Martin and Donaldson RCA Case: Tax Court Ruling and 2026 Appeal
Updated: Oct 4
Reviewed October 4, 2026.
Russell Martin and Joshua Donaldson's RCA litigation concerned a specific calculation of Canadian-source employment income. The Tax Court ruled for the players in 2024, and the Federal Court of Appeal dismissed the Crown's appeals on August 28, 2026.
The issue before the courts
The players were non-residents of Canada and performed 40% of their employment duties in Canada during the years at issue. Their employer paid part of the agreed compensation directly as salary and part to retirement compensation arrangements.
The dispute was whether the employer RCA contributions should be excluded before allocating compensation between Canada and the United States, or excluded from the compensation attributable to Canadian duties. This was an income-exclusion and source-allocation issue, not a general deduction for any contribution an athlete chooses to make.
A simplified 2017 comparison
Using the US-dollar figures discussed in the appellate reasons, Martin's total 2017 compensation was US$20,000,000, including US$2,451,597 paid to his RCA. The Crown's approach produced (US$20,000,000 − US$2,451,597) × 40% = approximately US$7,019,361.
The alternative calculation produced (US$20,000,000 × 40%) − US$2,451,597 = US$5,548,403. The difference is approximately US$1,470,958. These figures illustrate the allocation issue; they are not the final Canadian-dollar assessed income or the amount of tax saved.
What the 2026 appeal adds
In Canada v. Martin, 2026 FCA 144, the Court supported determining the compensation attributable to Canadian duties first and then identifying which parts are included or excluded from income. It dismissed each appeal with costs.
The agreed compensation, contractual allocation and reasonable RCA funding were important. Do not turn the result into a blanket rule that all RCA contributions can be subtracted in full from any athlete's Canadian income.
The RCA still has its own tax regime
Under the ordinary funded RCA rules, contributions and investment income or gains are generally subject to 50% refundable tax. Distributions are taxable under the applicable rules. Non-resident benefits require a separate withholding, treaty and foreign-tax review.
Practical next step
Before relying on this result, review the employment contract, allocation of compensation, service-day records, actuarial funding and the current procedural status of the litigation. Compare the total tax result in both countries rather than a single Canadian calculation.
Case text and guidance
Discuss your situation with Xponents
Contact Xponents to discuss the issue and the scope of a tax-planning review. Advice and implementation depend on your facts and the agreed engagement.
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