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NHL’s Canucks Sale Roiled in Battle Over Capital Gains Tax

June 24, 2021, 8:06 PM

A wealthy Canadian family is challenging a tax ruling that its transactions in connection with the purchase of the major league hockey team, the Vancouver Canucks, sought to lower its capital gains taxes.

The Aquilini family argued during hearings at the Federal Court of Appeal Wednesday and Thursday that the Canada Revenue Agency erred when it blocked the way the family dispersed C$48.46 million in income it made during the purchase of a 50% stake in the hockey team in 2007.

A Tax Court of Canada ruling in June 2019 that backed the agency should be overturned because it ignores the fact the transactions were done to protect the family’s financial interest, which is a legitimate commercial rationale not related to reducing taxes, Matthew Williams, partner at Thorsteinssons LLP and lawyer for the Aquilinis, told the court.

“That’s a reasonable, business-wise decision,” Williams said Wednesday.

Tax court Justice Frank Pizzitelli described the Aquilinis as one of Canada’s most iconic business families in his ruling. Their business activities center on real estate and buildings, including the downtown arena the Canucks call home. The family also has investments in agriculture, media, and energy.

The parties appealing the tax court decision include the three Aquilini brothers who run the family business—Roberto, Francesco, and Paolo—as well the estate of their late mother and a trust controlled by the family.

The Aquilini Investment Group Limited Partnership, the family’s main corporate vehicle, realized an income of C$48.46 million in the 2007 tax year after the family sold buildings to finance their acquisition of the hockey franchise, a partial agreed statement of facts says.

The income was reduced to almost nil after it was transferred to an insolvent company with capital losses that could be carried forward just days before the end of the partnership’s fiscal period, the revenue agency said in its submission to the appeal court.

The tax authority found the transfer of the income to the trusts and then to the insolvent company was commercially unreasonable and reallocated around C$39 million in income to the Aquilinis after reassessing their taxes in 2011, the partial agreed statement of facts says.

Williams, the Aquilinis’ lawyer, told the appeal court that the transfer of income to the trusts was done through a corporate structure created to protect the Aquilinis’ wealth from creditors, making it a sensible business decision.

However, the tax agency’s lawyer countered that the Aquilinis were selectively using evidence to support their narrative.

“You can’t just pluck and cherry-pick statements to support this new narrative,” Perry Derksen, general counsel with the federal Department of Justice and lawyer for the agency, told the appeal court Wednesday.

The case is: Atrium Investment Trust, Roberto Aquilini, Estate of Elisa Aquilini, Franceso Aquilini and Paolo Aquilini v. Her Majesty the Queen, case number A-313-19.

To contact the reporter on this story: James Munson in Ottawa at jmunson@bloombergindustry.com
To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergindustry.com; Vandana Mathur at vmathur@bloombergtax.com

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