Sobier
J.T.C.C.:
-
The
Appellant
appeals
the
assessment
by
the
Minister
of
National
Revenue,
(the
“Minister”),
for
her
1990
taxation
year,
whereby
the
Minister
assessed
the
penalty
under
subsection
163(2)
of
the
Income
Tax
Act
(the
“Act”),
and
denied
her
capital
gains
exemption
by
reason
of
subsection
110.6(6)
of
the
Act.
In
both
subsections,
the
key
phrases
read
as
follows:
In
163(2),
it
states:
(2)
Every
person
who,
knowingly,
or
under
circumstances
amounting
to
gross
negligence
in
the
carrying
out
of
any
duty
or
obligation
imposed
by
or
under
this
Act,
has
made
or
has
participated
in,
assented
to
or
acquiesced
in
the
making
of,
a
false
statement
or
omission
in
a
return,
form,
certificate,
statement
or
answer
(in
this
section
referred
to
as
a
“return”)
filed
or
made
in
respect
of
a
taxation
year
as
required
by
or
under
this
Act
or
a
regulation,
is
liable
to
a
penalty
...
and
a
formula
follows.
Similarly
subsection
110.6(6),
reads
as
follows:
(6)
Notwithstanding
subsections
(2),
(2.1)
and
(3),
where
an
individual
has
a
capital
gain
for
a
taxation
year
from
the
disposition
of
a
capital
property,
and
knowingly
or
under
circumstances
amounting
to
gross
negligence
(b)
fails
to
report
the
capital
gain
in
his
return
of
income
for
the
year
required
to
be
filed
pursuant
to
section
150,
no
amount
may
be
deducted
under
this
section
in
respect
of
the
capital
gain
in
computing
the
individual’s
taxable
income
for
that
or
any
subsequent
taxation
year
and
the
burden
of
establishing
the
facts
justifying
the
denial
of
such
an
amount
under
this
section
is
on
the
Minister.
The
issue
is
whether
the
penalty
and
denial
were
properly
made
in
connection
with
her
disposition
of
shares
of
MD
Growth
Investment
Fund
(“MD”).
Briefly,
the
circumstances
were
that
the
sale
of
shares
were
under
less
than
normal
circumstances.
Funds
were
required
in
order
to
purchase
a
house.
The
proceeds
of
the
sale
of
the
previous
house
were
not
available
at
the
time,
and
she
needed
cash
to
close.
The
physical
evidence
indicates
that
whenever
she
received
reporting
slips
such
as
T-5s,
she
gave
them
to
her
accountant.
She
did
this
with
respect
to
capital
gain
dividends.
Those
capital
gain
dividends
were
shown
on
T-5
slips.
The
documents
dealing
with
the
disposition
of
the
shares
called
the
action
a
“withdrawal”.
Similarly,
all
purchases
were
called
“deposits”.
It
was
the
Appellant’s
evidence
that
she
believed
this
to
be
akin
to
withdrawals
and
deposits
from
a
bank.
As
stated,
in
order
for
the
penalty
to
be
assessed,
it
must
be
demonstrated
that
she
knowingly
or
under
circumstances
amounting
to
gross
negligence
failed
to
report
the
amount.
While
what
she
did
or
did
not
do
may
have
been
careless
or
neglectful,
she
was
not,
in
my
opinion,
grossly
negligent.
To
amount
to
gross
negligence,
there
must
be
something
involving
a
greater
neglect
than
simply
a
failure
to
use
reasonable
care,
and
must
involve
a
high
degree
of
negligence,
tantamount
to
intentional
acting,
an
indifference
as
to
whether
the
law
is
complied
with
or
not.
(See
Venne
v.
R.
(sub
nom.
Venne
v.
The
Queen),
[1984]
C.T.C.
223,
84
D.T.C.
6247,
a
decision
of
the
Federal
Court
of
Appeal,
at
pages
233-34
(D.T.C.
6256)).
The
documents
provided
by
MD
were
less
than
clear
that
what
was
done
might
result
in
taxable
consequences.
Without
reviewing
in
detail
all
the
authorities
cited,
I
am
of
the
opinion
that
the
appellant
did
not
act
in
a
grossly
negligent
fashion,
nor
did
she
knowingly
fail
to
report
the
gain.
I
myself
would
have
had
difficulty
interpreting
the
documents
in
Exhibit
2,
which
are
headed
Statement
of
Account
or
Summary
Statement
of
MD,
as
showing
that
there
was
a
gain
or
loss
in
her
account.
For
these
reasons,
the
appeal
is
allowed,
and
the
matter
referred
back
to
the
Minister
for
reconsideration
of
the
assessment
on
the
basis
that
the
assessment
of
penalty
be
vacated
and
that
the
Appellant
is
entitled
to
a
capital
gain
exemption
denied
under
subsection
110.6(6).
Appeal
allowed.
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