BUSINESS LAW REPORTS Fifth Series/Cinqui`Eme S´Erie Recueil De Jurisprudence En Droit Des Affaires
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BUSINESS LAW REPORTS Fifth Series/Cinqui`eme s´erie Recueil de jurisprudence en droit des affaires VOLUME 14 (Cited 14 B.L.R. (5th)) EDITOR-IN-CHIEF/REDACTEUR´ EN CHEF Scott D. Conover, B. COMM., LL.B. Fasken Martineau DuMoulin LLP Toronto, Ontario ASSOCIATE EDITORS/REDACTEURS´ ADJOINTS Murray J. Braithwaite, A.B.(HONS.), Robin P. Roddey, B.A.A., LL.B. LL.B., LL.M., PH.D. Fasken Martineau DuMoulin LLP Fasken Martineau DuMoulin LLP Toronto, Ontario Toronto, Ontario Wojtek A. Baraniak, B.A., LL.B. Janice J. Javier, B.A.(HONS.), LL.B. Fasken Martineau DuMoulin LLP Fasken Martineau DuMoulin LLP Toronto, Ontario Toronto, Ontario CARSWELL EDITORIAL STAFF/REDACTION´ DE CARSWELL Cheryl L. McPherson, B.A.(HONS.) Director, Primary Content Operations Ariana Gic Perry, B.A., LL.B. Product Development Manager Nicole Ross, B.A., LL.B. Andrea Andrulis, B.A., LL.B., LL.M. Supervisor, Legal Writing (Acting) Supervisor, Legal Writing Mike MacInnes, B.A.(HONS.), LL.B. Jocelyn Cleary, B.A.(HONS.), LL.B. Lead Legal Writer Senior Legal Writer Stephanie Hanna, B.A., M.A., LL.B. Lisa Rao, B.SC., LL.B. Senior Legal Writer Senior Legal Writer Amanda Stewart, B.A.(HONS.), LL.B. Martin-Fran¸cois Parent, LL.B., LL.M., Senior Legal Writer DEA (PARIS II) Bilingual Legal Writer Heather Niziol, B.A. Content Editor BUSINESS LAW REPORTS, a national series of annotated topical law re- Recueil de jurisprudence en droit des affaires, une s´erie nationale de ports, is published 12 times per year. Subscription rate $380.00 per bound recueils de jurisprudence sp´ecialis´ee et annot´ee, est publi´e 12 fois par ann´ee. volume including parts. Indexed: Carswell’s Index to Canadian Legal L’abonnement est de 380 $ par volume reli´e incluant les fascicules. Indexa- Literature. tion: Index a` la documentation juridique au Canada de Carswell. 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Les analyses The analysis contained herein should in no way be construed as being either comprises dans les pr´esentes ne doivent etreˆ interpr´et´ees d’aucune fa¸con official or unofficial policy of any governmental body. comme etant´ des politiques officielles ou non officielles de quelque organ- isme gouvernemental que ce soit. 8 The paper used in this publication meets the minimum requirements of 8 Le papier utilis´e dans cette publication satisfait aux exigences minimales American National Standard for Information Sciences — Permanence of Pa- de l’American National Standard for Information Sciences — Permanence of per for Printed Library Materials, ANSI Z39.48-1984. Paper for Printed Library Materials, ANSI Z39.48-1984. ISSN 0703-5551 ISBN 978-0-7798-3874-5 Printed in Canada by Thomson Reuters CARSWELL, A DIVISION OF THOMSON REUTERS CANADA LIMITED One Corporate Plaza Customer Relations 2075 Kennedy Road Toronto 1-416-609-3800 Toronto, Ontario Elsewhere in Canada/U.S. 1-800-387-5164 M1T 3V4 Fax 1-416-298-5082 www.carswell.com Contact www.carswell.com/contact BUSINESS LAW REPORTS Fifth Series/Cinqui`eme s´erie Recueil de jurisprudence en droit des affaires [Indexed as: St. Arnaud v. R.] Jack St. Arnaud, Albert Patenaude, Harry Braun, Appellants and Her Majesty the Queen, Respondent Federal Court of Appeal Docket: A-463-11, A-464-11, A-465-11 2013 FCA 88 K. Sharlow, Johanne Trudel, Wyman W. Webb JJ.A. Heard: February 5, 2013 Judgment: March 22, 2013 Tax –––– Income tax — Deferred income plans — Registered pension plans — Tax on –––– Taxpayer A had RRSPs, taxpayer B had RRIF, and tax- payer P had locked-in retirement account — In 2001 and 2002, taxpayers were defrauded of retirement funds (funds) by fraudsters who transferred funds to trust company account in exchange for worthless shares in companies, C Corp. and S Corp. supposedly producing revolutionary construction materials — Fraudster was convicted but funds were not recovered — Minister reassessed taxpayers, adding consideration for shares to their income pursuant to either s. 146.3(4)(b) and 146(9)(b) of Income Tax Act (ITA) — Tax Court dismissed tax- payers’ appeals on basis of Supreme Court of Canada ruling that provisions ap- plied to avoidance situations and to transactions where annuitants were not try- ing to avoid tax and were simply duped into paying good money for worthless shares by fraudster — Taxpayers appealed — Appeals allowed — Evidence contradicted Minister’s assumption that taxpayers acquired shares upon which assessments were based — Sections 146(9) and 146.3(4) of ITA did not apply to taxpayers — Tax Court’s observation that there was no dispute as to facts in case without analyzing evidence to determine whether plans acquired shares ran counter to taxpayers’ assertions at hearing that they never accepted that shares were acquired by respective plans and never admitted that underlying corporate requirements to secure validity of transactions were met — S Corp. could not hold shares in itself under Alberta Business Corporations Act (ABCA), so S Corp. could not be lawful owner of issued and outstanding shares in itself and 2 BUSINESS LAW REPORTS 14 B.L.R. (5th) A’s RRSP could not acquire shares of S Corp. under agreement — Since s. 27(3) and (5) of ABCA provided that shares were not to issue until considera- tion was fully paid, and S Corp. did not appear to have received money or re- ceived it as conduit for another who disappeared with it, then shares of S Corp.