| Citation: |
Faraggi v. Canada, 2009 FCA 398, [2009] 3 F.C.R. D-13 |
A-297-07, A-298-07, A-299-07, A-300-07 |
Income Tax
Corporations
Four appeals from Tax Court of Canada (T.C.C.) decisions (2007 TCC 286) confirming Minister of National Revenue’s assessments adding surpluses generated during corporate appellants’ 1987 taxation year in computation of income—Individual appellants devising, implementing elaborate tax plan in 1987, intended to produce capital gains in hands of series of corporations to create capital dividend accounts (CDA), transfer tax benefit to unrelated third-party companies—Corporate appellants accumulated surpluses generated when third-party corporations paid premiums to subscribe to preferred shares thereof—Corporate appellants paying dividends elected to have dividends deemed capital dividends under Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 83(2)—Concepts of “sham”, “abuse” different—Concept of “sham” not needed to determine whether premiums paid by third-party corporations properly included in corporate appellants’ income—“Premium” described as difference between share redemption value, price paid by third-party corporations—Premiums paid for access to CDAs, corporate appellants’ undertaking to make s. 83(2) elections—T.C.C. correctly concluding additional amounts collected by corporate appellants constituting business income—Fact transactions leading to payment of dividends potentially resulting in abuse of Act insufficient to conclude transactions shams—However, transactions that generated alleged capital gains misrepresented; resulting s. 83(2) elections constituting “shams”—T.C.C. correctly relying on real transactions, which produced no capital gains, to conclude dividends received by individual appellants not capital dividends, therefore taxable—Appeals dismissed.
Faraggi v. Canada (A-297-07, A-298-07, A-299-07, A-300-07, 2008 FCA 398, Noël J.A., judgment dated December 12, 2008, 35 pp.)