of shares for purposes of s. 83(2.1).
Neal Armstrong. Summary of 2026 Ruling 2025-1076711R3 under s. 248(1) - disposition.
On its acquisition of Rupert Resources, Agnico Eagle issued contingent value rights that now trade on the TSX
On June 16, 2026, Agnico Eagle acquired all the shares of Rupert Resources in consideration for the issuance of Agnico Eagle common shares and of contingent value rights (CVRs).
Each CVR entitles its holder to the following payments if the specified conditions are met within 10 years of the effective date of the Plan Of Arrangement:
- $1.00 upon the public announcement by Agnico Eagle that the mineral reserves on the Rupert property are not less than 5 million ounces of gold (the current published reserves were 3.5 million);
- a further $1.00 upon Agnico Eagle publicly announcing that such property has reached commercial production and that the reserves, together with previously produced ounces, are not less than 7.5 million ounces; and
- a further $1.00 upon an announced reaching of 10 million.
Taxable resident shareholders were permitted to file a joint election under s. 85(1) or (2) with Agnico Eagle provided they submit a duly completed and signed election form within 120 days of the Arrangement. Agnico Eagle transferred all of its Rupert shares (including its previous 13.9% stake) to a new BC sub, which then amalgamated with Rupert.
The cost of a CVR for Canadian and U.S. tax purposes is considered to be equal to its FMV at the time of acquisition. The Canadian tax disclosure treats each milestone payment receipt as giving rise to a part disposition or disposition of CVRs for capital gains purposes; whereas the most likely treatment suggested for U.S. tax purposes is to treat payments on a CVR (except to the extent treated as imputed interest) as a return of the U.S. holder's adjusted cost base in such CVR and thereafter as gain. The U.S. tax disclosure indicates that Agnico Eagle intended to treat the FMV of a CVR on the effective date of the Arrangement as $0.65.
With a view to the CVRs being qualified investments to registered plans, Agnico Eagle agreed to use commercially reasonable efforts to obtain conditional approval for the listing of the CVRs on the TSX by Arrangement implementation. This occurred. The listing was approved on a discretionary basis under the TSX Sandbox (for the accommodation of novel securities that do not meet all the listing requirements). See Ghaith Sibai, “First-Ever Listing of Contingent Value Rights on the TSX,” Davies Insights, 7 July 2026 The most recent closing price for AEM.CV was $0.59.
Neal Armstrong. Summary of Circular of Rupert Resources Ltd. (the "Company”) respecting its proposed Plan of Arrangement with Agnico Eagle Mines Limited (“Agnico Eagle”) under Mergers – Mergers & Acquisitions – Mergers – Shares for CVRs and Shares/ Cash.
CRA refers to its rulings practice of no amalgamation or winding-up the deceased’s corp with the pipeline corp for at least 1 year, and suggests a ruling application re any departure from this
The estate of A incorporated “Parent” and transferred all its shares of a corporation (“Subsidiary”), that had been held by A on A’s death, to Parent in exchange for a promissory note. Is the amalgamation of Subsidiary with Parent, or its winding-up into Parent, a factor in determining whether s. 84(2) applies?
After referring to the various rulings it has issued on post-mortem pipeline strategies, CRA stated:
In almost each case, arguably in order to address the potential application of subsection 84(2), the proposed transactions submitted by the taxpayers provided that, among others, the original corporation would remain a separate and distinct entity from the pipeline corporation and would not be wound up or amalgamated with the pipeline corporation or another corporate entity for a period of at least one year. In addition, the original corporation would continue to carry on business during that particular period of time.
Where taxpayers wish to proceed in a manner different from that described above, they may consider requesting an advance income tax ruling in order to obtain certainty regarding the application of subsection 84(2).
Neal Armstrong. Summary of 5 May 2026 CALU Roundtable Q. 4, 2026-1089341C6 - Subsection 84(2) – Timing of Amalgamation in Post-Mortem Pipeline/Bump Planning under s. 84(2).
Neal H. Armstrong editor and contributor