www.lexisnexis.ca Vol. 31, No. 13 October 2015
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Black and gold seeing red over meal expenses brawl

The Boston Bruins are preparing to go into the corners with a new and very different opponent this National Hockey League season.

In what could be a precedent-setting case with wide-ranging implications if the Bruins are successful, owner Jeremy Jacobs recently filed a petition in U.S. Tax Court questioning Tax Code provisions that limit his team to a deduction of 50 per cent of its pregame team hotel meal expenses while on the road.

As reported in several media outlets, the Bruins argue that they should be permitted to deduct 100 per cent of those meal costs as a legitimate business expense, not entertainment, challenging the Internal Revenue Service position that the NHL club owes U.S. $85,028 in back taxes for 2009 and 2010. It is not known if the team continued the practice after 2010.

Offshore tax issues at heart of KPMG battle

The Canada Revenue Agency is alleging that KPMG Canada helped set up an elaborate offshore tax structure that has allowed a wealthy Victoria family to avoid reporting more than $4 million of income from foreign investments earned from an offshore company in the Isle of Man.

The case, first reported by the Canadian Broadcasting Corporation in September, potentially could have profound implications for professional accounting firms. It sits apparently stalled in the Tax Court of Canada, with KPMG reportedly fighting the CRA’s request to provide a full list of clients participating in an activity the agency believes is deceptive.  

“The offshore company structure used by the [family] is a sham. The parties to the structure wilfully presented its transactions as being different from what they knew them to be. All parties knew that the [family] controlled the offshore company and intended to reacquire the funds introduced to accounts held in its name. The offshore company structure was an attempt to generate tax-free income for the [family] and to avoid foreign reporting obligations,” the CRA alleged in Tax Court documents made public by the CBC.

An 11th-hour legal salvo to halt the flow of personal and account holder information demanded under the United States Foreign Account Tax Compliance Act (FATCA) has failed, leaving no barrier to Canadian banks submitting the data about their U.S. customers to the Canada Revenue Agency for dissemination to the U.S. Internal Revenue Service.

The Federal Court of Canada quashed the request for a permanent injunction brought forward by two women with dual U.S. and Canadian citizenship who both reside in Canada. The plaintiffs advanced numerous arguments to demonstrate why the intergovernmental agreement between the two countries that would allow for private accountholder information to be shared with the IRS is illegal.

Less than a year after the Federal Court of Appeal held that a supplier’s delinquent fiscal conduct is irrelevant to an input tax credit (ITC) claim, the Quebec Court of Appeal has ruled that the province’s businesses, as part of an effort to impede tax evasion, are expected to conduct due diligence on suppliers in order to be able to obtain ITC claims.

In a highly awaited ruling that muddied legal waters and startled tax professionals, the appeal court held that in order to qualify for ITC claims businesses are required to do more than simply confirm validity of a supplier’s GST/HST registration number and ensure invoices conform to current legislation and regulations. They also have the duty to authenticate that invoices used to claim ITCs originate from the person that actually performed the service, the appeal court held.