Andersen – Minister’s reassessments for unreported insurance proceeds failed due to failure to assume what was the policies’ adjusted cost basis
The taxpayers terminated life insurance policies for personal purposes, and were ultimately reassessed to include in their income the gross amounts received by them.
Spiro J set the stage by noting that “In order for the Minister to assess a policyholder under … subsection 148(1)… the “adjusted cost basis” of the policy to the policyholder immediately before its disposition must be determined,” and by stating:
The courts have consistently held that unless the Minister’s assumptions of fact are sufficient to support the assessment under the relevant legislation, the onus does not shift to the taxpayer.
Here, the Reply had stated that the Minister’s assessing assumptions included that the amounts so received “were the net proceeds after the subtraction of the Appellant’s adjusted cost basis with respect to the Policies.” Spiro J indicated that this “bald assertion” was “grossly inadequate” given that the amount included in each taxpayer's income in fact “was simply an amount equal to the ‘proceeds of the disposition’ of each policy.”
Thus, even though the taxpayers did not tender any evidence to speak of, their appeals were allowed:
The onus never shifted to the Appellants to disprove the Minister’s assumption about the “adjusted cost basis” of each policy immediately before its disposition because the Minister never made any such assumption.
Neal Armstrong. Summary of Andersen v. The Queen, 2020 TCC 51 under General Concepts – Onus.