23 July 2020
Rotfleisch & Samulovitch P.C.
To print this article, all you need is to be registered or login on Mondaq.com.
Subsection 15(1) of the Income Tax Act renders shareholderbenefits taxable. A shareholder benefit arises where a shareholderreceives a benefit from a corporation that is not part of a bonafide transaction between the corporation and the shareholder. Ashareholder benefit may also arise where the benefit is received bya person in contemplation of that person becoming a shareholder.The taxation of shareholder's benefits starred in the recentcase of Lalibert v. Canada 2020 FCA 97.
Guy Lalibert is the founder of Cirque du Soleil. In2009, he completed his long term dream of visiting theInternational Space Station. The twelve-day once-in-a-lifetime tripwas organized by a private space travel firm and paid for by acorporation in the Cirque du Soleil corporate group, of whichLalibert was the controlling shareholder. While at theInternational Space Station, Lalibert hosted a multi-hourcharity livestream in support of One Drop, a clean water charityfounded by Lalibert and associated with Cirque du Soleil.He took pictures for a photobook and film for a documentary, bothintended to support One Drop.
When Lalibert returned from the International SpaceStation, he reported $4 million of the $41,816,954 paid for thetrip as a shareholder benefit. He claimed he received noshareholder benefit, but reported the amount on his personal incometax return regardless to avoid a tax dispute and bad publicity. Thecosts of the trip were moved through several of Cirque duSoleil's corporations as a promissory note which was writtenoff.
The Canada Revenue Agency disagreed with Lalibert'stax treatment of the stellar trip. The position of the CanadaRevenue Agency was that the trip was primarily a personal trip forLalibert. Any business aspects of the trip were added byLalibert after planning the trip to make the trip appear asa business trip. They reassessed Lalibert for about $37.6million dollar shareholder benefit from the trip. The remaining 10%of the trip price was allowed as a tax deduction as a businessexpense to reflect Lalibert's promotion of One Drop andCirque Du Soleil during the trip.
The Tax Court of Canada and the Federal Court ofCanada both concluded the Canada Revenue Agency's taxassessment and allocation were correct. The Courts found based on27 factors that the "overwhelmingly primary purpose of thetravel was personal". These factors can be summarized in fourcategories:
With the overwhelming evidence the trip was primarily personallymotivated, and would have likely proceeded even if Lalibertcould not have promoted Cirque du Soleil, there was no bona fidebusiness transaction between the corporation and Lalibert.The Canadian tax lawyer for Lalibert attempted to arguethat the Tax Court relied too heavily on considering his intent.Alternately, Lalibert argued there must be an intent toimpoverish the corporation which can be derived from his intent asthe controlling shareholder. He reiterated his intent with the tripwas support of One Drop and Cirque du Soleil. The Federal Courtdisagreed. Many of the above listed factors were unrelated toLalibert's personal interest in space travel. Hispersonal interest was not, by itself, determinative. Further, thecourt rejected an intent to impoverish the corporation wasrequired, or that such an intent could be found in this case. Thecourt found it evident that Lalibert only planned thebusiness aspects of the trip after the contract with the privatespace travel company was signed. This means even if you derivecorporate intent from the controlling shareholder's intent inthese circumstances, that original intent would be the personalbenefit of Lalibert.
The Federal Court found if Lalibert wanted theshareholder benefit assessment overturned, he had to demonstrate ona balance of probabilities that the "that the space trip was abona fide business venture in its entirety." He was not ableto refute the evidence of the personal nature of the space trip.The Federal Court thus upheld the Canada Revenue Agency'sassessment.
Most taxpayer will not encounter the circus of circumstances inLalibert v. Canada, but tax audits and tax reassessments focusing onshareholder benefits are common. It is also common for the CanadaRevenue Agency to attempt to derive the nature of a transactionfrom surrounding circumstances and the intents of the partiesinvolved. The Canada Revenue Agency may see a quick sale of a houseto show intent of business not personal use, the high value of adonation to demonstrate a lack of "donative intent", orfew signs of traditional business planning in a space trip to showa shareholder benefit. Issues frequently arise with the CanadaRevenue Agency's analysis because they are observing thetransaction as an outside party without the full facts the taxpayermay have access to. Our experienced Canadian tax lawyers can assist you inpresenting these facts to the Canada Revenue Agency to successfullychallenge their characterization of your transactions.
The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.
POPULAR ARTICLES ON: Tax from Canada
Read the original:
- A Real Life Hibernation Chamber is Being Made For Deep Space Travel - Futurism [Last Updated On: February 7th, 2017] [Originally Added On: February 7th, 2017]
- Humans to be FROZEN IN TIME for space travel as scientists move to COLONISE other planets - Express.co.uk [Last Updated On: February 7th, 2017] [Originally Added On: February 7th, 2017]
- Space flight changes astronauts' brains, research reveals - Fox News [Last Updated On: February 7th, 2017] [Originally Added On: February 7th, 2017]
- Space travel changes DNA, study finds - STLtoday.com [Last Updated On: February 7th, 2017] [Originally Added On: February 7th, 2017]
- Space travel visionaries solve the problem of interstellar slowdown ... - Science Daily [Last Updated On: February 7th, 2017] [Originally Added On: February 7th, 2017]
- Quantum Entanglement May Be Key To Long Distance Space Travel Ex Lockheed Exec Said It's Already Happening - Collective Evolution [Last Updated On: February 7th, 2017] [Originally Added On: February 7th, 2017]
- Is This Buzz Aldrin-Inspired Locomotive The Future Of Space Travel? - Forbes [Last Updated On: February 7th, 2017] [Originally Added On: February 7th, 2017]
- Celestial bodies: The Kelly twins offer a vital sign for space travel ... - Pittsburgh Post-Gazette [Last Updated On: February 7th, 2017] [Originally Added On: February 7th, 2017]
- Space travel visionaries solve the problem of interstellar slowdown at Alpha Centauri - Phys.Org [Last Updated On: February 7th, 2017] [Originally Added On: February 7th, 2017]
- Newspaper review: Heartthrob and space travel in Wednesday's papers - BBC News [Last Updated On: February 8th, 2017] [Originally Added On: February 8th, 2017]
- Another View: NASA's Twins Study offers vital sign for space travel - Press Herald [Last Updated On: February 8th, 2017] [Originally Added On: February 8th, 2017]
- Piece of tragic shuttle history gets a second chance at space travel - WQAD.com [Last Updated On: February 9th, 2017] [Originally Added On: February 9th, 2017]
- Meet Shawn Pandya, The Third Indian-Origin Woman To Space-Travel - Huffington Post India [Last Updated On: February 9th, 2017] [Originally Added On: February 9th, 2017]
- Shawna Pandya clears the air on rumours of space travel - Daily News & Analysis [Last Updated On: February 10th, 2017] [Originally Added On: February 10th, 2017]
- The Expanse and Frankie Adams: Meet the Kiwi who's conquered space travel - Stuff.co.nz [Last Updated On: February 10th, 2017] [Originally Added On: February 10th, 2017]
- Did a CSU study find that space travel makes you younger? Not so ... - The Denver Post [Last Updated On: February 10th, 2017] [Originally Added On: February 10th, 2017]
- Twins study offers valuable data on space travel - Herald-Whig - - Herald-Whig [Last Updated On: February 10th, 2017] [Originally Added On: February 10th, 2017]
- The Expanse and Frankie Adams: Meet the Kiwi who's conquered space travel - Waikato Times [Last Updated On: February 11th, 2017] [Originally Added On: February 11th, 2017]
- Kelly twins offer a vital sign for space travel - San Angelo Standard Times [Last Updated On: February 11th, 2017] [Originally Added On: February 11th, 2017]
- Lacoste delves into the world of space travel at New York Fashion Week as Baptista honours founder's lesser-known ... - Evening Standard [Last Updated On: February 11th, 2017] [Originally Added On: February 11th, 2017]
- NASA's Irish Twins Study reveals first results of space travel on humans - IrishCentral [Last Updated On: February 12th, 2017] [Originally Added On: February 12th, 2017]
- Starbound to revamp space travel in future update - PC Gamer [Last Updated On: February 12th, 2017] [Originally Added On: February 12th, 2017]
- How Does Long-Term Space Travel Affect Humans? - Voice of America [Last Updated On: February 13th, 2017] [Originally Added On: February 13th, 2017]
- A VR Company is Attempting to Make Holographic Videos for Space Travel - Mobile Magazine [Last Updated On: February 15th, 2017] [Originally Added On: February 15th, 2017]
- Two-Time Space Traveling Astronaut to Speak at Black History ... - Patriots Point [Last Updated On: February 16th, 2017] [Originally Added On: February 16th, 2017]
- Make space travel great again: NASA, heeding Trump, may add astronauts to a test flight moon mission - National Post [Last Updated On: February 16th, 2017] [Originally Added On: February 16th, 2017]
- In recently unearthed essay, Winston Churchill anticipated space travel and extraterrestrial life - The Providence Journal [Last Updated On: February 16th, 2017] [Originally Added On: February 16th, 2017]
- Twins in space: intergalactic travel could change DNA - The Student [Last Updated On: February 17th, 2017] [Originally Added On: February 17th, 2017]
- An unearthed essay reveals Winston Churchill anticipated space travel and aliens - Stuff.co.nz [Last Updated On: February 17th, 2017] [Originally Added On: February 17th, 2017]
- Focus Friday: The necessity of space travel - The Daily Cougar [Last Updated On: February 17th, 2017] [Originally Added On: February 17th, 2017]
- NASA announces $2m investment on technology advancement for deep space travel - WDSU New Orleans [Last Updated On: February 17th, 2017] [Originally Added On: February 17th, 2017]
- Focus Friday: The necessity of space travel - The Daily Cougar - The Daily Cougar [Last Updated On: February 18th, 2017] [Originally Added On: February 18th, 2017]
- Ask Ethan: How Can I Travel Through Space Without Getting Into Trouble? - Forbes [Last Updated On: February 18th, 2017] [Originally Added On: February 18th, 2017]
- Do You Have The Right Personality For Long-Term Space Travel ... - Seeker [Last Updated On: February 18th, 2017] [Originally Added On: February 18th, 2017]
- In recently unearthed essay, Winston Churchill anticipated space travel and extraterrestrial life - Washington Post [Last Updated On: February 18th, 2017] [Originally Added On: February 18th, 2017]
- UK bids to be world leader in Space travel by 2020 - Daily Star [Last Updated On: February 20th, 2017] [Originally Added On: February 20th, 2017]
- Know before you fly: privatized space travel - Observer Online [Last Updated On: February 21st, 2017] [Originally Added On: February 21st, 2017]
- You could fly to SPACE from the UK within three years as plans are for space port are unveiled - The Sun [Last Updated On: February 21st, 2017] [Originally Added On: February 21st, 2017]
- Cosmic cinema: spurring interest in real-life space travel? - Miami Student [Last Updated On: February 22nd, 2017] [Originally Added On: February 22nd, 2017]
- Commercial space travel could be ready as early as 2020 - New York Post [Last Updated On: February 22nd, 2017] [Originally Added On: February 22nd, 2017]
- This Finnish startup democratizes space travel and it just raised over 3 million to find the next 'Slumdog ... - Business Insider Nordic [Last Updated On: February 23rd, 2017] [Originally Added On: February 23rd, 2017]
- Commercial space travel WITHIN THREE YEARS on flights to launch from BRITAIN - Express.co.uk [Last Updated On: February 23rd, 2017] [Originally Added On: February 23rd, 2017]
- Katherine Johnson led African American efforts in space travel - Farm and Dairy [Last Updated On: February 23rd, 2017] [Originally Added On: February 23rd, 2017]
- Space travel is measured in light years, but what's a light year anyway? - MyStatesman.com [Last Updated On: February 23rd, 2017] [Originally Added On: February 23rd, 2017]
- TRAPPIST-1: How Long Would It Take to Fly to 7-Planet System? - Space.com [Last Updated On: February 24th, 2017] [Originally Added On: February 24th, 2017]
- NASA Looking for Bright Ideas to Help With Space Travel - Tech.Co [Last Updated On: February 24th, 2017] [Originally Added On: February 24th, 2017]
- The history of space travel encapsulated - Fairfaxtimes.com [Last Updated On: February 25th, 2017] [Originally Added On: February 25th, 2017]
- SpaceX's reusable rockets make space travel much cheaper - The ... - CMU The Tartan Online [Last Updated On: February 27th, 2017] [Originally Added On: February 27th, 2017]
- Stars align for space travel at memorable Oscars ceremony - Siliconrepublic.com [Last Updated On: February 28th, 2017] [Originally Added On: February 28th, 2017]
- FSU researcher to lead US-Russia project on health, space travel - Florida State News [Last Updated On: February 28th, 2017] [Originally Added On: February 28th, 2017]
- Crowding the cosmos: space travel turns private - The Student [Last Updated On: March 1st, 2017] [Originally Added On: March 1st, 2017]
- Forget SpaceX: 10 companies that will change space travel in 2017 & 2018 - Geektime [Last Updated On: March 2nd, 2017] [Originally Added On: March 2nd, 2017]
- Safe space travel: Protecting alien worlds from earthlings - and vice versa - Deutsche Welle [Last Updated On: March 2nd, 2017] [Originally Added On: March 2nd, 2017]
- Watch: 'Black Holes' A Satirical Comedy About Space Travel From Sundance 2017 - Konbini US [Last Updated On: March 3rd, 2017] [Originally Added On: March 3rd, 2017]
- Doctor Launches Vision Quest To Help Astronauts' Eyeballs - NPR [Last Updated On: March 4th, 2017] [Originally Added On: March 4th, 2017]
- Beyond Earth talking about space travel - Alaska Public Radio Network [Last Updated On: March 4th, 2017] [Originally Added On: March 4th, 2017]
- Would You Book A Flight To The Moon? - The Alternative Daily (blog) [Last Updated On: March 6th, 2017] [Originally Added On: March 6th, 2017]
- Colorado Likely To Benefit From Privatized Space Travel - CBS Local [Last Updated On: March 6th, 2017] [Originally Added On: March 6th, 2017]
- NEC develops reliable FPGAs for space travel - Electronics Weekly - Electronics Weekly [Last Updated On: March 8th, 2017] [Originally Added On: March 8th, 2017]
- 4 Entrepreneurs Changing the Way We Think About Space Travel - Tech.Co [Last Updated On: March 9th, 2017] [Originally Added On: March 9th, 2017]
- Why Space Travel Can Be Absolutely Disgusting - Live Science [Last Updated On: March 9th, 2017] [Originally Added On: March 9th, 2017]
- EDITORIAL: Exploring private space travel - Indiana Daily Student [Last Updated On: March 11th, 2017] [Originally Added On: March 11th, 2017]
- Harvard Scientists Theorize That Fast Radio Bursts Come From Alien Space Travel - Popular Mechanics [Last Updated On: March 11th, 2017] [Originally Added On: March 11th, 2017]
- Space Exploration: US congress approves $19.5 billion for NASA to get humans to Mars by 2033 - NTA News [Last Updated On: March 11th, 2017] [Originally Added On: March 11th, 2017]
- MIT Conference To Focus On Space Travel For The Public - CBS Boston / WBZ [Last Updated On: March 11th, 2017] [Originally Added On: March 11th, 2017]
- Reusing rockets is best way to advance space travel, SpaceX officer tells symposium attendees - Colorado Springs Gazette [Last Updated On: April 8th, 2017] [Originally Added On: April 8th, 2017]
- How space travel leads to cognitive shifts in awareness | Life and ... - The Guardian [Last Updated On: April 8th, 2017] [Originally Added On: April 8th, 2017]
- Cheap space travel, electric cars and a whirlwind love life love life... the billionaire genius inventing our future - Mirror.co.uk [Last Updated On: April 8th, 2017] [Originally Added On: April 8th, 2017]
- Reusable rockets key for space travel industry - Alamogordo Daily News [Last Updated On: April 8th, 2017] [Originally Added On: April 8th, 2017]
- Is this massive airplane the future of space travel? One billionaire thinks so. - SOFREP (press release) (subscription) [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- spotlight - NYCAviation [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- BBC commissions documentary about commercial space travel fronted by Brian Cox - Radio Times [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- The Physics of Interstellar Travel : Explorations in ... [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- Mars rover scientist, SpaceX engineer join NASA astronaut corps - Reuters [Last Updated On: June 7th, 2017] [Originally Added On: June 7th, 2017]
- How SpaceX Launched a Chinese Experiment Into Space, Despite US Ban - Foreign Policy (blog) [Last Updated On: June 7th, 2017] [Originally Added On: June 7th, 2017]
- 'Blast Camp' gives students lessons on space travel - Fremont News Messenger [Last Updated On: June 7th, 2017] [Originally Added On: June 7th, 2017]
- IKEA looks to space travel for new micro-living furniture collection - Dezeen [Last Updated On: June 7th, 2017] [Originally Added On: June 7th, 2017]
- HPE's next frontier: Space travel & memory-driven computing - IT Brief Australia [Last Updated On: June 8th, 2017] [Originally Added On: June 8th, 2017]
- 20 Out-Of-This-World Companies Working On Space Travel Technologies - Interesting Engineering [Last Updated On: June 12th, 2017] [Originally Added On: June 12th, 2017]
- Here's how space travel is helping keep you healthy - Eyewitness News [Last Updated On: June 12th, 2017] [Originally Added On: June 12th, 2017]