Craig Burley has written a helpful article about a technicality relating to the $25,000 limit for informal procedure appeals to the Tax Court of Canada. He refers to Maier v R, 1994 CarswellNat 3242,  T.C.J. No. 1260 (TCC), in which the Court held that the limit on relief applies to the amount in issue in each assessment under appeal and not to the total amount in dispute in the appeal as such.
A taxpayer fails to meet the 90-day deadline for filing an appeal to the Tax Court apparently because he was badly advised by a professional about procedural matters. Should the Court grant his application to late-file the appeal? The Federal Court of Appeal said ‘yes’ in Bygrave v R, 2017 FCA 124. Continue reading
In Shreedhar v R, 2016 TCC 254, the Crown brought a motion to strike an informal procedure appeal. The Crown claimed that the taxpayer was attempting to appeal from a nil assessment. The Court disagreed because, while the assessment had not assessed tax, it had imposed $2.10 of interest. According to the Court, this meant that the assessment in question was not a nil assessment.
Justice Boyle pointed out that a number of cases have found that tax, penalties and interest are each amounts that are “assessed” under the Act. See Cooper v R, 2009 TCC 236, which also cites Wright et al v R, 2005 TCC 485, McFadyen v R, 2008 TCC 441, and Moledina v R, 2007 TCC 354. From the foregoing cases it follows that an “assessment” is not a nil assessment even if it only assesses interest.
Mr Douglas McCarthy participated in the Fiscal Arbitrators fiasco. His lawyer, as part of some pre-trial skirmishing, tried to argue, among other things, that Mr McCarthy shouldn’t have to answer questions on examinations-for-discovery because the discovery process amounts to torture. Mr Justice Patrick Boyle’s response: no it doesn’t; “Enough said.” McCarthy v R, 2016 TCC 45.
I would call this comic relief except that, for Mr McCarthy, I’m sure the tax position he finds himself in is not at all funny.
From H.M. Dolson, “What To Expect in Tax Adjudication”, Canadian Tax Highlights 23:4 (April 2015):
As a whole, a [Tax Court] general procedure taxpayer represented by counsel achieved a meaningful victory in 38.5 percent of the published TCC decisions and tied in a further 7 percent. The low rate of success may seem discouraging, but the success rate increased to 46.32 percent when the 205 group B cases were excluded. This result suggests that in a group A case (whose outcome often turns on a question of law), a general procedure taxpayer represented by competent counsel is on a relatively even footing with the Crown (but the odds slightly favour the Crown because of the litigation advantage that flows from its power to plead assumptions).
“Group A” cases were cases turning primarily on a question of law where the taxpayer was attempting to vindicate a tax benefit derived from a plan prepared by a professional. A “Group B” case was more fact-driven and did not relate to a benefit derived from a plan.
Regarding FCA appeals, Mr Dolson writes:
Of the 147 appeals to the FCA, the taxpayer initiated 112 (76 percent) but prevailed in only 20 (18 percent). In contrast, the Crown prevailed in 17 (47 percent) of Crown-initiated appeals. One appeal ended in an effective tie. When the results are shown as a percentage of all FCA appeals initiated by both the taxpayer and the Crown, the taxpayer prevailed in 26.5 percent of the cases and the Crown prevailed in the remaining 73.5 percent. The result for the taxpayer does not materially improve if the group B cases are excluded: favourable outcomes for the taxpayer rose to only 31.6 percent.
In Brown v R, 2014 FCA 301, Webb JA had no trouble dismissing the taxpayer’s claim that the Income Tax Act (Canada) was void for uncertainty because, for example, it did not provide an adequate definition of “person”.
The Court, however allowed the taxpayer’s appeal from orders of the Tax Court striking the portion of his notices of appeal that disputed whether the Minister should have assessed gross negligence penalties. Webb JA pointed out that, under subsection 163(3), the Minister has “the burden of establishing the facts justifying the assessment of the penalty”. The Court wrote:
 Therefore the Minister, and not Mr. Brown, would have the burden of establishing the facts justifying the assessment of the gross negligence penalties imposed for 2009 and 2010. Since the only documents filed in these matters at the Tax Court of Canada were the notices of appeal (and amended notices of appeal) filed by Mr. Brown, it is not plain and obvious that the Minister will be successful in establishing the facts justifying the assessment of the gross negligence penalties. Since this is the Minister’s burden, there are no material facts that Mr. Brown would need to allege (and then have the onus to prove) in his notices of appeal.
The Court also set aside the awards of costs made by the Tax Court and awarded the taxpayer his costs in the Tax Court and the Federal Court of Appeal.
Alex Klyguine reminds us that, if the CRA reassesses a year and the taxpayer wishes to dispute the reassessment, the taxpayer must be cautious about applying losses of other years to reduce the taxable income of the reassessed year. If the losses of other years are used to reduce taxable income to nil, the taxpayer will be prevented from disputing the reassessment. The taxpayer should leave enough taxable income in the year to ensure that more than $2.00 of federal tax is left payable. See Nottawasaga Inn Ltd. v R, 2013 TCC 377. Alex Klyguine, “CRA Reassessments: The Trap in Eliminating the Extra Tax by a Loss Carryback” Canadian Tax Focus 4:4 (November 2014).
James Rhodes, in a recent post on the Canadian Tax Professionals group on LinkedIn, drew our attention to McIntrye v R, 2014 TCC 111, in which Justice Diane Campbell, among other things, found that the CRA was not bound by an agreed statement of facts (ASF) arrived at as part of a plea bargain and that the CRA, in assessing the taxpayers, was not required to make assumptions that were consistent with the ASF. Continue reading
Can the CRA use evidence it has obtained (arguably) illegally using its civil audit powers in the course of a criminal investigation in reassessing a taxpayer for civil purposes? I would have thought that the answer was ‘yes’, and the Court in Piersanti v R, 2013 TCC 226, seemed to think the same thing. Bill Innes, however, seems to think that, if the taxpayer had successfully challenged the introduction of the evidence at her criminal trial, the Tax Court judge would have also excluded it for the purposes of the appeal of the civil assessments.
Sometimes clients with a tax problem will ask whether it would help to have an MP or MPP write to the CRA or the Department of Justice on their behalf. In my experience, MPs and MPPs will almost always refuse, more or less politely, to get involved. It appears that John Duncan agreed to “help out”. He has now resigned from Cabinet as a result. Continue reading