Marino – Federal Court of Appeal confirms the Oceanspan principle that a non-resident who does not compute income from any source for ITA purposes does not have a taxation year

An individual with no connection to Canada paid significant tuition fees while in attendance at U.S. universities prior to 2012 then, on immigrating to Canada, claimed his “unused” tuition tax credits as a deduction from Canadian tax. Those provisions referred to an individual’s “taxation year.” The Tax Court applied 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” (para. 29). The Tax Court 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.

In the Court of Appeal, Stratas JA stated (at para. 3) that “Oceanspan is … directly on point … [and] binds us, just as it bound the Tax Court,” and further rejected the taxpayer’s argument - that s. 250.1 supersedes Oceanspan and has the effect of deeming every non-resident person to have a taxation year in Canada – and expressed agreement here as well with the Tax Court’s reasons.

Neal Armstrong. Summary of Marino v. Canada, 2022 FCA 115 under s. 248(1) – taxation year, and s. 250.1(a).