In this decision, Justice Dominique Lafleur has decided that an heir can appeal an assessment of an estate. There is a missing element to the analysis. But as this case stands, it leaves open the possibility that, where an heir is unhappy with how the executor is handling the estate’s tax affairs, either or both of these two (the heir or the legal representative) could file an objection and Tax Court appeal against the same assessment.
The facts here are also a bit peculiar. Mrs. Straessle died in 1996, without a will. Not until 2013 did the CRA propose to reassess her 1992 to 1996 tax years. CRA sent correspondence to Mrs. Straessle’s daughter, who was the only heir of the estate.
It’s not entirely clear why the daughter felt she needed to object to these assessments. But it seems she had a concern about being pursued personally later for the debts of the estate. As the CRA was acknowledging that the daughter was not a legal representative of the estate, it could not pursue her under s. 159. But perhaps it might have tried to pursue her under s. 160 for a non-arm’s length transfer.
Even so, it’s well-established that a person who is subject to a section 160 assessment can challenge the underlying assessments (in this case against the estate). So there would be no prejudice to the daughter if she had not been able to pursue, on behalf of the estate, objections to the assessments.
Returning to the decision, the basis of the reasoning is that the word “person” includes an heir as well as a legal representative of an estate. “Taxpayer” means a “person”. So, an heir is a taxpayer, as is a legal representative. That is as far as the analysis goes.
Justice Lafleur includes a lot of discussion about statutory interpretation. She spends a great deal of time referring to Québec civil law to show that the daughter of the widowed deceased is an heir. She shows that “heir” can’t mean the same thing as “legal representative”. So, she concludes, the daughter can appeal the assessment.
That reasoning skips this in ITA section 165:
“(1) A taxpayer who objects to an assessment under this Part may serve on the Minister a notice of objection …
(a) if the assessment is in respect of the taxpayer for a taxation year and the taxpayer is an individual … “
At the least, one would have to make some leaps to say that the “heir”, who is not liable under section 159, is a taxpayer “in respect of” the assessment”, or, more rightly, that the assessment is in respect of the heir. Despite all the breadth that courts give to the phrase “in respect of”, most people would not generally say that s. 165(1) means that anyone who might feel a connection to the assessed taxpayer can object to the assessment.
Applying the Court’s reasoning, an heir who doesn’t like the legal representative and how she or it is handling the estate, could file her own Tax Court appeal just as could the legal representative. So one could have two Tax Court appeals in respect of the same assessment.
And the reasoning in this case could go further. A shareholder who doesn’t like an assessment against the corporation is a “taxpayer”. And the corporate assessment can be said to be “in respect of” the shareholder in some way. (At some point, the shareholder could be liable under section 160, for example for dividends the corporation paid well it supposedly had a tax debt.) So, the corporation or its shareholder could file objections.
Perhaps the Crown will think it worthwhile to appeal this decision.
Estate of Winifred Straessle v. The Queen, 2018 TCC 144 (Lafleur)