Summary

Keywords

Taxation — Income Tax — Calculation of income — Break fees — Appeal from taxation reassessment dismissed — Proper tax treatment of break fees — Scope of s. 12(1)(x) of Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) 

Summary

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In 1996, Falconbridge Limited offered to acquire publicly-traded shares of Diamond Fields Resources Inc. for consideration valued at approximately $4.1 billion. A bidding auction took place and Falconbridge lost to its competitor, Inco Ltd. In connection with its offer, Falconbridge received fees from Diamond Fields totalling $101,541,987.

The applicant, Glencore Canada Corporation is a successor to Falconbridge. Pursuant to the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), Glencore received a reassessment for Falconbridge’s 1996 taxation year in which the fees, less related expenses, were included in income.

The Tax Court upheld the reassessment. Glencore appealed to the Federal Court of Appeal. It dismissed the appeal.

Lower Court Rulings