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TITLE:
The
Retroactive Effect of Conditional Obligations in Tax
Law
AUTHOR(S):
Allard,
Marie-Pierre
EDITOR:
Department of Justice Canada
This
research report inspired two articles published in:
- Allard, Marie-Pierre, “The Retroactive Effect
of Conditional Obligations in Tax Law”, (2001), Vol. 49, No.
6, Canadian Tax Journal, pp. 1726-1839
.
-
Allard, Marie-Pierre, “The Retroactive Effect of
Conditional Obligations in Tax Law”, The Harmonization of Federal
Legislation with Quebec Civil Law and Canadian Bijuralism –
Collection of Studies in Tax Law, Montreal, Association de
planification fiscale et financière, 2002, pp. 2
:1-138.
PAGE(S):
SERIE(S):
The
Harmonization of Federal Legislation with Quebec Civil Law and
Canadian Bijuralism – Collection of Studies in Tax Law
SUBJECT(S):
Canadian Bijuralism
Tax
Law
ISBN:
EXTRACT:
This extract is an exact copy of
the one published in The Harmonization of Federal Legislation
with Quebec Civil Law and Canadian Bijuralism - Collection of
Studies in Tax Law.
This paper comes within the scope
of the harmonization process and proposes some solutions to one of
the problems that arise in tax law--retroactive effect of
conditional obligations under civil law. In civil law,
suspensive and resolutory conditions have an effect that is
retroactive to the date on which the contract was concluded; by
contrast, in common law, conditions precedent and conditions
subsequent have no retroactive effect. For tax law purposes,
the time at which a disposition of property takes place is pivotal
in determining, inter alia, the
timing of taxation of a capital gain, recapture of depreciation, or
a change of control of a corporation. The following question
thus arises: where the issue is to determine the moment in time when
a disposition has occurred, does federal tax law recognize the
retroactive effect of conditional obligations?
TABLE OF
CONTENTS:
INTRODUCTION
I. CONDITIONAL OBLIGATIONS UNDER
CIVIL LAW
1.1 SUSPENSIVE
CONDITIONS
1.2 RESOLUTORY CONDITIONS
1.3
THE EFFECTS OF
RETROACTIVITY
1.3.1
General Effects of
Retroactivity
1.3.2
Limitations to the Retroactive Effect of
Conditions
1.3.2.1 Risks
1.3.2.1.1
Resolutory Conditions
1.3.2.1.2
Suspensive Conditions
1.3.2.2 Fruits
1.3.2.3 Acts of Administration
1.3.3
Interpreting Retroactivity
Restrictively
1.4
OTHER CIVIL LAW CONCEPTS THAT RAISE
QUESTIONS OF RETROACTIVITY
1.4.1
Resolution of Contract for Non-Performance
of an Obligation
1.4.2
Instalment Sales
1.4.3
Nullity as a Sanction of Conditions of
Formation of Contracts
1.4.4
Sales with a Right of
Redemption
1.4.5
Trial Sales
1.4.6
Promises of Sale
1.4.7
Retroactivity Provided For by
Contract
1.4.8
Retroactivity Under the Civil
Code
II. CONDITIONS UNDER COMMON
LAW
2.1 PRELIMINARY
CONCEPTS
2.2 CONDITIONS
PRECEDENT
2.3 CONDITIONS
SUBSEQUENT
2.4 OTHER COMMON LAW CONCEPTS THAT
RAISE QUESTIONS OF RETROACTIVITY
2.4.1
Retroactivity Provided For by Contract
2.4.2 Retroactivity Under Provincial Law
III. THE RETROACTIVITY EFFECT OF
CONDITIONAL OBLIGATIONS IN TAX LAW
3.1
THE PROVISIONS OF THE INCOME TAX
ACT
3.2
THE CASE LAW AND SCHOLARLY
WRITING
3.2.1 The Complementarity of Provincial Private Law
3.2.2 The Concept of Disposition
3.2.2.1 In Common Law Provinces
3.2.2.2
In Quebec
3.2.3
The Retroactivity of Conditional Obligations in Civil
Law
3.2.4 Other Retroactive Situations in Civil Law
3.2.4.1 Resolution of Contract for Non-Performance of an
Obligation
3.2.4.2 Instalment Sales
3.2.4.3 Nullity as a Sanction of Conditions of Formation of
Contracts
3.2.4.4 Sales with a Right of Redemption
3.2.4.5 Trial Sales
3.2.4.6
Promises of Sale
3.2.4.7 Retroactivity Provided For by Contract
3.2.4.8 Retroactivity Under the Civil code
3.2.5
Conditions Precedent and Conditions Subsequent
3.2.6
Other Retroactive Situations in Common
Law
3.2.6.1 Retroactivity Provided For by Contract
3.2.6.2 Retroactivity Under Provincial Law
3.2.7 The Case Law and Scholarly Writing: A Summary
3.3 THE CCRA’S ADMINISTRATIVE
POSITION
3.3.1 The Concept of Disposition and Conditional
Obligations
3.3.2 Contractual Retroactivity
3.3.3 ITA Paragraph 248(3)(f)
3.4 CONDITIONAL OBLIGATIONS IN
QUEBEC TAX LAW
IV. THE TAX TREATMENT OF
CONDITIONAL OBLIGATIONS: A CRITICAL
ANALYSIS
4.1 CONFLICTS BETWEEN FEDERAL TAX
LAW AND CIVIL LAW
4.1.1 Suspensive Conditions
4.1.1.1.1
Without Transfer of
Possession
4.1.1.1.2
With Transfer of
Possession
4.1.2 Resolutory Conditions
4.2 PROPOSED
SOLUTIONS
4.2.1
The Consequences of Retroactivity in Tax Law
4.2.2 Parliament’s Intent
4.2.3 Proposed Amendments
CONCLUSION
BIBLIOGRAPHY
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