Last – Federal Court of Appeal finds that the principle that CRA cannot appeal its own assessments applies on a source-by-source basis

The principle that the Minister cannot appeal her own reassessment by arguing for an even higher level of tax on appeal to the Tax Court applies on a source-by-source basis.

The taxpayer was successful in Tax Court in establishing additional deductible expenses respecting his rental operation but was also found by the Tax Court to have realized an unrelated gain on income account notwithstanding that the Minister had reassessed on the basis that it instead was a capital gain.  In light of the above principle, the taxpayer was in effect allowed to "keep" the additional expense deductions rather than those expenses in effect being netted against the additional income arising from the income-account finding, which related to another source.  Dawson JA reasoned that to follow the netting approach advocated by the Crown would be to indirectly allow the Minister to appeal her reassessment on the disposition issue to the extent of the additional expenses.

Neal Armstrong.  Summary of The Queen v. Last, 2014 FCA 129 under s. 152(1).