De Geest – Federal Court of Appeal confirms gross negligence penalty where taxpayer’s legal argument had “no merit”

The taxpayer, who stated that he had formed the subjective activity to no longer carry on his work of installing windows and other construction work as a business, was assessed for failure to report $625,157 of business net income generated in three of his taxation years. In rejecting the taxpayer’s position, Webb JA stated:

[T]he appellant … acknowledged that the monies he received were used for his personal and living expenses. He therefore intended to receive monies in excess of the related expenditures … [I]n effect he did have the intention of earning a profit, i.e., the intention of receiving amounts in excess of his expenses.

Notwithstanding that the taxpayer was more coherent than the “natural person” cohort, Webb JA sustained the imposition of gross negligence penalties, stating that “there is no merit in the appellant’s interpretation of the Act.”

Neal Armstrong. Summary of De Geest v. Canada, 2022 FCA 22 under s. 163(2).