Skip to main content

Supreme Court of Canada - Lipson

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

O

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.

Comments

Popular posts from this blog

Day 109: Writing a Novel—The Deep Blue Hold

Sunday, March 6, 2017 Note: Unedited writings from my notebook for this novel. Square bracket items represent added comments.
At 18:47 Office ... I barely remembered anything about this story... H as it really been three months? I guess it has. I put it out of my mind [so much so] that I barely remembered anything about this story. Not even the title. [Unreal!!!!!!] I had the general premise and an ending—enough I thought for a novel. What I lacked was a determination and desire to want to write it. Why bother… I wasn’t enjoying the process and I had no reason to believe the result wouldn’t be anything more than what’s gone before—nothing.
James Piper Kitchener, Ontario Post comments on facebook page. Follow me on twitter. Posted 2017/04/14 at 14h02ET in The Deep Blue Cage | Writing A Novel

Words: Fairy—Ferry

Thursday, September 6, 2012
A homonym.
FAIRY—A fairy tale. A fairy godmother. Fairy—not a long, long way to run.
FERRY—A boat or ship to transport drunken Swedes back home from Copenhagen. It’s the Danish beer.
Fairy Ferry Samantha the Swimming Fairy by Daisy Meadows Evening Ferry by Katherine Towler
Posted 2012/09/06 at 5h02ET in Words, Writing.

Day 2: Writing a Novel—The Deep Blue Hold

Friday, November 18th, 2016 Note: Unedited writings from my notebook for this novel. Square bracket items represent added comments. ... There’s also poetic justice for this crew for what they did to the women they kept.... I t’s still Friday to me. [Writing early Saturday morning.] I wasn’t in bed until 6h and up at 14h. Then lots of errands. Lots of walking. Felt tired earlier—something different. I haven’t spent much time thinking about this story. I seemed to have put my mind into another lane. Not what I want. I was thinking too much about my future as a successful writer. Not simply being a writer, but a successful writer. One that makes a good living off or from it. That’s a better goal. So what to say about this story. No title. Oh. I did decide on something. She can’t die. Too much of a downer. That would seem to rule out a revenge aspect by the husband. Maybe she does it. These guys [the baddies] have to get it in the end. I was thinking about how she wants to sink the s…