included

The Minister assessed Part XI.1 tax on the appellant RRSP (“Grenon RRSP”), which held non-qualified investments, computed at 1% of the non-qualified investments' acquisition date value. However, by virtue of s. 146(10), Part XI.1 tax did not apply where the acquisition date value was included in the income of the annuitant (Grenon). This was not done because he had not reported such amounts, and those years became statute-bared.

The taxpayer was an Australian resident who was taxed at the 15% long-term U.S. capital gains rate on his gains on disposal of U.S. oil and gas drilling rights. For Australian purposes a 50% discount was applied to the capital gain before imposing tax at a rate of around 45% on it.

The Australian foreign tax credit (FITO) provision (s. 770-10) provided:

An amount of foreign income tax counts towards the tax offset for the year if you paid it in respect of an amount that is all or part of an amount included in your assessable income for the year.

The taxpayer argued that no imputed interest was required to be included in his income under s. 80.4(2) respecting shareholder advances because, under s. 80.4(3)(b), the amount of those advances had previously been required to be included in his income for a statute-barred year (although no such inclusion had been reported by him or assessed by the Minister). In rejecting this submission, Bowman TCJ stated (at pp. 1060-1061):

The taxpayer made a loan, bearing interest at 25%, to a corporation ("SA") owned by his brother-in-law, which in turn lent the funds, at the same rate of interest, to an arm's length Canadian-resident corporation ("EMB"), which received those funds as part of a Ponzi scheme. The principal of EMB committed suicide on 17 March 2010, media accounts suggested a Ponzi scheme, and on 6 April 2010, SA filed notice of intention to make a proposal under the Bankruptcy and Insolvency Act.

The taxpayer was not entitled to claim a deduction under s. 20(1)(l) because the sale giving rise to the receivable had not been reported in his return for the year of disposition. The Court rejected a submission that the requirement in ss. 12(1)(b) and 20(1)(l) that the amount receivable have been "included in computing" income required only that the taxpayer have taken that amount into account in computing his net income and did not establish a requirement that the amounts be reported on a tax return. Strayer JA stated (at para. 9):

The assumption by another corporation ("Polar Oils") of the obligation of the taxpayer to pay $119,658 in consideration for the taxpayer's agreement to pay four cents per litre more for diesel fuel purchased by it from Polar Oils until the total overpayments amounted to $119,658, constituted an inducement under s. 12(1)(x). The amount of the inclusion under s. 12(1)(x) was the full amount rather than the amount of additional payments made by the taxpayer to Polar Oils in the taxation year.