INCOME TAX |
Income Calculation |
Deductions |
Kaulius v. Canada
A-346-02
2003 FCA 371, Rothstein J.A.
7/10/03
13 pp.
Appeals from T.C.C. decision ([2003] 1 C.T.C. 2045) denying appellants' appeals from notices of reassessment issued by MNR--Facts herein same as those in OSFC Holdings Ltd. v. Canada, [2002] 2 F.C. 288 (C.A.)--Standard Trust Company lent money on security of mortgages on real property, became insolvent--In order to maximize recovery from disposition of Standard's assets, liquidator caused series of transactions to take place which allowed appellants to use losses accrued on portfolio of Standard's mortgages--Appellants deducted shares of partnership loss in computing 1993, 1994 taxable incomes-- Minister disallowed deduction of losses, relying on Income Tax Act, s. 245 (General Anti-avoidance Rule--GAAR)--T.C.C. holding transactions series of avoidance transactions conferring tax benefit on appellants--Appellants conceded transactions in question avoidance transactions, obtained tax benefit as result of them but attack OSFC, GAAR itself--Appellants arguing Court should overrule prior decision in OSFC in respect of abuse analysis under Income Tax Act, s. 245--No reason for Court to consider overruling prior decision--GAAR not unconstitutional having regard to Constitution Act, 1867, s. 53--GAAR not allowing Minister to set defining feature of income tax such as setting of tax base, rates as in Ontario English Catholic Teachers' Assn. v. Ontario (Attorney General), [2001] 1 S.C.R. 470--Minister has not been delegated power to make policy, to impose new tax on own initiative--GAAR not unconstitutional having regard to Charter, s. 7--Reassessments of taxpayers not resulting in deprivation of liberty, security of person--S. 245(4) not unconstitutionally vague--Capable of supporting legal debate, coherent judicial interpretation--Appeals dismissed-- Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 245--Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1) [R.S.C., 1985, Appendix II, No. 5], s. 53--Canadian Charter of Rights and Freedoms, being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44], s. 7.