330:
it, the purchasers would be liable for any tort damages that were awarded. Still, despite the existence of such future tort liability, the parties attributed no value to the assumption of this liability by the purchasers. Because no value was attributed by the parties to the purchasers' assumption of tort liability, the
Minister correctly did not add any income to the appellant's disposition of proceeds for the assumption of that liability. Conversely, if the parties to an agreement attribute a value to a future liability, then the Minister is entitled to add this amount to the vendor's proceeds of disposition – whether or not the liability assumed by the purchaser is contingent or absolute.
29:
326:
not ask whether the liability assumed by the purchaser is contingent or absolute; as a matter of fact, the nature of the liability assumed by a purchaser is irrelevant. Instead, the jurisprudence seems concerned only with the value attributed by the parties, if any, to the liability assumed by the purchaser. If the parties attribute no value to a future liability, then there is nothing to be added to the seller's proceeds of disposition for the purpose of taxation.
432:) and those that affect the value of property (such as the need for repairs). The assumption of the former would be included in the proceeds of disposition, while assumption of the latter would reduce the value (and therefore the purchase price) of the property. This suggests that the distinction can be made based on whether a liability can be described as being embedded in a specific property right or not, which causes the following questions to arise:
301:
consideration it would have paid the
Appellant would have increased." Given that acknowledgement and admission, it is difficult to find the assumption of liability is not part of the consideration in the deal notwithstanding Daishowa took great pains to have that element of the deal removed from the definition of purchase price in the final agreement.
394:
the
Minister's approach, which would have resulted in different values for the vendor's proceeds of disposition and the purchaser's adjusted cost base, is thus avoided, as "an interpretation of the Act that promotes symmetry and fairness through a harmonious taxation scheme is to be preferred over an
329:
For instance, in the
Contracts for the sale of both High Level and Brewster, the purchasers assumed all future tort liability flowing from their running the appellant's timber mills. Obviously, if a worker had been injured through gross negligence at one of the two mills after the appellant had sold
325:
Liabilities are absolute or contingent. The
Supreme Court defined a contingent liability as "a liability which depends for its existence upon an event which may or not happen." If a liability is not contingent, it is absolute. However, the jurisprudence interpreting subsection 13(21) of the Act does
305:
However, he held that it was not appropriate to add the entire estimated cost of the obligations to the proceeds, preferring to restrict the amount added back to the estimated cost that would take place within the 12 months following each sale, plus 20 percent of the estimated cost of the activities
270:
In filing its 1999 and 2000 tax returns
Daishowa did not include the amounts relating to the assumption of such liabilities as part of the proceeds of disposition relating to the sale of such properties. The Minister of National Revenue asserted that it should have been part of such amount, relying
465:
While I need not decide that question on the record before me, I would certainly not foreclose the possibility that obligations associated with a property right could be embedded in that property right without there being a statute, regulation or government policy that expressly restricts a vendor
279:
The
Minister accordingly reassessed, adding into the proceeds of disposition $ 11,000,000 in respect of High Level and $ 2,966,301 in respect of Brewster, based on the estimated cost in DMI's accounting records, and accordingly adjusted Daishowa's taxable income for the years in question. Daishowa
321:
As part of its argument that the $ 11,000,000 relating to the silviculture liability should not be included in the proceeds of distribution, the appellant argued that the liability was uncertain or contingent and, as a result, not subject to taxation. In view of my conclusion that Tolko and the
300:
Dealing first with the issue of consideration, Daishowa has acknowledged that a benefit was received by it on the assumption by Tolko of the reforestation liability. Indeed there is an admitted fact: "If Tolko had not assumed the
Appellant's silviculture liability, the amount of cash or other
455:, acting as an intervener, submitted that statutory obligations to reclaim mined land may be so physically connected to the process of mining itself that the obligations cannot be separated from the property right. Rothstein J declared in
267:(Canada). Under Alberta law, consent was granted for the transfer of such licences subject to the condition that the purchaser assume all obligations relating to the reforestation of the land covered by the licence.
444:
should the assumption of such obligations be reflected as an addition to the cost of assets acquired by the purchaser, and does such an addition occur at the time of acquisition or when such expenses are actually
868:
337:
dissented, arguing that the reforestation obligations depressed the value of the timber resource properties, and thus resulted in a lower purchase price than would otherwise have been obtained for the sale.
322:
appellant had agreed to a specific price for the assumption of the silviculture liability, this submission is without merit. However, the following remarks regarding that argument will, I hope, be helpful.
494:
where
Rothstein J (in his decision there) observed that interpretation should not be based on "a value judgment of what is right or wrong nor with theories about what tax law ought to be or ought to do."
390:
as the cost of reforestation is not a distinct existing liability of the vendor, the assumption of such cost is thus excluded from proceeds of disposition independent of whether the cost is absolute or
386:
Mainville J was correct in stating that the obligations — much like needed repairs to property — are a future cost embedded in the forest tenure that serves to depress the tenure's value at the time of
116:
As the cost of reforestation is not a distinct existing liability of the vendor, the assumption of such cost is thus excluded from proceeds of disposition independent of whether the cost is absolute or
413:
It is also irrelevant that
Daishowa estimated the cost of future reforestation to compute its income for accounting purposes, as financial accounting and income tax calculation serve distinct purposes
373:
Are the reforestation liabilities to be included in the proceeds of disposition because the vendor is relieved of a liability or are they integral to and run with the forest tenures?
317:(as he then was) agreed with Miller J as to the whether assumption of liabilities formed part of consideration, but held that there was no basis for reducing the value in question:
256:("Brewster"), it carried on the business of harvesting logs and manufacturing finished timber. At the beginning of 1999, the subsidiaries were amalgamated into the parent company.
263:, and Brewster in 2000 to Seehta Forest Products. Both transactions included the sale of timber licences, each of which is considered to be a "timber resource property" under the
571:
351:
In this appeal, the Court is called upon to answer the age-old question: If a tree falls in the forest and you are not around to replant it, how does it affect your taxes?
120:
Any amount that the parties assigned to the reforestation obligations in the sale agreement was simply a factor in determining the fair market value of the forest tenures.
410:
any amount that the parties assigned to the reforestation obligations in the sale agreement was simply a factor in determining the fair market value of the forest tenures
876:
538:
334:
470:
While of considerable economic significance to Canadian resource industries, and praised by observers as reflecting commercial common sense,
474:
also has great importance in assessing the SCC's "modern" approach to statutory interpretation. Although not as extensive in its use of the
650:
284:, contending that the fair market value of those liabilities was not determinable at the time of closing and thus should not be included.
452:
438:
would pension deficits or post-retirement benefit obligations affect the value of property rights such as workforce in place or goodwill?
275:"amount" means money, rights or things expressed in terms of the amount of money or the value in terms of money of the right or thing...
103:
Appeal is allowed with costs throughout to DMI; the matter is remitted to the Minister for reassessment in accordance with the ruling.
590:
963:
407:
the Minister and the lower courts were mistaken in relying on the company's accounting estimates as a basis for their reasoning
998:
830:
968:
978:
940:
791:
763:
490:
365:
Appeal was allowed, and the matter was returned to the Minister for appropriate reassessment. In a unanimous ruling,
163:
313:
dismissed Daishowa's appeal, allowed the Minister's cross-appeal and set aside the Judge's decision. In his ruling,
993:
898:
480:
310:
80:
376:
Does it make any difference that the parties agreed to a specific amount of the future reforestation liability?
973:
903:
810:
923:
233:
621:
506:
983:
88:
76:
945:
696:
637:
296:
allowed DMI's appeal of the Minister's reassessment in part. He agreed with the Minister, observing:
245:
441:
should an agreed estimate of such liabilities be included in proceeds of disposition to the vendor?
253:
927:
907:
814:
658:
586:
553:
521:
428:, the SCC made a distinction between obligations that do not affect the value of assets (such as
217:
171:
34:
260:
197:
241:
237:
8:
281:
249:
92:
475:
366:
357:
293:
221:
159:
136:
988:
787:
759:
466:
from selling the property right without assigning those obligations to the purchaser.
50:
28:
841:
167:
672:
147:
572:"Supreme Court weighs in on age-old question: If a tree falls in the forest..."
155:
957:
457:
779:
151:
143:
507:"Interpretation of Tax Legislation: The Evolution of Purposive Analysis"
314:
220:
concerning the application of Canadian income tax law, as well as the
429:
341:
Daishowa appealed the FCA ruling to the Supreme Court of Canada.
539:"Timber! Consequences of Assuming Reforestation Obligations"
536:
232:
Daishowa‑Marubeni International Ltd., a company owned by
488:, it did employ a more restrained approach as seen in
786:(9th ed.). Toronto: Carswell. pp. 171–172.
869:"The Supreme Court redefines Taxable Consideration:
813: at par. 36, 1 SCR 147 (12 February 1998),
271:on the definition set out in the Act at s. 248(1):
948: at par. 70, 3 SCR 721 (16 December 2011)
504:
85:Daishowa-Marubeni International Ltd. v. The Queen
955:
833:Daishowa-Marubeni International Ltd. v The Queen
871:Daishowa‑Marubeni International Ltd. v. Canada
866:
634:Daishowa‑Marubeni International Ltd. v. Canada
569:
395:interpretation which promotes neither value."
699: at par. 17, 2 SCR 79 (22 May 2008)
213:Daishowa-Marubeni International Ltd v Canada
22:Daishowa-Marubeni International Ltd v Canada
753:
453:Canadian Association of Petroleum Producers
73:Daishowa Paper Manufacturing Ltd. v. Canada
831:"Supreme Court of Canada allows appeal in
778:
451:During the SCC's hearing of the case, the
825:
823:
758:. Toronto: Carswell. pp. 6-14–6-15.
862:
860:
655:(R.S.C., 1985, c. 1 (5th Supp.)), s. 13"
784:The Fundamentals of Canadian Income Tax
537:Michael Colborne; Steve Suarez (2012).
956:
820:
920:Stubart Investments Ltd. v. The Queen
857:
486:Stubart Investments Ltd. v. The Queen
259:High Level was sold later in 1999 to
906:, 1 SCR 27 (22 January 1998),
622:SCC Case Information - Docket 34534
287:
248:. Through separate subsidiaries in
13:
498:
306:that would take place thereafter.
14:
1010:
941:Copthorne Holdings Ltd. v. Canada
899:Rizzo & Rizzo Shoes Ltd. (Re)
491:Copthorne Holdings Ltd. v. Canada
280:appealed the reassessment to the
926:, 1 SCR 536 (7 June 1984),
202:, R.S.C. 1985, c. 1 (5th Supp.)"
27:
933:
913:
891:
867:Peter S. Spiro (17 July 2013).
848:
800:
772:
747:
738:
729:
720:
711:
702:
686:
665:
643:
627:
615:
1:
964:Supreme Court of Canada cases
875:. thecourt.ca. Archived from
609:
380:On the first issue, he held:
344:
227:
216:is a significant case of the
999:Corporate taxation in Canada
360:, in delivering his judgment
234:Daishowa Paper Manufacturing
16:Supreme Court of Canada case
7:
756:Taxation of Canadian Mining
10:
1015:
969:Canadian taxation case law
505:Stephen W. Bowman (1995).
484:or in its earlier case of
79: (23 September 2011),
43:Hearing: 20 February 2013
979:2013 in Canadian case law
589:: 723–729. Archived from
566:(comment on FCA decision)
419:
246:Quesnel, British Columbia
240:, operated pulp mills in
195:
190:
182:
177:
132:
127:
112:
107:
99:
67:
59:
49:
42:
26:
21:
254:Red Earth Creek, Alberta
222:purposive interpretation
83:(Canada), setting aside
994:Nippon Paper Industries
807:Canderel Ltd. v. Canada
624:Supreme Court of Canada
587:Canadian Tax Foundation
570:Ryan L. Morris (2013).
554:Canadian Tax Foundation
522:Canadian Tax Foundation
369:dealt with two issues:
311:Federal Court of Appeal
218:Supreme Court of Canada
172:Andromache Karakatsanis
81:Federal Court of Appeal
35:Supreme Court of Canada
468:
353:
332:
303:
277:
463:
401:On the second issue:
349:
319:
298:
273:
261:Tolko Industries Ltd.
91: (11 June 2010),
45:Judgment: 23 May 2013
974:Income tax in Canada
754:I.J. Gamble (2004).
677:(RSA 2000, c. F-22)"
579:Canadian Tax Journal
546:Canadian Tax Journal
514:Canadian Tax Journal
242:Peace River, Alberta
238:Marubeni Corporation
183:Unanimous reasons by
282:Tax Court of Canada
252:("High Level") and
250:High Level, Alberta
640: (23 May 2013)
476:purposive approach
358:Marshall Rothstein
160:Marshall Rothstein
137:Beverley McLachlin
984:Taxation case law
879:on 19 August 2013
842:Ernst & Young
693:Canada v. McLarty
209:
208:
1006:
949:
937:
931:
917:
911:
895:
889:
888:
886:
884:
864:
855:
852:
846:
845:
839:
827:
818:
804:
798:
797:
776:
770:
769:
751:
745:
742:
736:
733:
727:
724:
718:
715:
709:
706:
700:
690:
684:
683:
681:
669:
663:
662:
657:. Archived from
647:
641:
631:
625:
619:
605:
603:
601:
595:
576:
565:
563:
561:
543:
533:
531:
529:
511:
361:
288:The courts below
205:
168:Michael Moldaver
141:Puisne Justices:
128:Court membership
31:
19:
18:
1014:
1013:
1009:
1008:
1007:
1005:
1004:
1003:
954:
953:
952:
938:
934:
918:
914:
904:1998 CanLII 837
896:
892:
882:
880:
865:
858:
853:
849:
837:
829:
828:
821:
811:1998 CanLII 846
805:
801:
794:
777:
773:
766:
752:
748:
744:SCC, par. 44–46
743:
739:
734:
730:
725:
721:
716:
712:
707:
703:
691:
687:
679:
671:
670:
666:
649:
648:
644:
632:
628:
620:
616:
612:
599:
597:
596:on 4 March 2016
593:
574:
559:
557:
541:
527:
525:
509:
501:
499:Further reading
422:
363:
355:
347:
290:
230:
196:
164:Thomas Cromwell
148:Marie Deschamps
139:
123:
44:
38:
17:
12:
11:
5:
1012:
1002:
1001:
996:
991:
986:
981:
976:
971:
966:
951:
950:
932:
924:1984 CanLII 20
912:
890:
856:
847:
844:. 24 May 2013.
835:, 2013 SCC 29"
819:
799:
792:
771:
764:
746:
737:
728:
719:
710:
701:
685:
664:
661:on 2013-11-09.
653:Income Tax Act
642:
626:
613:
611:
608:
607:
606:
567:
534:
500:
497:
449:
448:
447:
446:
442:
439:
421:
418:
417:
416:
415:
414:
411:
408:
399:
398:
397:
396:
392:
388:
378:
377:
374:
348:
346:
343:
289:
286:
265:Income Tax Act
229:
226:
207:
206:
200:Income Tax Act
193:
192:
188:
187:
184:
180:
179:
175:
174:
156:Rosalie Abella
134:Chief Justice:
130:
129:
125:
124:
122:
121:
118:
113:
110:
109:
105:
104:
101:
97:
96:
69:
65:
64:
61:
57:
56:
53:
47:
46:
40:
39:
32:
24:
23:
15:
9:
6:
4:
3:
2:
1011:
1000:
997:
995:
992:
990:
987:
985:
982:
980:
977:
975:
972:
970:
967:
965:
962:
961:
959:
947:
943:
942:
936:
929:
928:Supreme Court
925:
921:
916:
909:
908:Supreme Court
905:
901:
900:
894:
878:
874:
872:
863:
861:
851:
843:
836:
834:
826:
824:
816:
815:Supreme Court
812:
808:
803:
795:
793:0-459-28028-7
789:
785:
781:
775:
767:
765:0-459-28133-X
761:
757:
750:
741:
732:
723:
714:
708:FCA, par. 130
705:
698:
694:
689:
678:
676:
668:
660:
656:
654:
646:
639:
635:
630:
623:
618:
614:
592:
588:
584:
580:
573:
568:
555:
551:
547:
540:
535:
523:
519:
515:
508:
503:
502:
496:
493:
492:
487:
483:
482:
478:as it was in
477:
473:
467:
462:
460:
459:
454:
443:
440:
437:
436:
435:
434:
433:
431:
427:
412:
409:
406:
405:
404:
403:
402:
393:
389:
385:
384:
383:
382:
381:
375:
372:
371:
370:
368:
362:
359:
352:
342:
339:
336:
331:
327:
323:
318:
316:
312:
307:
302:
297:
295:
285:
283:
276:
272:
268:
266:
262:
257:
255:
251:
247:
243:
239:
235:
225:
224:of statutes.
223:
219:
215:
214:
203:
201:
194:
189:
185:
181:
178:Reasons given
176:
173:
169:
165:
161:
157:
153:
149:
145:
142:
138:
135:
131:
126:
119:
115:
114:
111:
106:
102:
98:
94:
90:
86:
82:
78:
74:
70:
68:Prior history
66:
62:
58:
54:
52:
48:
41:
37:
36:
30:
25:
20:
939:
935:
919:
915:
897:
893:
881:. Retrieved
877:the original
870:
854:SCC, par. 36
850:
832:
806:
802:
783:
774:
755:
749:
740:
735:SCC, par. 43
731:
726:SCC, par. 40
722:
717:SCC, par. 29
713:
704:
692:
688:
674:
667:
659:the original
652:
645:
633:
629:
617:
598:. Retrieved
591:the original
582:
578:
558:. Retrieved
549:
545:
526:. Retrieved
517:
513:
489:
485:
479:
471:
469:
464:
456:
450:
425:
423:
400:
379:
364:
354:
350:
340:
335:Mainville JA
333:
328:
324:
320:
308:
304:
299:
292:At the TCC,
291:
278:
274:
269:
264:
258:
231:
212:
211:
210:
199:
191:Laws applied
140:
133:
89:2010 TCC 317
84:
77:2011 FCA 267
72:
71:APPEAL from
33:
946:2011 SCC 63
697:2008 SCC 26
675:Forests Act
638:2013 SCC 29
524:: 1167–1189
481:Rizzo Shoes
391:contingent.
367:Rothstein J
186:Rothstein J
152:Morris Fish
144:Louis LeBel
117:contingent.
55:2013 SCC 29
958:Categories
883:8 November
780:V. Krishna
610:References
600:8 November
560:8 November
528:8 November
345:At the SCC
228:Background
60:Docket No.
556:: 137–143
445:incurred?
430:mortgages
356:—Justice
95:(Canada).
93:Tax Court
51:Citations
989:Marubeni
930:(Canada)
910:(Canada)
817:(Canada)
782:(2006).
472:Daishowa
426:Daishowa
315:Nadon JA
294:Miller J
944:,
922:,
902:,
809:,
695:,
636:,
244:and in
108:Holding
87:,
75:,
790:
762:
458:obiter
420:Impact
100:Ruling
63:34534
838:(PDF)
680:(PDF)
594:(PDF)
585:(3).
575:(PDF)
552:(1).
542:(PDF)
520:(5).
510:(PDF)
387:sale.
885:2013
788:ISBN
760:ISBN
602:2013
562:2013
530:2013
309:The
236:and
424:In
960::
859:^
840:.
822:^
583:61
581:.
577:.
550:60
548:.
544:.
518:43
516:.
512:.
461::
170:,
166:,
162:,
158:,
154:,
150:,
146:,
887:.
873:"
796:.
768:.
682:.
673:"
651:"
604:.
564:.
532:.
204:.
198:"
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