26 April 1989 Income Tax Severed Letter

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

April 26, 1989

HEAD OFFICE Audit Programs Directorate Audit Applications Division R.B. Boicey (613)957-3586

Subsections 110.6(6) and 70(5)

We refer to your memorandum of February 6, 1989 to the Estate and Trust Section of the Kingston District Office regarding the Department's position on imposing the provisions of subsections 110.6(6) and 70(5) of the Act. A copy of your reply was forwarded to this office for our review and consideration.

Your position, in summary, is that subsection 110.6(6) is a penalty provision and the individual referred to in the subsection is the taxpayer. Since the taxpayer in this case is deceased, no deliberate and intentional consciousness on the part of his representative to an act can be attributed to the taxpayer since he is dead. In other words, a deceased taxpayer cannot be penalized by an action or omission by his agent and therefore the Department cannot deny the capital gains deduction provided by subsection 110.6(6) to the deceased taxpayer.

We have studied the position you have taken on this case and examined the relevant law and purportments that you have used to support your conclusion. In our view, however, a reasonable argument can be made that subsection 110.6(6) can apply to deceased taxpayers in situations where gross negligence on the part of the taxpayer's representative is indicated and readily proved.

Clause 58 of Finance's Technical Notes to Bill C-84, dated November 1985, explains that subsection 110.6(6) was introduced as a compliance measure to encourage taxpayers to report dispositions of capital property. It is our contention that this provision was to apply to all taxpayers, individuals, deceased individuals, estates, trusts, etc. as all are subject to dispositions and capital gains.

As to the legislation, subsection 248(1) defines "individual" to mean a person other than a corporation and "person" is defined to include, inter alia, "any body corporate... and the heirs, executors, administrators or other legal representatives of such persons, ... extends;

We therefore see no reason to restrict or limit the definition of "individual" to the taxpayer for purposes of application of subsections 110.6(6) and 163(2) of the Income Tax Act.

In view of the fact that this subsection is relatively new and has not been tested in the courts, we asked that you reconsider the administrative position that you have taken on this provision.

W.A. Fulton Chief Application Opinions Section

c.c.: Kingston District Office Estate and Trust Section