Federal Appeal


Income tax


Obligation to repay only arose with issuance of declaration

Taxpayer’s corporation paid capital dividend which Minister determined exceeded its available capital dividend account balance as determined by Minister. Quebec Court granted taxpayer’s application for declaratory relief setting aside resolution of sole director, and declaring as void entirety of capital dividend. Minister assessed taxpayer for 2009 taxation year increasing taxpayer’s net income by $381,260 under s. 15(2) of Income Tax Act, and by $4,228 under s. 80.4 of Act. Federal Court dismissed appeal holding that dividend was a nullity but that taxpayer was unjustly enriched. Taxpayer appealed. Appeal allowed. Upon declaration of nullity by Quebec court taxpayer had repaid amount to corporation. Obligation to repay only arose with issuance of declaration and so re-assessment based on non-existent debt. Upon repayment unjust enrichment became theoretical. Re-assessment therefore without foundation and notice quashed.

St-Pierre c. Canada (2018), 2018 CarswellNat 4008, 2018 CAF 144, Johanne Gauthier J.A., Richard Boivin J.A., and Yves de Montigny J.A. (F.C.A.); reversed (2017), 2017 CarswellNat 2558, 2017 CCI 69, Réal Favreau J. (T.C.C. [General Procedure]).

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