Normally, CRA is limited to three or four years for reassessing your tax return after the original assessment. But if you made a negligent misstatement when you filed your return there is no limitation period.
Here, the deceased taxpayer’s long-standing accountants, a reputable firm, made several errors in both the original return and later amendments. Nevertheless, the Tax Court and, now, the Federal Court of Appeal concluded that the Estate’s executor should at least have questioned the accountants. Failure to ask the question was an error that allowed late reassessment.
[47] As noted by the Tax Court Judge, in determining whether the person filing a return that has been prepared by someone else is careless or negligent, the degree of care that must be exercised is “that of a wise and prudent person” (Angus v. The Queen, [1996] T.C.J. No. 883, 96 D.T.C. 1824 at paragraph 29, as cited in the reasons of the Tax Court Judge at paragraph 39). Mr. Glowinsky was the son-in-law of Stanley Vine and one of the executors of the Estate. He was also the President of the property management company for Stanley Vine’s real estate holdings. Schedule 3 to the final tax return lists eight companies. The Tax Court Judge found that Mr. Glowinsky would have known what assets were owned by Stanley Vine. There is no dispute that Victoria Park was not owned by any of the companies that are listed in Schedule 3 and that there is no reference to the interest of Stanley Vine in Victoria Park in Schedule 3.
[48] As a careful and prudent person Mr. Glowinsky should have reviewed the return and noted that Victoria Park was not included. This should have prompted questions, just as Bowie J. indicated would have been prompted in College Park. …
[50] The question is whether the inference that the missing recaptured capital cost allowance would have been discovered is reasonably supported by the evidence. Since no questions were asked about Victoria Park, this is speculative. However, it seems to me that the best indication of what would probably have been the response to such questions is the response of Mintz when the return was reviewed in relation to the election to carry back the capital loss. The response of Mintz was that not only was the recaptured capital cost allowance not included, but also no amount was included for the capital gain related to Victoria Park. The amended return included both an amount for the recaptured capital cost allowance and an amount for the capital gain. It was not until over two and half years later that it was discovered that the total capital gains in the original final return had been overstated by $2,915,000. The evidence reasonably supports the inference that if questions would have been raised about why Victoria Park was not listed, that the error related to the unreported recaptured capital cost allowance would have been found.