Citation: 2009 TCC 228
Date: 20090429
Docket: 2008-2650(IT)I
BETWEEN:
TADEUSZ KOSEK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bédard J.
[1]
This is an appeal from
a reassessment (notice of which is dated May 1, 2006) made against the
Appellant for his 2002 taxation year. In so reassessing, the Minister of
National Revenue (the “Minister”) disallowed the deduction claimed for an allowable
business investment loss (“ABIL”) of $33,269. This is also an appeal from a
reassessment made against the Appellant for his 2006 taxation year. In so
reassessing, the Minister disallowed the deduction claimed for a non‑capital
loss from other years in the amount of $36,423.44.
The facts for the 2002 taxation year
[2]
The Appellant filed his
income tax return for the 2002 taxation year on June 27, 2003 and the
Minister issued the initial assessment for the taxation year on July 14,
2003. In so assessing the Appellant, the Minister allowed the deduction claimed
for an ABIL in the amount of $33,269.
[3]
Following information
received from the Quebec Minister of Revenue, the Minister sent a letter (Exhibit
R-3) to the Appellant advising him that the ABIL claimed for the 2002 taxation
year had been revised to nil, and reassessed the appellant for that taxation
year on May 1, 2006, disallowing the ABIL as claimed. Consequently, the
time for objecting to the reassessment expired on July 30, 2006.
[4]
Following the
reassessment, the Appellant sent a letter (Exhibit R-4) dated September 5,
2006 to the Canada Revenue Agency (the “Agency”). The Agency replied to the
Appellant by letter dated September 25, 2006 (Exhibit R-5). The Appellant
also sent a letter (Exhibit R-5) dated January 22, 2007 to the Agency.
[5]
On January 25, 2008, the
Appellant made a follow‑up call regarding a notice of objection filed for
the 2002 taxation year and dated September 22, 2007. That notice of objection
had not been received by the Minister and the Appellant resubmitted the same together
with attached documentation, which was received by the Minister on
January 30, 2008.
[6]
On May 12, 2008,
the Minister informed the Appellant that the notice of objection postmarked
January 25, 2008 could not be accepted as it was not filed within
90 days following the date of reassessment, namely May 1, 2006, and
further informed the Appellant that he was also too late to file a request for
an extension of time to file a notice of objection.
Analysis and conclusion for the 2002
taxation year
[7]
The relevant sections of
the Income Tax Act (the “Act”) are the following:
165(1) Objections to assessment -- A
taxpayer who objects to an assessment under this Part may serve on the Minister
a notice of objection, in writing, setting out the reasons for the objection
and all relevant facts,
(a) where the assessment is in respect of the taxpayer for a
taxation year and the taxpayer is an individual (other than a trust) or a
testamentary trust, on or before the later of
(i) the day
that is one year after the taxpayer's filing-due date for the year, and
(ii) the day
that is 90 days after the day of mailing of the notice of assessment; and
(b) in
any other case, on or before the day that is 90 days after the day of mailing
of the notice of assessment.
. . .
165(2)
Service -- A notice of objection under this section shall be served by
being addressed to the Chief of Appeals in a District Office or a Taxation
Centre of the Canada Revenue Agency and delivered or mailed to that Office or
Centre.
. . .
166.1(1)
Extension of time [to object] by Minister -- Where no notice of objection
to an assessment has been served under section 165, nor any request under
subsection 245(6) made, within the time limited by those provisions for doing
so, the taxpayer may apply to the Minister to extend the time for serving the
notice of objection or making the request.
. . .
169(1)
Appeal -- Where a taxpayer has served notice of objection to an assessment
under section 165, the taxpayer may appeal to the Tax Court of Canada to have
the assessment vacated or varied after either
(a) the
Minister has confirmed the assessment or reassessed, or
(b) 90
days have elapsed after service of the notice of objection and the Minister has
not notified the taxpayer that the Minister has vacated or confirmed the assessment
or reassessed,
but no appeal
under this section may be instituted after the expiration of 90 days from the
day notice has been mailed to the taxpayer under section 165 that the Minister
has confirmed the assessment or reassessed.
[8]
Subsection 169(1) of
the Act obliges a taxpayer to serve a notice of objection in order for that
taxpayer to be able to appeal an assessment. In other words, service of notice
is a condition precedent to the institution of an appeal. In the present case,
there is no evidence that Appellant served on the Minister within the time prescribed
(which in the present case expired on July 30, 2006) a notice of objection
(the notice of objection must be addressed to the Chief of Appeals of the
appropriate district) in writing, setting out the reasons for the objection and
all the relevant facts, nor is there any evidence that the Appellant made an
application to the Minister for an extension of time to file a notice of objection.
As a result, the appeal for the 2002 taxation year must be quashed.
The 2006 taxation year
[9]
The Appellant filed his
income tax return for the 2006 taxation year on April 29, 2007 and the
Minister issued the initial assessment for the 2006 taxation year on
May 10, 2007. In so assessing the Appellant, the Minister disallowed the
deduction claimed for a non‑capital loss from other years in the amount
of $36,423.44. The Minister refused that non‑capital loss claim for the
2006 taxation year as the Appellant had no non‑capital loss within the
meaning of subsection 111(8) and paragraph 111(1)a) of the Act
available to carry forward to the 2006 taxation year. The evidence revealed in
this regard that:
i)
The Appellant claimed
in his 1994 income tax return an ABIL of $235,132 ($313,509 x 75%). The ABIL
was applied against the Appellant’s income in the following manner:
— $34,603 in 1994
— $34,292 in 1991 (carry‑back)
— $29,448 in 1992 (carry‑back)
— $44,223 in 1993 (carry‑back)
— $11,219 in 1995 (carry‑forward)
— $48,750 in 1996 (carry‑forward)
— $32,597 in 1997 (carry‑forward).
ii)
The Appellant claimed
in his 1998 income tax return an ABIL of $62,194 ($82,926 x 75%). The
Appellant was allowed a deduction of $39,666 against his income for that year.
The amount left was $22,528. This amount was carried forward to the year 2000.
iii)
The Appellant claimed
in his 1999 income tax return an ABIL of $27,375 ($36,500 x 75%). This amount
was applied against the Appellant’s income for that year.
iv)
The Appellant never
claimed an ABIL in his income tax returns for taxation years following the 1999
taxation year.
[10]
Consequently, I am of
the opinion that the Minister was justified in refusing the non‑capital
loss carried forward from other taxation years to the 2006 taxation year since
the evidence showed that the Appellant had no non‑capital loss within the
meaning of subsection 111(8) and paragraph 111(1)a) of the Act
available to carry forward to the 2006 taxation year.
[11]
In this case, the
Appellant submitted essentially that he incurred in his 2002 and preceding taxation
years ABILs that were never claimed and that, consequently, he should be
allowed to carry forward those ABILs for application against his 2006 income.
[12]
I am of the opinion
that a taxpayer cannot carry forward an ABIL never claimed in his income tax
return for the year in which the ABIL occurred. I also want to point out that
it is simply too late for the Appellant to claim those ABILs since the taxation
years in which they occurred are statute‑barred.
[13]
For these reasons, the
appeal for the 2006 taxation year is dismissed.
Signed at Ottawa, Canada, this 29th
day of April 2009.
“Paul Bédard”
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