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Bakorp: appeal dismissed for failure to comply with large corporations rules

By Timothy Fitzsimmons

In Bakorp Management Ltd v The Queen (2014 FCA 104), the Federal Court of Appeal upheld a decision of the Tax Court dismissing the taxpayer’s appeal for failure to comply with the rules relating to objections and appeals filed by large corporations.

The result in Bakorp is a reminder to large corporations and their advisers of the need for careful consideration of the issues and relief sought in objections and appeals. In this regard, it would be good practice to have a notice of objection of a large corporation reviewed by a tax litigation lawyer before the objection is filed with the Canada Revenue Agency.

The taxpayer was a large corporation under subsection 225.1(8) of the Income Tax Act (ITA). In 1992, five Class A shares of a corporation not connected with the taxpayer were redeemed by that corporation for $338,213,849 (£200m) resulting in a deemed dividend pursuant to subsection 84(3). A portion of the proceeds was not payable until 1995, and the taxpayer reported that portion ($52,912,264) as taxable income in 1995, resulting in $13,333,059 of Part IV tax…

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