Skip to main content

Supreme Court of Canada - Lipson

...A major victory for the Canada Revenue Agency from the Supreme Court of Canada...


n January 8th, 2009, the Supreme Court of Canada issued its decision in the case of Lipson v. Canada. For tax practitioners across the country, the earth swayed, thunder rumbled and some checked their insurance coverage.

Lipson is an individual resident in Canada who purchased a home, in part with borrowed money, and structured his affairs in such a manner to allow for a deduction on interest paid on the debt. Normally, debt used to acquire personal property is not deductible, but some taxpayers in the past have structured the purchase and debt to allow for an interest deduction against business income and income from property. This is what Lipson tried to do, but the government argued against it citing ITA 245--the General Anti-Avoidance Rule.

Prior to Lipson, the courts held up such structures, but that was before the GAAR was law. Not so with Lipson and all courts involved in the case ruled against the taxpayer and in favour of the government.

If you know 20(1)(c) doesn't relate to the size of an engine, you can read an excellent summary of the facts and arguments as written by UoT Tax Law Prof. Ben Alaire. Click here to read it. I assume no liability if you hurt your brain reading it.

And if you want to read the court decision, click here.

So what does it all mean? Be very careful in trying to turn personal non-deductible debt into deductible debt. Your deduction maybe denied.

Further, look for more supreme court decisions relating to the GAAR. There have been several already and there will be more. It's an area of tax law that is uncertain and open to debate, just what the SCC looks at when deciding to hear tax cases.

The good news is that interest paid on debt used to earn income from a business or property is still a valid tax deduction provided you meet the requirements under the ITA and common law. That's where a tax advisor can help with this complex area of tax law.

Posted 2009/01/22 at 20h26ET in Tax Law.


Popular posts from this blog

Cast of Characters from The Protectors

Friday, September 16, 2011 ... Cast of Characters from The Protectors... M ost novels do not include a list of characters, although I have read some with them. Tolstoy readers would likely appreciate it. Plays do. Scripts don’t. Not sure what the thinking is, but I didn’t include it with my novel. I had a feeling I’d be shot if I had suggested it, but with the internet, I can provide such a list and here is the list of the major players in my first novel The Protectors (A Thriller).
Black Carr Security Consultants Limited Baird Carr, Former CIA Officer, Co-founder, OwnerEmerson Black, Former Secret Service Agent, Co-founder, OwnerSarah Bishop, Former FBI Agent, Senior ConsultantDebra Paeytonne, Office AdministratorBeth, ReceptionistStephen Tedeschi, Former Secret Service Agent, ConsultantNigel, Independent Consultant
U.S. Secret Service Ken Milton, DirectorRichard Heyward, Retired AgentJulian Constance, Agent, Killed in Assassination AttemptTrisha Evrington, AgentTerry Flannon, Agen…

Day 5—Writing a Novel—The Deep Blue Cage

Monday, November 21st, 2016 No work on the novel on Day 4. Note: Unedited writings from my notebook for this novel. Square bracket items represent added comments.
At 18:31 Office ... if I use Leänne instead of Leanne how will people react... Y esterday was Sunday and I took it off, plus I was dealing with some mental health issues. I know this story is something that is simply a matter of putting in the time to make it happen. I’m supposed to be working on it as much as I can but I haven’t been doing that. Two main reasons. It’s been a while since I’ve worked on a story. Then there’s the issues of my mental health. Things happen. I get down and it impacts on my writing. I might be using it as an excuse, but it’s clearly something I need to deal with. I have to find a schedule I can work with. Perhaps I need to put this first and cut out other things. Not sure but I will figure it out. A name for the hero came to me. For the moment going with Leanne or is it Leanna? Should be Le…

Writing a Novel–The Deep Blue Cage–Introduction

Thursday, March 9th, 2017 ... I fight my insecurities and doubts and I withdraw farther away from people and life ... I n November 2016 I started work on a new novel with the working title: The Deep Blue Cage. A few weeks after I started, I stopped. I was feeling too depressed about everything including the idea of writing a new novel. It happens to me at various times, with varying degrees, and it is debilitating. The ultimate issue was: Why bother? Why bother write another novel no one will read and no one will care about. I also found I was dreading the writing process more and more. It was painful to think about. I walked away and focused on other things. Or tried to. That didn’t work either. I felt trapped and unsure where I should head, what I should do. I even asked the big question, what the hell is life about anyway. There’s no one answer to this question despite the proclamations of some and because I believe I can think critically, can reason, I look at it from many a…