Amit Ummat has written a good article about Glatt v Canada (National Revenue), 2019 FC 738. The taxpayer was assessed a preparer penalty. To reduce risk, the taxpayer paid the assessed amount, which was later reversed, but without interest on the ‘prepayment’. The Federal Court held that the CRA was required to pay interest on the amount the taxpayer had paid.
Owen J, in Morrison v R, 2018 TCC 220, writes the following about the burden of proof relating to the Minister’s assumptions:
 The Federal Court of Appeal makes two important points in these decisions [Transocean Offshore Ltd. v R, 2005 FCA 104, and R v Anchor Pointe Energy Ltd., 2007 FCA 188]. First, the issue of whether assumptions of fact should be taken as true is one of fairness to the taxpayer. Second, assumptions regarding facts that are exclusively or peculiarly within the knowledge of the Minister may not be treated as true. The “”may”” in the second point simply recognizes that in determining whether or not to treat the assumptions of fact as true, the Court must consider whether an affirmative decision would be unfair to the taxpayer in the circumstances. If there is no unfairness to the taxpayer the assumption may stand as true even if exclusively or peculiarly within the knowledge of the Minister. The outcome in any given situation will depend on all the relevant circumstances.
 The word “”exclusively”” is clear in its meaning: the Minister is the only person that has the information. I assume the word “”peculiarly”” is similarly being used in the sense of belonging to or pertaining to the Minister, or in the sense of being unique to the Minister.
 I have considerable difficulty understanding how facts obtained by the Minister through the audit of the Appellants and the Programs in which they participated are exclusive or peculiar to the Minister. Save for the audit, the facts are outside the purview of the Minister’s knowledge and are clearly known by others involved in the Programs even if not known by the Appellants.
 The Appellants consciously chose to participate in the Programs with little or no knowledge of what went on behind the curtain, so to speak. In such circumstances, it is not unfair to the Appellants to allow the Minister to assume what went on behind the curtain.
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