INCOME TAX |
Income Calculation |
Capital Gains and Losses |
Canada v. Toronto Refiners and Smelters Ltd.
A-593-01
2002 FCA 476, Sharlow J.A.
28/11/01
13 pp.
Crown appealing Tax Court Judge's decision--Whether $9 million received by Toronto Refiners in 1992 as damages suffered by expropriation "eligible capital amount" as defined in Income Tax Act, s. 14(5)(a)--Payment in question eligible capital amount if meeting requirements set out in s. 14(5)(a)(iv)(A)--Proper analysis consists of four questions: (i) whether amount received as result of disposition; Answer: yes; (ii) whether amount received in respect of business carried on by Toronto Refiners; Answer: yes; (iii) consideration given by Toronto Refiners in exchange for payment of $9 million; consideration herein release of any claim of Toronto Refiners for compensation for destruction of goodwill of business; (iv) whether, if Toronto Refiners had paid $9 million for similar consideration given by City of Toronto, payment of $9 million would have been eligible capital expenditure of Toronto Refiners--Whether payment meets definition of eligible capital expenditure in s. 14(5)(b) --First condition: payment must result in an outlay or expense made or incurred on account of capital for purpose of gaining or producing income from a business--An expropriation has no income earning purpose, and certainly no purpose of gaining or producing income from a business--Therefore, condition not met--$9 million payment non-taxable capital receipt--Appeal dismissed--Income Tax Act, R.S.C., 1985 (5th Supp), c. 1, s.14(5)(a),(b).