Matthew Macisaac Consulting – Tax Court dismisses request for Rule 58 determination that reporting gains as on capital rather than income account was not a “misrepresentation”

The taxpayer was reassessed for quite a number of taxation years for which the main substantive issue was whether dispositions of shares in an offshore fund were on capital account – but many of the earlier years were beyond the normal reassessment period. The taxpayer sought to reduce the scope of the dispute to the latter years by bringing a motion for the Court to permit a Rule 58 determination that the earlier years could not be reassessed under s. 152(4)(a)(i), because this required that there have been a misrepresentation. In particular, in light of the French version of s. 152(4)(a)(i), “misrepresentation” referred to a factual misrepresentation, and the question of whether a gain was a capital gain or income account gain instead was one of mixed fact and law and, therefore, outside of the meaning of s. 152(4)(a)(i).

Wong J stated that the “English and French versions are of equal force and effect, and there is no basis to prefer one version over the other without further context.” In dismissing the motion, she stated:

I cannot agree with the Appellant’s proposition … that a question of income versus capital necessarily amounts to a difference in opinion. … [T]he factual circumstances of the appeal will determine whether the issue of income versus capital is purely a difference of opinion or not. …

The question of whether a misrepresentation under subparagraph 152(4)(a)(i) contemplates fact only or mixed-law-and-fact, should properly remain with the trier of fact to determine in conjunction with the related substantive issues.

This seems to be an indication that whether reporting gains as capital gains was a misrepresentation in light of both the English and French versions could, in her view, turn on a determination of the factual circumstances by the trial judge.

Neal Armstrong. Summaries of Matthew Macisaac Consulting Inc. v. The Queen 2020 TCC 44 under Rule 58 and s. 152(4)(a)(i).