Tax Court Dispute Involving Valuation of Preferred Shares

Tax dispute concerning fair market value of fixed value preferred shares. Canada Revenue Agency did not agree with valuation of shares in non-arm’s length transaction.

Our client in this tax dispute was appealing a tax reassessment issued by Canada Revenue Agency (“CRA”) relating to tax owing on a transfer of fixed value preferred shares between non-arm’s length parties.

We prepared a Limited Critique Report in response to the Comprehensive Valuation Report prepared by the CRA’s expert.  Our analysis relied heavily on our thorough understanding of valuation theory, particularly in relation to the definition of fair market value, as well as special interest purchaser theory. Our report included a detailed assessment of why we disagreed with the CRA’s expert’s interpretation of these concepts.  We identified and assessed the numerous assumptions that had to be proven in order to even consider the analysis presented by the CRA’s expert.

Our work in this matter also required careful consideration of the applicability of a control premium to the subject shares and research into market dividend and interest rates for preferred shares and debt issued by the client.  The matter settled shortly before trial.