As there is no NHL hockey to watch right now, the second best way to pass the time is to consider the interaction of hockey players and tax.  Hockey players, and other professional athletes, have complicated tax lives.  They often live in new countries, move frequently, and supply their services in a bewildering number of jurisdictions.  Their tax returns look like telephone books.  Such complication will inevitably lead to disputes, as three cases decided in the fall of 1999 show.

First in time (and the only one involving an active NHL player) is Khabibulin v, The Queen, 2000 DTC 1426.  The issue was caused by – wait for it – a lockout!  In 1994 Khabibulin was an unsigned prospect for the Winnipeg Jets (not the current Jets, but the ones that became the Phoenix Coyotes; and people complain that tax law is complicated).  He lived in Belarus.  Khabibulin signed a contract in August, attended training camp, and was then sent to Springfield in the AHL when the lockout commenced on October 1.  His contract called for a signing bonus of $104,123, which he claimed was not taxable in Canada under the provisions of the Canada-USSR Income Tax Convention (despite the fact the USSR no longer existed; this just gets better as it goes along).   Revenue Canada disagreed.  Khabibulin appealed.  The legal question was whether the signing bonus was paid for signing the contract (and thus taxable) or for playing hockey (and thus exempt).  Justice Bowie decided that all the components of Khabibulin’s contract were paid for playing hockey, despite the components being divided into categories for “signing bonus” and “salary”.  Therefore, Khabibulin was not required to pay Canadian tax on the signing bonus.

The next case was Pavel Bure v. The Queen, 2000 DTC 1507.  That case concerned a taxable benefit that was assessed to Bure after the Vancouver Canucks paid his agent the fees due to the agent for negotiating a $25 million contract for Bure.  Bure had instructed his agent that he would accept a contract of that magnitude, but that he had to get the entire amount, meaning the Canucks had to pay Bure’s agent.  That was an employment benefit, for which the Canucks issued Bure a T4A slip.  He appealed, claiming that his agent, Ron Salcer, was acting for the Canucks, not for him.  The Court did not believe him, and that was that.  Appeal dismissed, and added to the grievances Pavel Bure held against the Canucks.

The last case is Nanne and Mikita v. The Queen, 2000 DTC 1653.  The case deals with whether payment of a surplus amount in the National Hockey League Pension Plan to Louis Nanne and Stan Mikita was subject to withholding tax under Part XIII of the Income Tax Act. Louis Nanne played for the Minnesota North Stars and Stan Mikita for the Chicago Black Hawks.  Neither was resident in Canada. The legal question was whether the pension payments related to services provided by the players during taxation years when each was “only occasionally” employed in Canada.  Each played scheduled regular season games and playoff games in Canada (unless they were injured).  Justice Beaubier has a lot of fun analyzing the evidence, before reaching the conclusion – that was obvious to anyone but an auditor – that playing a few games in Canada in the course of a gruelling NHL schedule constitutes employment in Canada that is only occasional.  Appeal allowed.

One notable aspect of each of these cases is that each was over relatively modest sums, at least in the context of modern professional sports.  Considering the current battle of millionaires and billionaires, a final case to consider is one that did not go to court.  In 1996 the Winnipeg Jets were sold to a group in Phoenix.  The sale was conducted in such a way that the owners avoided all provincial income tax on the gains resulting from the sale.  Everybody agreed that the transaction complied with Manitoba’s Income Tax Act, which did not have a general anti-avoidance provision.  To cure the problem, special, retroactive legislation was passed by the provincial legislature to overturn the result of the transaction and collect the tax Manitoba considered it was owed on the sale.