Garron v Canada WTLR(w) 2011-02

WTLR Issue: Web Only

St Michael Trust Corp, as Trustee of the Fundy Settlement

St Michael Trust Corp, as Trustee of the Summersby Settlement

V

Her Majesty the Queen

Analysis

Appeals by the trustee from a Tax Court decision dismissing the appeal from assessment. The assessed tax arose from capital gains realized by two trusts on the disposition of the shares of two Canadian corporations at a time when, according to the Crown, the trusts were resident in Canada. The beneficiaries of both trusts were residents in Canada. The trustee was incorporated in Barbados and was licensed as a trustee in Barbados. The trustee argued that because the trusts were residents of Barbados for purposes of the Barbados Tax Treaty, their capital gains were exempt from income tax in Canada. The Minister rejected the claims for exemption and assessed the trustee accordingly. On appeal by the trustee, the Tax Court judge held that the trusts were resident in Canada as the essential responsibility for decision making was intended from the outset to be exercised, and was in fact exercised, by the beneficiaries and not by the trustee.

Held: Appeals dismissed. A central management and control test should be applied in determining the residence of the trusts. It was reasonably open to the Tax Court judge to conclude that for the purposes of the Income Tax Act, the trusts were resident in Canada. Where a question arose as to the residence of a trust for tax purposes, it was appropriate to undertake a fact driven analysis with a view to determining the place where the central management and control of the trust was actually exercised. The evidence indicated that the trustee had no involvement in the affairs of the trusts except the execution of documents and in administrative, accounting and tax matters. The Tax Court judge made no error warranting the intervention of this Court in concluding that, at the time of the sale of the shares, the management and control of the trusts resided in Canada with the beneficiaries.

SHARLOW JA: St. Michael Trust Corp., in its capacity as the trustee of the Fundy Settlement and the Summersby Settlement (the “Trusts”), has been assessed under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) for the 2000 taxation year. The assessed tax arises from capital gains realized by the Trusts on the disposition …
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Counsel Details

Douglas H. Mathew, Matthew G. Williams and Mark A. Barbour, for the Appellant.

Elizabeth Chasson, Erin Strashin and Margaret Nott, for the Respondent.

Legislation Referenced

  • Appeal from the Judgment of the Honourable Madam Justice Woods of the Tax Court, dated September 10, 2009, in Docket Nos. 2006-1409(IT)G, 2006-1411(IT)G), [2009] T.C.J. No. 345.
  • Canada-Barbados Income Tax Agreement (1980)
  • Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 2(1), s. 2(3), s. 3, s. 94(1), s. 104, s. 110(1)(f), s. 115(1), s. 245, s. 245(4), s. 248(1)