Hunt – Tax Court of Canada finds that CRA’s discretion to waive tax does not render the tax unconstitutional

A taxpayer implemented an estate freeze, subscribed for common shares of the company at a low value and contributed those shares to his TFSA at a low value. CRA assessed him advantage tax under s. 207.05 equalling 100% of the appreciation of the shares within his TFSA before the shares’ sale – and following a Federal Court action by him, proposed to reduce the rate of advantage tax to his marginal federal and provincial tax rate.

Pizzitelli J rejected the following taxpayer argument: s. 207.05 contravened s. 53 of the Constitution Act, 1867 because “the existence of the discretionary relieving provision of section 207.06 following 207.05 gives the Minister the discretion to set the tax rate from anywhere between 0 and 100 percent thus amounting to an implied delegation of the right to set the tax rate.” Pizzitelli J also found that s. 207.05 did not infringe on the provincial right to make laws respecting “property and civil rights.”

Neal Armstrong. Summaries of Hunt v. The Queen, 2018 TCC 193 under s. 207.05(2), s. 207.06(2) and Constitution Act, 1867, s. 91(3).