Irving's offshore split was a race against time — and taxes
CBC
As New Brunswick's Irving family raced to break up their multibillion-dollar corporate empire more than a decade ago, brothers J.K., Arthur and Jack Irving agreed on at least one common goal.
They needed to keep their tax bills down.
"The threat of a massive impending Canadian tax charge in December 2013" was a key driver for carving up the fortune as soon as possible, U.K. lawyer Andrew Hine wrote in a February 2010 court filing in Bermuda.
Hine was representing Arthur Irving's grandchildren, one of many lawyers negotiating the division of the empire, including tax-free offshore trusts set up in Bermuda by late patriarch K.C. Irving.
K.C.'s three sons, J.K., Arthur and Jack, had agreed to split the conglomerate, disentangling a complex web of cross-ownership.
A "growing conflict" between the three branches of the family was "increasingly problematic," Keith Bruce-Smith, a London lawyer representing some of J.K. Irving's grandchildren, wrote in a March 2010 legal affidavit filed in Bermuda.
Hine wrote that if the conglomerate did not break up, "tension and distrust" could "jeopardize the potential benefits available for current and future generations of the Irving family."
Those comments are contained in confidential court filings never made public that were reviewed by CBC News and Radio-Canada thanks to a leak known as the Paradise Papers.
Despite the tensions, the three branches of the family saw eye-to-eye on the need to finalize the reorganizing of their assets by the end of 2013 to beat a major change to Canadian laws on taxes and trusts.
New federal legislation would take effect to tax income from offshore trusts benefiting Canadian residents — such as K.C. Irving's sons, grandchildren and great-grandchildren.
"If the beneficiaries are Canadian, going forward after 2013, they're going to be paying tax on the investment income," Geoffrey Loomer, an offshore tax expert and professor at the University of Victoria Law School, said in an interview with CBC and Radio-Canada.
K.C. Irving established two trusts in Bermuda in 1976, one for his sons and one for his grandchildren. He created a third with his will when he died in 1992.
The plan that took shape in 2009 and early 2010 was to declare those two trusts void, fold their assets into the K.C. Irving Estate Trust, then divide that among the three families.
Otherwise, the tax bill from the Canada Revenue Agency "could potentially cripple the operating businesses," Bruce-Smith wrote in his affidavit.
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