September 14, 2018 3:40 pm
Updated: September 14, 2018 3:46 pm

Tax court rules Guy Laliberté’s $42M space trip was a taxable benefit

Space tourist Canadian billionaire and clown Guy Laliberte shows A victory sign while sitting inside the Soyuz TMA-14 spacecraft shortly after his landing with the members of the main mission to the International space station, Russian cosmonaut Gennady Padalka and NASA astronaut Michael Barratt, not seen, near the town of Arkalyk, Kazakhstan, on Sunday, Oct. 11, 2009. The federal tax court says the out-of-this-world trip taken by Quebec billionaire Guy Laliberte in 2009 is taxable.

Sergei Remezov/The Canadian Press

The Tax Court of Canada has ruled that a trip to outer space by billionaire Quebec businessman Guy Laliberté in 2009 was a taxable benefit.

At issue was a $41.8-million price tag for a trip the Cirque du Soleil’s founder had been reimbursed for as a business expense.

READ MORE: Cirque du Soleil acquires Minnesota based company as part of expansion drive

Story continues below

The Canada Revenue Agency challenged that and Tax Court Justice Patrick Boyle wrote in a ruling Wednesday he believes a large portion of the travel cost to the International Space Station was indeed a taxable benefit.

“I find that the motivating, essential and overwhelmingly primary purpose of the travel was personal,” Boyle wrote.

“I find that the Appellant (Laliberté) is the person who made the decision to travel on his space trip and that his overarching reasons for that decision were personal.”

The judge added 27 reasons to buttress his decision — notably that Laliberté had long been interested in space travel and there was no evidence the Cirque du Soleil was considering sending anyone else to space; that Laliberté’s representative negotiated the flight agreement on behalf of Laliberté; and there was no suggestion that any benefit attributed to the Cirque du Soleil was contemplated ahead of the trip.

READ MORE: Maison Alcan in Montreal declared a heritage building

A spokeswoman for Laliberté, the Cirque’s controlling shareholder in 2009 when he took a Soyuz capsule to the station, said Friday the billionaire was aware of the court decision and was considering his options.

Laliberté was Canada’s first space tourist when he took the 12-day space trip as part of a “social and poetic mission” to raise awareness about water issues for his One Drop foundation.

WATCH: Why an astronaut’s DNA not matching his identical twin’s after going into space matters

It included a two-hour feature program involving various artists such as Bono and Shakira as well as environmentalists David Suzuki and former U.S. vice-president Al Gore.

The businessman first paid for the trip through a personal holding firm. Two months after his return, he was reimbursed by Creations Meandres, the company that controlled Cirque du Soleil, minus a self-assessed $4-million shareholder benefit.

READ MORE: Sending your ashes to space: Not just for the rich and famous anymore

His accountants claimed it wasn’t a personal trip, but rather a “stunt marketing event” to promote the popularity of the circus as well as the foundation, and as such should be deductible as a marketing or promotional expense that far outweighed the trip’s cost.

In response to this week’s ruling, a spokeswoman for Lune Rouge, an entrepreneurial firm Laliberte now heads, issued a statement.

READ MORE: Cirque du Soleil aerialist killed by fall during Volta performance in Tampa

“Guy Laliberté already paid all the taxes associated with this project several years ago, upon receipt of the notice of assessment,” Anne Dongois wrote in an email Friday. “We have read the judgment, which recognizes that part of the cost of the project is attributable to business.

“A question remains with regards to the proportion that is business and the proportion that is to be considered for, potentially, personal benefit. Various options are currently evaluated.”

Guy Laliberté was Canada\’s first space tourist when he took the 12-day space trip as part of a “social and poetic mission\’\’ to raise awareness about water issues for his One Drop foundation.

Graham Hughes/The Canadian Press

In his decision, Boyle fixed the amount of the business-related portion of the trip to be about 10 per cent or $4.2 million, meaning the remaining 90 per cent of the trip’s cost — $37.6 million — was the amount of the benefit.

“Simply put, there is a difference between a business trip which involves or includes personal enjoyment aspects, and a personal trip with business aspects, even significant ones, tacked on,” Boyle wrote.

“I have found that this space trip falls into the latter category, and the tax consequences to the business income are considered and determined accordingly.”

A Cirque du Soleil spokeswoman said the organization would have no comment.

“As this is a personal matter for Guy, we will not be commenting,” Marie-Helene Lagacé said in an email.

READ MORE: Parents could be missing out on thousands of dollars in tax refunds — here’s how to claim it

Nicolas Simard, a tax law expert and partner at Fasken law firm in Montreal, said the law means the amount owed will have to be paid in full regardless of whether Laliberté appeals.

The matter has been referred back to the minister of National Revenue for reassessment.

Simard said the lesson here is that tax agencies are conducting more and more audits, including those of family businesses.

READ MORE: Son of Cirque du Soleil co-founder dies after accident at ‘Luzia’ show in San Francisco

“Taxpayers have to be mindful of the expenses that their corporations pay for them or reimburse them or the goods for which their corporations might buy for them like vehicles, time-shares, condos, vehicles,” Simard said.

“They have to be prepared to offer proper justification and offer books and records to demonstrate (they) did not personally benefit from an expense paid for by the corporation.”

© 2018 The Canadian Press

Report an error


Want to discuss? Please read our Commenting Policy first.