Marino – Tax Court of Canada finds that an individual not within s. 2(1) or (3) was not a taxpayer who could generate a tuition tax credit

An individual with no connection to Canada paid a lot in tuition fees while in attendance at U.S. universities prior to 2012 then, on immigrating to Canada, claimed his purported unused tuition tax credits as a deduction from Canadian tax. Given that the tax credit provisions referred to an individual’s “taxation year,” the Crown successfully argued the Oceanspan principle that “a non-resident with no source of income in Canada, was not a ‘taxpayer’ and therefore did not have a taxation year.” Monaghan J rejected the taxpayer’s position that s. 250.1(a) had the effect of deeming any non-resident to have a taxation year - and instead indicated that this provision only “applies where a non-resident must have a taxation year if a provision of the Act is to operate as it is intended to operate, including in respect of another taxpayer,” for example, respecting a non-resident trust with a resident beneficiary recognizing income under s. 104(13) based on when that trust has a taxation year end.

She also found against the taxpayer on less esoteric grounds, namely, that the tuition tax credit provision (s. 118.5(1)(b)) “applies for one purpose only: ‘for the purpose of computing the tax payable by an individual for a taxation year.’,” so that:

[A] person will not be an individual for purposes of section 118.5 in a particular year unless that individual is a taxpayer in that year because the individual is described in subsection 2(1) or 2(3) and is potentially liable to tax in Canada under Part I.

The taxpayer was described in neither s. 2(1) nor (3) prior to 2012.

Neal Armstrong. Summaries of Marino v. The Queen, 2020 TCC 50 under s. 118.5(1)(b) and s. 250.1(a).