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This review of criteria for judicial review of a CRA decision refusing a late adjustment (ITA ​s. 152(4.2)) includes a discussion (para. 17) of when the Court will consider affidavit evidence that goes beyond the documents before the CRA reviewer who made the decision.  [22]           In the present case, the decision made under subsection 152(4.2) of the ITA is a discretionary one. Subsection 152(4.2) of the ITA does not provide the… Read More »David Anthony v. Canada (National Revenue) 2016 FC 955 (Boswell J) — Judicial review of CRA discretion to allow late return adjustments — factors FC considers

This case is interesting because it was not a tax protester case but it applied Torres and other Fiscal Arbitrators decisions to find this investment banker grossly negligent for failing to report $18 million of taxable dividends in his 2007 tax return. The banker blames his accountants for failing to include properly the $18 million in his tax return. The most damning fact was that the taxpayer… Read More »Melman v. The Queen – 2016 TCC 167 (Bocock) — Gross negligence penalty for failing to report $18MM of taxable dividends

Ms. O’Callaghan was her brother’s designated beneficiary under his RSP. She got about $273,000 from his RSP on his death.  As a result of the RSP benefit under ITA subsection 146(8.8), the estate owed about $98,000 of federal and provincial tax.  ​To pay for the tax liability, Ms. O’Callaghan gave the executor (who was also her brother) $135,000. But the executor only paid to CRA about $39,000… Read More »O’Callaghan v. The Queen 2016 TCC 169 (Favreau) — an RRSP designate beneficiary may be liable for the Estate’s tax on the RSP even if she paid the tax to the Executor

This case deals with the non-arm’s length transfer rule in ETA s. 325.  That rule taxes a non-arm’s length transferee who receives property from a tax debtor.  The amount of the assessment is reduced by the amount of consideration given for the transfer.   Here, the appellant’s common law partner’s corporation loaned the appellant money ($27,000.)  Throughout the reasons there is no suggestion by the Court or… Read More »St-Pierre c. La Reine 2016 CCI 146 (Favreau J) — ETA s. 325 — must a transferee repay the debt for there to be valid consideration for a loan?

The Crown brought this motion to delete from the Notice of Appeal facts and reasons pleading “the Minister of National Revenue’s motivation and predominant purpose in issuing the requirements and obtaining from the banks the appellant’s bank records, and documents and information derivative of such records, used to issue the reassessments”.  The Notice of Appeal also challenged the way the CRA applied the net worth method.… Read More »Bauer v. The Queen 2016 TCC 136 (Lyons) — CRA motives and conduct are irrelevant in a TCC appeal; related pleadings will be struck from the Notice of Appeal

Funds were seized from a Somali man who was trying to leave an area where gunshots had been heard.  Although he did not appear at the hearing, the court refused to accept the Crown’s hearsay and speculative evidence as grounds for concluding that the funds were proceeds of crime or to be used for crime.  The court ordered the money returned to the young man.… Read More »Attorney General of Ontario v $8,740 In Canadian Currency, 2016 ONSC 3773 (Dunphy J.) — Civil Remedies Act (ON) — Crown has burden of proof

This was a non-arm’s length transfer case (here, under ITA s. 160).  This rule taxes a transferee of property from a person who owed taxes at the time of the transfer.  This was a strategic dispute over the lack of particulars in the Notice of Appeal.  The appellant had been the major shareholder of a bankrupt corporation which the Crown said owed taxes at the… Read More »Atwill-Morin c. La Reine 2016 CCI 127 (Lamarre) – ITA s 160 — Can you demand that the Crown prove the underlying tax debt?

[13]           Next, the appellant argues that subsection 18.15(3) of the Act entitled him to have his evidence considered on a less onerous and technical standard in accordance with the objective of the informal procedure. This argument fails as well. This provision of the Act has been interpreted by our Court to mean that the rules for the admission of evidence do not apply technically in the context… Read More »Barnwell v. Canada 2016 FCA 150 (Boivin, Rennie, Gleason JJ.A.) — informal procedure eliminates strict rules of evidence but does not entitle the appellant to a more favourable weighting of certain portions of his evidence

“[33]           In the circumstances of this case, CRA’s determination not to accept the Form T661 as submitted by the Applicant was not procedurally unfair. Not only was this determination reasonable for the reasons stated above, it did not, as the Applicant contends, wrongfully convert an appealable SR&ED claim into a non-appealable non-filing. The Minister did not deprive the Applicant of any procedural rights because the Applicant… Read More »AFD Petroleum Ltd. v. Canada (Attorney General) (Boswell, J.) — There is no right to amend a return to claim SRED credits and there is no TCC appeal or FC judicial review from CRA’s refusal to accept an incomplete claim form after the objection period e

Another precise analysis of the law from Justice Owen, here in the context of a Fiscal Arbitrators-like tax scheme based on a false distinction between a person and his social insurance number. The case analyses the criteria for gross negligence in this context. The essence of the reasons is that gross negligence involves “a marked and substantial departure from the conduct of a reasonable person… Read More »De Gennaro v. The Queen 2016 TCC 108 (Owen, J.) – gross negligence penalty criteria in tax protester case

This was a disallowed ITCs case, where the issue was simply whether or not the appellants carried on business with a reasonable expectation of profit sufficient to satisfy the definition of “commercial activity”.​   There was no credible tree farming business and the primary expenses did not seem to relate to the tree farm. Justice Campbell says, though:  [19]        According to the definition of commercial activity… Read More »Living Friends Tree Farm v. The Queen 2016 TCC 116 (Campbell, J.) — No reasonable expectation of profit to support ITCs claimed

This case is a dispute over the deductibility of expenses paid.  The Crown said these were either for the purchase of shares or excessive and prohibited by ITA ss. 18(1)(a) and 67. The Court did not find the Appellant’s witnesses credible.   The Crown had accepted, based on wrong information that it had from the Appellant, that the inter-company agreement that provided for the expensed payment had… Read More »Edison Transportation, LLC v. The Queen 2016 TCC 80 (Pizzitelli J.) — the Court is not bound by false pleadings

See also Chartrand v. The Queen 2015 TCC 298 (RG Masse) Spurvey v. The Queen 2015 TCC 300 (RG Masse) 

[36]        In the present case, the Appellant has adduced evidence of a product improvement that benefitted the company but there was insufficient evidence for me to conclude that a scientific or technological advancement occurred. Product improvement alone is insufficient to bring a taxpayer within the SR&ED provisions contained in the Act. …  The evidence supports that well-known, routine programming tools were used to develop and improve upon… Read More »2037625 Ontario Inc. (ITC Invoice to Cash Inc.) v. The Queen 2015 TCC 269 (D Campbell) — Integrating your software with someone else’s is routine programming, not SR&ED — there is no technical uncertainty or advancement

Justice Pizzitelli in his recent decision, Mariano (a Global Learning Gift Initiative (GLGI) scheme) referred to Justice Woods’ decision David, distinguishing it on the basis that the Crown had failed to plead donative intent as an issue. (See Mariano at para. 23.)  He also noted that David had been appealed.  This was the appeal (along with Mr. Castro and others).  The FCA overturned Justice Woods’ decision on the basis that… Read More »Canada v. Castro 2015 FCA 225 (Scott, Stratas, Boivin) — Charity scams — no right to credit for cash portion if receipt is for higher amount

The Estate in this case argued that it was entitled to capitalize interest expense for carrying land held for capital gain. (The taxpayer wasn’t represented by counsel.)  Lyons J. rejected that view on the basis that ITA ss. 20(1)(c) and 18(2) restrict interest deductibility.  She says: ​[1]             The Estate of Zoltan Kokai-Kuun (“Zoltan”), the appellant, appeals the reassessment for the 2008 taxation… Read More »Kokai-Kuun Estate v. The Queen, 2015 TCC 217 (Lyons) — interest expense excluded from ACB notwithstanding ITA s. 53(1)(h)

This decision deals with the propriety of Crown pleadings and responses to discovery questions. It is also a rare decision where the court orders solicitor-client costs, and is especially rarer because the costs were awarded to the Crown.  [42]        With the questions at hand the deponent was essentially being asked to recall all the contracts between the Appellant and CEL and other members of the group as… Read More »Cameco Corporation v. The Queen 2014 TCC 367 (Pizzitelli) — On discovery, a party may not ask compound questions; Solicitor-client costs to the Crown 

This is another in a series of cases which establish generous costs awards in favor of appellants under General Procedure rules. “[31]        In light of the above, and given that there are no other factors relevant in determining costs here, I believe that an appropriate costs award under section 147 is one based on 20% of the fees incurred, plus disbursements. This works out to… Read More »Otteson v. The Queen, 2014 TCC 362 (Hogan) – You could get a costs award of 20% of legal fees for a case of moderate difficulty 

“[50]        It is thus clearly established in the jurisprudence that a taxpayer can not file an appeal against a nil assessment for the simple reason that an assessment according to which no tax is payable is not an assessment within the meaning of the ITA. “[51]       Moreover, the right to appeal an assessment has for its goal the reduction of tax payable or… Read More »Bérubé c. La Reine, 2014 CCI (Tardif) — You can’t appeal an assessment that says you don’t owe tax.  But you can claim the loss in later years.

“[40]        In my opinion, in light of the facts of this case, that in a building with many floors where the post box does not show the name of the applicant, the suite number takes on an essential character, one which might be different for a duplex or a building with few occupants. “[41]        Although the Minister showed that… Read More »Le sage au piano c. La Reine, 2014 CCI (D’Auray) — A wrong suite number may invalidate CRA’s service, so that the objection time limit doesn’t start to run

“[ 14]           Section 12 requires people to report any currency they actually possess if it is equal to or greater than the prescribed amount. The amount is prescribed as $10,000 by subsection 2(1) of the Cross-border Currency and Monetary Instruments Reporting Regulations, SOR/2002-412. “[15]           The issue in this case largely revolves around the interpretation of the term “actual possession” in paragraph 12(3)(a). The plaintiff essentially contends that… Read More »Wise v. Canada (Public Safety and Emergency Preparedness), 2014 FC (O’Keefe) — Crossing the border, you must report more than $10,000 in cash, even if half belongs to your spouse 

“[29]        I am of the view that an individual need not be involved in all facets of the management of the corporate operations to be held to be a de facto director. Depending on the corporate structure and the complexity of the corporate operations, it will be a question of fact as to whether an individual has performed duties that one would expect only a de jure director… Read More »McDonald v. The Queen, 2014 TCC (Campbell) — You need not be involved in all facets of the management of the corporate operations to be held to be a de facto director liable for payroll and GST debts. 

“[4]               In Aridi c. La Reine, 2013 CCI 74 (CanLII), … the TCC states at paragraph 34 that “negligence of an accountant is not the factor that allows one to by-pass the time limit under 152(4)a)(i) of the ITA.  It is the negligence of the taxpayer at the time of filing that must be analyzed. … “[7]        … Read More »Vachon c. Canada, 2014 CAF (Scott, Nadon, Gauthier) — For statute-barred tax years, negligence of the taxpayer, not his accountant, is critical 

“[3]            With respect to the reassessments for the reporting periods ending December 31 of 2006, 2007, 2008 and 2010, the Respondent filed affidavit evidence to show that Mr. Mackey had not filed notices of objection to those reassessments. Section 306of the Excise Tax Act (Act) requires that a taxpayer file a notice of objection prior to commencing an appeal in this Court. Therefore I agree with the… Read More »Mackey v. The Queen, 2014 TCC Paris–You can’t appeal if you haven’t objected; and you can’t use Tax Court to correct CRA payment allocation errors

Large corporations must comply with stricter rules for their Notices of Objection.  They must state the issues and the amount of money related to each issue.  Failure to do so prevents an appeal on the issue.  “[11]        The courts have not yet had the opportunity to fully consider the parameters of subsections 165(1.11) and 169(2.1) but there are themes that have emerged from the cases that have been… Read More »Devon Canada Corporation v. The Queen, 2014 TCC (Graham)–Large corporations must state issues carefully in the Notice of Objection but the reasons may change

This case gives another example of the importance of reading the paragraph in the Crown’s “Reply” that lists the facts CRA assumed when assessing you.  You must prove facts on which you rely, if they oppose the Crown’s assumptions.  But the Crown must prove all other facts on which it relies, beyond the ones it says CRA assumed:  “[24]        Any assumption of fact that… Read More »Elbadawi v. The Queen, 2014 TCC 259 (D. Campbell)–If the Crown doesn’t plead all the assumptions to make its case, you may win, even without your own evidence

“’”It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.”‘” “‘The application of this maxim has led to a well‑recognized rule that the failure of a party or a witness to give evidence, which it was in… Read More »Soshiroda v. The Queen, 2014 TCC 256 (Bedard) — You could lose because you don’t call evidence that could help you

Suppose CRA reassesses you, claiming you owe tens of thousands of dollars.  CRA says it sent you a Notice of Reassessment but you never got it.  As you didn’t know about the assessment, you never filed an objection and now CRA says you’re too late to do so and it begins to take collection steps.  Are you really too late?  Maybe — though it was… Read More »Hamer v. The Queen, (2014 TCC Woods) –You may not be able to object to a reassessment, even if you never got the CRA’s notice of it

Generally, a taxpayer or GST appellant must prove its case against the Minister’s assumption of facts.  Usually, in a separate (and often long paragraph), the Government states the CRA’s assumptions in the Tax Court document called a “Reply”.  In this HST case (where the appellant didn’t have all the evidence it might have needed), the Court allowed the appeal because the Reply explained the CRA’s… Read More »Health Quest Inc v. The Queen, (2014 TCC Campbell) — Read carefully the Government’s Reply for missing assumptions

The Crown sought to dismiss the appeal, brought by the bankrupt GST registrant’s secured creditors, on the basis that the secured creditors can’t appeal a bankrupt’s assessment to get ITC refunds.  Justice Bocock thought that secured creditors, exercising rights under a general security agreement (GSA), can appeal the bankrupt’s GST assessment.   But Justice Bocock did not consider the effect of s. 67 of the Financial Administration Act. … Read More »International Hi-Tech Industries Inc. v. The Queen, (2014 TCC  Bocock) — TCC says a secured creditor can appeal a bankrupt’s GST assessment.  Is the TCC right?  

In this Tax Court motion, Justice Woods discusses when a taxpayer has impliedly waived privilege by pleading in its Notice of Appeal advice from a lawyer. Here, the taxpayer said:  “[42] … 67. Until November 8, 2006, and particularly at the time of making the investments in the Funds, it was Gerbro’s understanding that the proposed amendments to section 94.1 of the ITA would come into force with retroactive… Read More »Gerbro Inc. v. The Queen, (2014 TCC Woods) — Have you accidentally waive solicitor-client privilege in your Tax appeal?

Like the rules of provincial courts, the Tax Court General Procedure Rules allow a party or the Court to strike pleadings to speed up the appeal and keep out abusive or improper claims.  (See Rule 53(1)(d) of the Tax Court of Canada Rules (General Procedure).)  Here, the taxpayer brought a motion to strike some of the Crown’s case on a tax shelter investment.  The purpose of pleadings… Read More »Kinglon Investments Inc. v. The Queen, (2014 TCC Graham)–the Crown can’t make vague pleadings, waiting for discovery to find evidence to support its theories of the case

The Tax Court is most strict in interpreting objection and appeal filing deadlines.  So this case is important because the taxpayer missed the normal deadline and the 90-day EI and CPP deadline for applying for an extension of time.  Still, the TCC treated the appeal as valid.  “[18]        Generally, the authorities may be divided into several categories: deadlines completely missed by even a few days for no reason; incomplete or… Read More »Breathe E-Z Homes Ltd. v. M.N.R., (2014 TCC Bocock) — Missing deadline for an extension to file a Notice of Appeal is not always fatal

Under the TCC’s General Procedure, parties are to disclose to one another the documents they intend to rely on.  This is “the default rule” in Rule 81.  But parties can agree, or either can apply to the Court for an order, that each disclose all documents it has, whether or not it plans to rely on them.   In this motion decision, in a “Fiscal Arbitrators”-like… Read More »Bolduc v. The Queen, (2014 TCC V A Miller) — Proportionality, materiality and relevance limit the discovery of documents

If you disclose documents or facts to the Government during your Tax Court appeal, may the Government use that information to reassess you?  Justice D’Arcy says no.  But the Government has appealed to the FCA; so the answer may change.   There is a rule in provincial court civil actions that if you give documents to the other side during “discovery”, that other party may not… Read More »Fio Corporation v. The Queen, (2014 TCC D’Arcy)–The deemed undertaking rule–Should you rush to Tax Court?

The TCC’s General Procedure r. 58 allows the parties to shorten a hearing by having the Court decide a question of fact, law or both.  In this case, two of the three taxpayers had agreed to a plea bargain in CRA’s criminal prosecutions on some of the tax issues.  CRA refused to be bound by the agreed facts from the plea bargain, seeking to impose more tax.… Read More »McIntyre v. The Queen, (2014 TCC D. Campbell)–Criminal conviction by plea bargain does not bind you in a Tax Court appeal

You missed your status hearing and your case was dismissed.  (The Court had your wrong address.)  When the Crown sent you its bill of costs, you paid it, but sought legal advice to have the dismissal set aside so that you could continue your Tax Court appeal.  It took you 18 months to file your request to have the judgment against you set aside and… Read More »Izumi v. The Queen, (2014 TCC Rossiter ACJ)–18-months is not too long to wait to have your status hearing dismissal set aside

“In all, Bennett Jones provided five accounts totalling $312,825.78 inclusive of taxes and disbursements for its work over the approximately three months that it was retained by the appellants.”  The lawsuit was aimed at collecting a $2MM debt, including using a Mareva injunction to prevent wasting of assets.   Alarmed at the high fee, the client changed lawyers and paid another law firm $200,000 to finish the case.… Read More »Ghaeinizadeh v. Bennett Jones LLP, 2014 ONCA (Rosenberg) — You can ask for costs based on a high legal bill, then apply to have the fees assessed.  

Suppose you let pass the 90 days to file your Notice of Objection, because you think the CRA’s assessment is right.  A year after the assessment, you find out about a court decision that seems to say CRA’s assessment is wrong.  Are you too late to file a Notice of Objection?  No, says judge Masse. This was an application to the Court for an extension… Read More »Patterson Dental Canada Inc. v. The Queen, (2014 TCC R. Masse DJ)  — You can get an extension of time for a late objection if you didn’t know about a court case in your favor

Tax Court rules allow the Court to order the defeated party to pay some of the other’s legal fees.  The Court has broad discretion in the amount it orders.  (See Spruce Credit Union v. The Queen, (2014 TCC Boyle) (Costs order).)  In deciding how much to order for a costs award, the Court will consider whether a party made a settlement offer which the other side… Read More »Harvey v. The Queen, (2014 TCC Graham) (Costs order)–CRA can’t agree to a settlement offer based on waiving part of a penalty

The TCC has the power to award costs to a successful party.  There are limits on this discretion for Informal Procedure appeals but much more flexibility under r. 147 of the General Procedure rules. In this case, Justice Boyle made the extraordinary costs award of about $410,000 (subject to adjustments for a motion and three discoveries).  This was about 1/2 the Appellant’s lawyers’ billed fees of… Read More »Spruce Credit Union v. The Queen, (2014 TCC Boyle) (Costs order)–$400,000 of legal costs for 2700 hours of work (on principle)?

This is appeal involves investors in a software partnership loss scheme from the early 2000s.  The appellants were investors, whose tax losses CRA denied.  In General Procedure cases, the parties can “discover” one another in writing or orally (subject to restrictions for appeals where $50,000 or less of tax is at issue.)   The taxpayers couldn’t answer the government’s questions during discovery.  They were investors;… Read More »Mould v. The Queen, (2014 TCC Rip CJ) — You can examine a non-party to get information before your hearing — if the Court agrees

Can you split long-term disability payments with your spouse, just as you can split the pension amounts you get?  No.   In 2009, Mr. Cantin got about $16,000 from Hydro-Quebec’s long-term disability insurer.  He tried to split that amount with his wife, to reduce income.  He relied on ITA s. 60.03 which allows you to reduce your taxable income for a year by splitting your “eligible pension income”… Read More »Cantin c. La Reine, (2014 CCI Masse)–You can’t split long-term disability payments with your spouse

If you invest $100,000 in a business run by a man later proven to be a fraud, and you claim you lost your $100,000 but you write off the debt within days of its becoming due, you take no action to collect it, and you’re still speaking with the fraudster, may you claim an “allowable business investment loss” and reduce your income for the year… Read More »Affordable Sign Service Ltd v. The Queen, (2014 TCC Woods)–You must have a real loss to claim an “allowable business loss”

The taxpayer missed the deadline for filing a Notice of Appeal.  His accountant represented him at Court and got an extension of time allowing him to file a proper Notice of Appeal in 30 days.  They did nothing for 600 days.  Then, discovering that CRA was collecting the taxes due for the appealed years, they applied to the TCC for another extension of time.  The… Read More »Salari Kamangar v. The Queen, (2013 TCC V. Miller) — If the TCC gives you an extension of time to file an appeal but you don’t bother, you can lose your appeal right

Courts in Canada can “award costs” to the successful party.  These awards make the opposing party pay some of the legal expenses of the successful party, on the basis that the losing party should not have pressed its objections so far.  One of the goals of these awards is to encourage parties to settle without going to a trial (or appeal), using up the court’s… Read More »Transalta Corporation v. Canada, (2013 FCA Blais CJ)  — If you make a settlement offer to CRA, you can get extra costs at trial — but only if CRA could legally accept the offer

The charity, effectively, got only about 0.5% of the cash donations in this scheme.  Promoters would get most of the rest, net of money set aside to fight the CRA.  For that, the participants in the program expected to get about 18% more in tax credits than the cash amount they paid.  So, the scheme was funded by the Government of Canada through tax credits… Read More »Kossow v. Canada, (2013 FCA Near) — You can’t get a tax deduction for giving nothing.  

This is an odd technical case.  It turns on the rule that you can’t appeal a “nil assessment” — i.e., one which says you don’t owe taxes.  But it can affect how you think about whether you should object to a reassessment or, instead, ask CRA to amend your return.   CRA reassessed Nottawasaga for about $150,000 in extra income. Half of that arose because CRA thought… Read More »Nottawasaga Inn Ltd. v. The Queen, (2013 TCC Pizzitelli) – You can’t use loss carrybacks to eliminate a tax debt, but then appeal the tax debt