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Laliberté V. Canada Shareholder Benefit Decision – Tax Lawyer Analysis

Published: July 22, 2020

Last Updated: October 25, 2021

A Canadian Tax Lawyer’s Perspective on An Out of This World Shareholder Benefit Decision – Laliberté v. Canada

Taxation of Shareholder Benefits

Subsection 15(1) of the Income Tax Act renders shareholder benefits taxable. A shareholder benefit arises where a shareholder receives a benefit from a corporation that is not part of a bona fide transaction between the corporation and the shareholder. A shareholder benefit may also arise where the benefit is received by a person in contemplation of that person becoming a shareholder. The taxation of shareholder’s benefits starred in the recent case of Laliberté v. Canada 2020 FCA 97.

The Factual Background of Laliberté v. Canada

Guy Laliberté is the founder of Cirque du Soleil. In 2009, he completed his long term dream of visiting the International Space Station. The twelve-day once-in-a-lifetime trip was organized by a private space travel firm and paid for by a corporation in the Cirque du Soleil corporate group, of which Laliberté was the controlling shareholder. While at the International Space Station, Laliberté hosted a multi-hour charity livestream in support of One Drop, a clean water charity founded by Laliberté and associated with Cirque du Soleil. He took pictures for a photobook and film for a documentary, both intended to support One Drop.

When Laliberté returned from the International Space Station, he reported $4 million of the $41,816,954 paid for the trip as a shareholder benefit. He claimed he received no shareholder benefit, but reported the amount on his personal income tax return regardless to avoid a tax dispute and bad publicity. The costs of the trip were moved through several of Cirque du Soleil’s corporations as a promissory note which was written off.

The Canada Revenue Agency disagreed with Laliberté’s tax treatment of the stellar trip. The position of the Canada Revenue Agency was that the trip was primarily a personal trip for Laliberté. Any business aspects of the trip were added by Laliberté after planning the trip to make the trip appear as a business trip. They reassessed Laliberté for about $37.6 million dollar shareholder benefit from the trip. The remaining 10% of the trip price was allowed as a tax deduction as a business expense to reflect Laliberté’s promotion of One Drop and Cirque Du Soleil during the trip.

The Courts’ Analysis in Laliberté v. Canada

The Tax Court of Canada and the Federal Court of Canada both concluded the Canada Revenue Agency’s tax assessment and allocation were correct. The Courts found based on 27 factors that the “overwhelmingly primary purpose of the travel was personal”. These factors can be summarized in four categories:

  • Laliberté’s repeated personal interest in space travel, including past attempts to plan a personal trip to space.
  • Cirque du Soleil’s high level of non-involvement in planning the trip, such as making no associated promotion of the trip and no contemplation of other individuals (e.g. performers or entertainers) taking the trip in Laliberté’s place.
  • The payment for the trip was moved between corporations in the Cirque Du Soleil group through a promissory note which was ultimately written off, but not reported by these corporations as would have been done for a legitimate expense.
  • The limited business nature of the trip and trip planning. The promotional broadcast was approved only shortly before launch, and NASA would not permit broadcast of the Cirque du Soleil’s logos.

With the overwhelming evidence the trip was primarily personally motivated, and would have likely proceeded even if Laliberté could not have promoted Cirque du Soleil, there was no bona fide business transaction between the corporation and Laliberté. The Canadian tax lawyer for Laliberté attempted to argue that the Tax Court relied too heavily on considering his intent. Alternately, Laliberté argued there must be an intent to impoverish the corporation which can be derived from his intent as the controlling shareholder. He reiterated his intent with the trip was support of One Drop and Cirque du Soleil. The Federal Court disagreed. Many of the above listed factors were unrelated to Laliberté’s personal interest in space travel. His personal interest was not, by itself, determinative. Further, the court rejected an intent to impoverish the corporation was required, or that such an intent could be found in this case. The court found it evident that Laliberté only planned the business aspects of the trip after the contract with the private space travel company was signed. This means even if you derive corporate intent from the controlling shareholder’s intent in these circumstances, that original intent would be the personal benefit of Laliberté.

The Federal Court found if Laliberté wanted the shareholder benefit assessment overturned, he had to demonstrate on a balance of probabilities that the “that the space trip was a bona fide business venture in its entirety.” He was not able to refute the evidence of the personal nature of the space trip. The Federal Court thus upheld the Canada Revenue Agency’s assessment.

Pro Tax Tips: Deriving the Nature of a Transaction

Most taxpayer will not encounter the circus of circumstances in Laliberté v. Canada, but tax audits and tax reassessments focusing on shareholder benefits are common. It is also common for the Canada Revenue Agency to attempt to derive the nature of a transaction from surrounding circumstances and the intents of the parties involved. The Canada Revenue Agency may see a quick sale of a house to show intent of business not personal use, the high value of a donation to demonstrate a lack of “donative intent”, or few signs of traditional business planning in a space trip to show a shareholder benefit. Issues frequently arise with the Canada Revenue Agency’s analysis because they are observing the transaction as an outside party without the full facts the taxpayer may have access to. Our experienced Canadian tax lawyers can assist you in presenting these facts to the Canada Revenue Agency to successfully challenge their characterization of your transactions.


"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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