Chiang – Tax Court of Canada finds that a “reasonable error of fact” (e.g., confusion as to how to claim a deduction) established a due diligence defence to penalties

The taxpayer (Chiang) overcontributed to his RRSP (thereby incurring Part X.1 tax) because he “genuinely and reasonably believed” that he had deducted his contributions for two years in his returns for those years (but, in fact, did not enter the amounts in the deduction line) and that for a third year he had unused RRSP deduction room (which he did not). In finding that Chiang was not subject to penalties under s. 162(1) for not filing Part X.1 tax returns, Sommerfeldt J found that because

Mr. Chiang reasonably believed in, and was operating under, a mistaken set of facts that, if true, would have resulted in there not having been a cumulative excess amount…his failure to file tax returns (Form T1-OVP) for 2004 to 2013 resulted from a reasonable error of fact, so as to be excused by the due diligence defence.

Neal Armstrong. Summary of Chiang v. The Queen, 2017 TCC 165 under s. 162(1).