Taxpayer and her spouse owned and operated construction company. During relevant period, taxpayer was status Indian and was entitled to tax exemption under Indian Act (Can.) in respect of personal property situation on reserve. Her spouse was not, and was not entitled to tax exemption. Construction company employed up to 50 individuals on various construction sites, and almost none of sites were located on reserves. Spouse worked on construction sites and taxpayer worked in company office which was located on reserve. Company paid regular remuneration to taxpayer and spouse and paid balance of its annual income to taxpayer in form of year end bonuses. For income purposes, company claimed deductions for regular pay and bonuses and these deductions were allowed by Minister. Taxpayer claimed tax exemptions with respect to her regular pay and bonuses and Minister allowed exemption with respect to regular pay and disallowed exemption with respect to bonuses. Taxpayer appealed. Taxpayer did not qualify for exemption with respect to bonuses. Appeal allowed only with respect to issues agreed between parties. For purposes of appeal property at issue was remuneration from employment. Taxpayer already received adequate compensation for her employment in form of biweekly pay. Bonuses were not entitlement from reserve land by virtue of taxpayer’s employment because there was no substantive connection between land and bonuses. It was abusive of exemption to allow taxpayer to receive bonuses exceeding reasonable remuneration. Company undertook transaction having appearance of strong connection between bonuses and employment. In reality, there was no substantive connection. There was no evidence to support that bonuses were reasonable remuneration or that bonuses were intended by parties to reasonably compensate taxpayer for her duties of employment. Taxpayer received remuneration through her bi-weekly pay that was roughly equivalent to spouse’s remuneration except for 2008 when her pay exceeded that of her spouse. In order for bonuses to be reasonable, taxpayer should have made greater contribution to company than her spouse but evidence did not support this. Taxpayer played administrative role with respect to construction contracts with limited exceptions. Taxpayer’s employment was not strong connecting factor for bonuses. It was not abusive to move company’s office to reserve. Office was substantial and Minister’s argument in this regard attempted to read business purpose test into Act exemption.
Bell v. R. (July 27, 2016, T.C.C. [General Procedure], Judith Woods J., 2013-1806(IT)G) 268 A.C.W.S. (3d) 701.