Terry v. MNR, (1973) 1 N.R. 176 (FCA)

JudgeThurlow, J., Sheppard, D.J. and Bastin, D.J.
CourtFederal Court of Appeal (Canada)
Case DateDecember 04, 1973
JurisdictionCanada (Federal)
Citations(1973), 1 N.R. 176 (FCA)

Terry v. MNR (1973), 1 N.R. 176 (FCA)

MLB headnote and full text

Terry v. Minister of National Revenue

Indexed As: Terry v. Minister of National Revenue

Federal Court of Appeal

Thurlow, J., Sheppard, D.J. and Bastin, D.J.

December 4, 1973.

Summary:

This case arose out of a reassessment of income tax against a taxpayer for income of a personal corporation. The Income Tax Act provides that the income of a personal corporation is deemed income to the shareholders of the corporation. The personal corporation received a stock dividend which the Minister alleged was a distribution of "undistributed income on hand" within the meaning of s. 82(1)(a) of the Income Tax Act. The Minister alleged that the company which declared the dividend improperly claimed an expense or a reduction arising out of the sale of a vessel. The vessel was sold and then the seller sold the proceeds at a loss or discount to avoid recapture of capital cost allowance. The Trial Division of the Federal Court of Canada affirmed the Minister's reassessment and dismissed the taxpayer's appeal. On appeal to the Federal Court of Appeal the appeal was dismissed and the judgment of the Trial Division was affirmed.

The Federal Court of Appeal stated that an agreed loss or acceptance of loss of part of the proceeds of the sale of goods is not an "expense" within the meaning of s. 82(1)(a)(i) of the Income Tax Act - see paragraph 7.

Income Tax - Topic 4480

Corporations and shareholders - Determination of "undistributed income on hand" as defined by s. 82(1) of the Income Tax Act, R.S.C. 1952, c. 148 - Whether an agreed loss of a part of the proceeds of a sale is an expense for purposes of calculating "undistributed income on hand" - The taxpayer sold a vessel and then sold the proceeds of the sale at a discount to avoid the recapture of capital cost allowance - The Federal Court of Appeal held that the loss or discount was not an "expense" for purposes of calculating "undistributed income on hand" pursuant to s. 82(1).

Words and Phrases

Undistributed income on hand - The Federal Court of Appeal discussed the meaning of the phrase "undistributed income on hand" as found in s. 82(1) of the Income Tax Act, R.S.C. 1952, c. 148.

Statutes Noticed:

Income Tax Act, R.S.C. 1952, c. 148, sect. 82(1)(a) [para. 4].

Counsel:

K.S. Fawcus and D.M. Clark, for the appellant;

M.R.V. Storrow, for the respondent.

Sheppard, D.J., concurred with Thurlow, J.

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