Liu – Tax Court of Canada finds that the expanded s. 152(9) does not permit the Minister to advance a new argument based on transactions that were not the subject of the reassessments

The Minister's reassessments of the taxpayers were made on the assumption that their offshore corporations generated unreported employment and business income, and capital gains, to them. After the taxpayers had appealed, the Attorney General filed Replies asserting that income of controlled foreign affiliates of the taxpayers constituted foreign accrual property income (FAPI) to them.

Clark J noted that Walsh (2007 FCA 222) had “held that the pre-2016 version of subsection 152(9) did not permit the Minister to include in its alternative argument transactions which did not form the basis of the taxpayers' reassessment” and that the 2016 amendments (expanding s. 152(9) to permit the advancing of an additional source of income) should be narrowly construed on the basis that “Parliament is taken to have been aware of the jurisprudence limiting subsection 152(9) to the transactions that formed the basis of the taxpayers' reassessment.” She stated:

I find it plain and obvious that amended subsection 152(9) does not enable the Minister to raise new arguments and bases arising from an entirely new set of transactions. An assessment of tax liability under the FAPI rules requires a determination of the income of a Canadian taxpayer's foreign affiliates. The Minister made no such … determination … prior to reassessment.

The FAPI pleadings were struck.

Neal Armstrong. Summaries of Liu v. The King, 2026 TCC 126 under s. 152(9), Rule 8 and Statutory Interpretation – Prior Cases.