In Moore v R, 2019 TCC 141 (informal procedure), the taxpayer, in filing his 2016 return, realized that he needed to file a T1135 for shares he owned of a US corporation that he had acquired under an employee stock option plan. The tax cost of his shares exceeded $100,000 for the first time in 2015. The taxpayer promptly filed the T1135. The CRA, being the CRA, dinged him for a $2,500 penalty.
The court reversed the imposition of the penalty on the basis that the taxpayer had been duly diligent.
The TCC noted that Mr. M had acted in good faith and voluntarily disclosed his late filing to the CRA.
The TCC also noted the steps that Mr.M took, including that he properly reported the benefit and all income received on the shares, paid the appropriate amount of tax, promptly filed his T1135 notification form for subsequent taxation years after learning about the requirement, notified the CRA in writing about the 2015 obligation, and filed a 2015 form T1135.
The court appears to have been influenced as well by the CRA’s deficient communication about the T1135 requirement in the 2015 T1 Guide.
Georgina Tollstam “No Late-Filing Penalty for Cautious Taxpayer” (August 2019) 27:8 Canadian Tax Highlights