Cases
Swirsky v. The Queen, 2014 DTC 5037 [at 6723], 2014 FCA 36, aff'g 2013 TCC 73, 2013 DTC 1078 [at 431]
Before affirming a finding of Paris J that the taxpayer's wife had not established an income-producing purpose for money borrowed by her to acquire shares of a family company, Dawson JA stated (at para. 8) that "where the purpose or intention behind an action is to be ascertained, a court should objectively determine the purpose, guided by both objective and subjective manifestations of purpose." Paris J (contrary to the taxpayer's submission) had, in fact given weight to a number of objective manifestations of purpose.
Ludco Enterprises Ltd. v. The Queen, 2001 DTC 5505, [2001] 2 S.C.R. 1082, 2001 SCC 62
Before going on to consider whether the taxpayer had borrowed money for an income-producing purpose, Iacobucci J. stated (at p. 5514):
"In the interpretation of the Act, as in other areas of law, where purpose or intention behind actions is to be ascertained, courts should objectively determine the nature of the purpose, guided by both subjective and objective manifestations of purpose ... . In the result, the requisite test to determine the purpose for interest deductibility under s. 20(1)(c)(i) is whether, considering all the circumstances, the taxpayer had a reasonable expectation of income at the time the investment is made."
Backman v. The Queen, 2001 DTC 5149, 2001 SCC 10
Before finding that the taxpayers had not entered into an arrangement with the requisite intention to be partners, the Court stated (at p. 5154) that "motivation is that which stimulates a person to act, and intention is a person's objective or purpose in acting. This Court has repeatedly held that a tax motivation does not derogate from the validity of transactions for tax purposes ...".
Roseland Farms Ltd. v. The Queen, 99 DTC 5704 (FCTD), aff'd , 2001 DTC 5392 (FCA)
Before going on to find that the decision to purchase farm land by the corporation originated with its shareholders, Sharlow J. stated (at p. 5707):
"that the intention of a corporation is that of the natural persons by whom it is managed and controlled ... . In the case of a widely held public corporation, the requisite intention may be that of a corporate officer or a group of officers or directors who made the purchasing decision. The intention of a closely held corporation, however, is normally that of the shareholders."
The Queen v. Wu, 98 DTC 6004, Docket: A-762-96 (FCA)
In light of the additional word in s. 15(1.1) referring to "it may reasonably be considered", the Tax Court Judge had erred in finding that the relevant purpose must be the conscious intent of the taxpayer. Rather than a subjective test, the quoted words clearly indicated that the evidence of necessary intent could be established if in the circumstances it was reasonable to consider that this was one of the purposes of the payment.
74712 Alberta Ltd. (formerly Cal-Gas & Equipment Ltd.) v. The Queen, 97 DTC 5126 (FCA)
Robertson J.A. stated (at p. 5135) after discussing jurisprudence on paragraph 20(1)(c):
"... I see nothing in the jurisprudence ... which requires a subjective appreciation of the motives or intent underlying the taxpayer's decision to borrow funds ... . The words 'use' and 'purpose' are used in paragraph 20(1)(c) in an objective not subjective sense."
Maritime Forwarding Ltd v. The Queen, 88 DTC 6114, [1988] 1 CTC 186 (FCTD)
"It has often been repeated in tax matters that assertions by a taxpayer as to his intentions are only persuasive to the extent that they may be directly or indirectly confirmed by or be consistent with overt and objective fact."
[C.R.: "Evidence"]
Mohawk Horning Ltd. v. The Queen, 86 DTC 6296, [1986] 2 CTC 89 (FCA)
It was found that any change of intention by a non-controlling member of a syndicate ("Schneider") to hold his interest in the real property of the syndicate as capital property rather than inventory, did not entail a change of intention by the syndicate. Urie, J. stated that where the participants in a transaction "all are to greater or lesser degrees active, (as here) the most active participant's intention (in this case Schneider's) must be enveloped by that of the consortium as a whole, even if, alone, his purpose would have been different."
Don Fell Ltd. v. The Queen, 81 DTC 5282, [1981] CTC 363 (FCTD)
The intention of a company of which one person is the sole shareholder, director and officer, is the intention of that person.
Bomag (Canada) Ltd. v. The Queen, 81 DTC 5085, [1981] CTC 156 (FCTD), aff'd 84 DTC 6363, [1984] CTC 378 (FCA)
The intention of the German parent of the taxpayer in negotiating a contract for the cancellation of a franchise prior to the incorporation of the taxpayer, was attributed to the taxpayer for the purpose of determining the tax treatment of payments made by the taxpayer pursuant to the contract.
Kit-Win Holdings (1973) Ltd. v. The Queen, 81 DTC 5030, [1981] CTC 43 (FCTD)
The intentions of the dominant member of a land-development syndicate were attributed to the taxpayer, which was a more passive member, for the purpose of determining whether it had acquired its interest in the syndicate lands on capital account.
Robbie Holdings Ltd. v. The Queen, 80 DTC 6336, [1980] CTC 422 (FCTD)
"The motivation or motivations which lead a person to make a purchase of land are always questions of fact. What the purchaser says on this point must always be considered, but it may not be decisive. Particularly is this the case when the motives or intention he ascribes for the purchase would result in a sustantial financial benefit to himself. The purchaser's actions and other circumstances may be a far better guide to his true motives than are his statements about them."
Program Properties Ltd. v. The Queen, 78 DTC 6215, [1978] CTC 320 (FCTD)
Walsh, J. stated: "The intent of this closely held company can only be determined by examing the intent of the shareholders of it and in particular the principal and controlling shareholder. The intent must be determined as of the date of purchase".
See Also
High-Crest Enterprises Ltd. v. The Queen, 2015 TCC 230
ETA s. 191.1(2) effectively deems the HST to be payable on the greater of most costs and the fair market value where the builder received government funding "for the purpose of making residential units in the complex available to [seniors]."
Owen J found (at para. 93) that although the form of government assistance for an addition to a Nova Scotia nursing home was its agreement to subsidize operating costs relating to the additional residents and not the construction costs:
[T]his does not alter the fact that the dominant purpose of the Department in…agreeing to make these payments was to secure additional long‑term care beds for seniors in Nova Scotia. The immediate result of the payments may have been the provision of the Services but that was not the purpose behind the payments.
He previously noted (at para. 80):
In light of the focus on the purpose of a third party - the grantor or organization - the use of the definite article "the" before the word "purpose" suggests that the definition requires a determination of the main or dominant purpose of the grantor or organization. Otherwise the builder would be faced with the near impossible task of ruling out all other possible purposes.
See summary under ETA, s. 191.1(1) - Government Funding.
McKesson Canada Corp. v. The Queen, 2014 DTC 1040 [at 2723], 2013 TCC 404
FCA appeal settled.
The taxpayer sold receivables to its Luxembourg parent at over twice the discount which could be supported under s. 247(2)). Boyle J stated (at para. 268):
[T]he predominant purpose and intention of McKesson Canada participating in the… transactions with the other McKesson Group members was not to access capital or to lay off credit risk. Those were results of the transactions but did not motivate them. The purpose was to reduce McKesson Canada's Canadian tax liability... .
McCoy v. The Queen, 2003 DTC 660, 2003 TCC 332
Before going on to find that a limited partnership had acquired software for the purpose of gaining or producing income, Bowman A.C.J. stated (at p. 678):
"Intention is subjective. Purpose, while it may involve a subjective element, must be largely determined on the basis of objective considerations. It is impossible if one looks at the material that was presented to the investors to conclude that the earning of income was not a purpose of the partnership."
Jacques St-Onge Inc. v. The Queen, 2003 DTC 153 (TCC)
Archambault T.C.J. referred, with approval, to the statement of Rip T.C.J. in Bailey v. The Queen, [1989] T.C.J. 602 that: "what is 'reasonable' is not the subjective view of either the respondent or appellant but the view of an objective observer with a knowledge of all the pertinent facts", and went on to find that it was reasonable to expect that a subsidiary of the taxpayer would be wound-up notwithstanding that the proprietor of the taxpayer had indicated that, in fact, he had no intention to wind-up the subsidiary.
Wong v. The Queen, 99 DTC 458, Docket: 95-3255-IT-G (TCC)
Before going on to accept evidence that stock dividends that produced the result described in s. 15(1.1) were not declared with that purpose in mind, Rowe D.J. stated (at p. 464):
"In my view the addition of the words 'it may reasonably be considered' in subsection 15(1.1) does not detract from the validity of examining the definition of 'purpose' as it pertains to the intention, end, aim, object, plan, project or goal to be accomplished or achieved. The additional words make it clear that an objective standard is to be applied to the evidence offered up by a taxpayer and fanciful, outrageous or otherwise unreliable testimony on the issue of purpose does not have to be accepted at face value any more than any other portion of testimony or piece of evidence even though it is forcefully expressed in a manner consistent with a deeply-held belief. It is apparent the standard to be applied against the taxpayer is much more stringent than where the language of the legislation used the word 'desired' as in subsection 56(2) of the Act as considered by the Federal Court of Appeal in Jones v. The Queen, 96 DTC 6015 (also reported as Ascot Enterprises v. R, [1996] 1 CTC 384."
Vodafone Cellular Ltd. v. Shaw, [1997] BTC 247 (C.A.)
Before going on to find that a contract-cancellation payment by the taxpayer was made exclusively for the purposes of its trade, Millett L.J. noted (at p. 254) that the inquiry as to what was the taxpayer's subjective intention did "not involve an inquiry of the taxpayer whether he consciously intended to obtain a trade or personal advantage by the payment".
IRC v. Fisher's Executors, [1926] A.C. 395 (HL)
"In any case desires and intentions are things of which a company is incapable. These are the mental operations of its shareholders and officers. The only intention that the company has is such as is expressed in or necessarily follows from its proceedings. It is hardly a paradox to say that the form of a company's resolutions and instruments is their substance."
Articles
David C. Nathanson, "Tax Motive Kills Partnership: Spier Freezes (cf. Continental Bank)", Tax Litigation, Vol. VII, No. 3
Includes a discussion of Norglen Ltd. v. Reeds Rain Prudential Ltd., Circuit Systems Ltd., [1998] 1 All E R 218 (HL) (respecting the irrelevance of motive).