The Federal Court of Appeal has determined that Guy Laliberté's trip to the International Space Station – which came with what the court called a “once-in-a-lifetime” price tag of $41.8-million – was largely personal, making it a taxable benefit and not a business expense.
The Cirque du Soleil founder spent 12 days in space and on the ISS in 2009, while he was still the controlling shareholder of the Montreal-based live entertainment company. Mr. Laliberté first paid for the trip through a personal holding company but later charged all but $4-million of the cost to Creations Meandres, the top operating company of Cirque du Soleil.
Mr. Laliberté had long harboured an interest in space travel; the trip with U.S. private space tourism company Space Adventures Ltd. was the fulfillment of a childhood dream. But he took the position that the endeavour was a “stunt-type promotional activity” meant to highlight the Cirque’s operations, including its 25th anniversary and its opening in Russia. During the voyage, he also conducted a worldwide broadcast as a benefit for One Drop Foundation, a clean water charity.
In a 2014 tax reassessment, the Canada Revenue Agency challenged his characterization of the cost as a business expense, calling it instead a shareholder benefit that added about $38-million to his 2009 income. Mr. Laliberté appealed, but the Tax Court of Canada ruled in 2018 that the purpose of the space trip was “overwhelmingly personal.” The court ruled he received a shareholder benefit from the trip and determined its value was about 90 per cent of the total cost, or $37.6-million.
Mr. Laliberté appealed, but the Federal Court of Appeal on Friday dismissed his case.
“We are disappointed with the outcome of the appeal, though this decision will not give rise to any additional tax liability, as the related tax had been paid several years ago,” Anne Dongois, a spokeswoman for Mr. Laliberté, said Monday. She added that he does not plan to appeal.
Justice Mary Gleason, writing unanimous reasons for the three-judge panel that heard the appeal in December, pointed to 27 facts that she relied upon to conclude the trip was personal.
Those included Mr. Laliberté's childhood interest in space and reference to himself as a “space tourist” in a documentary made about the trip, the fact that it was never a possibility for another Cirque du Soleil official or employee to travel in his stead, that the live charity broadcast was not confirmed to occur until shortly before the mission and the fact that “the CFO did not suggest that any thought was given as to the value to Cirque du Soleil of the space trip before it was completed.”
Justice Gleason compared the case to another in which a shareholder purchased a condominium for both personal use and to occasionally entertain business clients. In that instance, the court concluded the expense was overwhelmingly personal and the judge said the facts supported a similar conclusion in the Laliberté case.
“Central among the relevant facts in support of such a conclusion are the Tax Court’s findings that the appellant would have travelled to the ISS, even if it had not been possible to conduct the live broadcast ... [and] the fact that the Cirque corporations did not authorize the expenditure and were instead presented with a fait accompli, after the appellant had already committed to taking the trip.”
In a statement, Mr. Laliberté's spokeswoman quoted a passage from the lower-court ruling in which the judge said the businessman "genuinely intended that he would use his time on the trip to promote Cirque du Soleil, and himself as its most recognizable public representative, to enhance the value of his business.”
“On appeal before the Federal Court of Appeal, Guy Laliberté argued that, despite the personal satisfaction he derived from the space trip, such intention to enhance the value of Cirque du Soleil while promoting the objects of the One Drop Foundation was determinative in applying the legal test for shareholder benefits,” Ms. Dongois said.
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