Subsection 152(1) - Assessment


Ludmer v. Attorney General of Canada, 2018 QCCS 3381, aff'd 2020 QCCA 697

improper advancing of “settlement” elements that were not sustainable

Hamilton JCS found that the Montreal TSO had acted improperly in making unreasonable reassessments that were contrary to advice received from Rulings and by offering in a settlement offer to settle elements that it knew it was going to abandon (summarized at para. 702).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) recurring fee reduction amounts received for no work were income and taxable under s. 56(2) when directed to controlled company 289
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) nature of the legal advice relied upon was unclear 417
Tax Topics - Income Tax Act - Section 94.1 - Subsection 94.1(1) equity-linked notes held in BVI company were portfolio investments held with a tax avoidance purpose, but were not subject to 7000(2)(d) interest accrual 576
Tax Topics - Income Tax Regulations - Regulation 7000 - Subsection 7000(2) - Paragraph 7000(2)(d) mere possibility of locking in value accretion each year did not crystallize the maximum amount of interest respecting the year 484
Tax Topics - General Concepts - Negligence, Fiduciary Duty and Fault damages awarded against CRA for inter alia making unreasonable reassessments 260
Tax Topics - Income Tax Act - Section 3 - Business Source/Reasonable Expectation of Profit recurring fee reduction amounts received for no work were income from a source 313

Archibald v. Canada, 2018 FCA 2

taxpayers cannot rely on favourable CRA treatment of similarly-situated taxpayers

In the course of dismissing the taxpayer’s appeal of an assessment made on the basis that tuition fees paid to the University of Liverpool for an on-line MBA program did not qualify for the tuition tax credit, Woods J.A. stated (at para 12):

Ms. Archibald also submits that she is aware of individuals similarly situated who have been granted the tax credit. This … is not a basis for relief.… [I]t is “well settled that a taxpayer does not become entitled to relief simply because another taxpayer similarly situated was assessed differently” (Roy v. The Queen, 2011 TCC 299 …).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(b) on-line MBA program that progressed 3-times more slowly than full-time course did not qualify 121

University Hill Holdings Inc. (Formerly 589918 B.C. Ltd.) v. Canada, 2017 FCA 232

a settlement agreement agreeing as to round percentages of expenses that were unreasonable accorded with Galway

The Appellants were members of two film production tax-shelter limited partnerships (“collectively, “Glenelg”). A lawyer who was acting for them had entered into a settlement agreement with CRA which focused on a different LP with the same promoter, but which stipulated that the members of Glenelg would be assessed on a “basis consistent” with that for the other LP members. The settlement agreement provided that specified amounts or percentages of different categories of expenses would be denied, and there was a dispute as to how this was to be applied to Glenelg. After finding (at para. 57) that these “terms of the Settlement Agreement are sufficiently certain” to apply to the Appellants in relation to Glenelg, Boivin JA went on to affirm the conclusion of the Tax Court Judge that the terms of the Settlement Agreement were principled and in accordance with the Galway principle, stating (at paras 66, 67):

The rule in Galway … prohibits the parties from arriving at settlements that have no basis in the ITA. Since the question in Galway was whether a particular amount of money was to be treated as income or not, the parties could not compromise on the tax treatment of that sum. …

The same cannot be said of the facts in the case at bar. … The Tax Court Judge indeed found that: “[s]ection 67 ITA clearly gives the basis for disallowing a portion of the expenses claimed by a particular taxpayer; it does not have to be an all or nothing” … . The test is not…whether the Minister effectively demonstrated before the Tax Court that the disallowed expenses were in fact unreasonable… . [I]t is in the interest of our legal system that settlement agreements remain a feasible option and that they be enforced provided that the settlement terms are permitted under the ITA.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 169 - Subsection 169(3) settlement agreement terms were sufficiently clear to be enforceable 226

Rosenberg v. Canada (National Revenue), 2016 FC 1376

CRA bound by agreement not to further audit the taxpayer

Following an audit of the straddle transactions engaged in by the taxpayer for his 2006 and 2007 taxation years, the CRA auditor drafted an agreement to which the taxpayer agreed under which the taxpayer agreed not to engage in further straddle transactions and the Minister agreed not to proceed with any reassessment of those taxation years unless a new fact pattern emerged. Three years after this agreement, a different CRA auditor issued a demand for information respecting the straddle transactions in the 2006 and 2007 returns.

In rejecting the Minister’s argument that the Galway doctrine precluded her from being bound by the agreement, Roy J stated (at paras 88, 91):

[T]he agreement reached conforms with the Galway line of authorities. The CRA has already assessed the taxpayer based on the facts as known and the legislation as understood. If there is a change, the parties agree that the Minister can proceed with reassessments; if the facts have changed, reassessments may occur. …

[C]ertainty is an essential ingredient. … [U]nless the agreement is contrary to public order, the contract is valid and binding.

Roy J concluded that the agreement also was not contrary to public order, stating (at paras 101-102):

Far from disabling the Minister from fulfilling the primary purpose for which the legislation was created, the exercise of discretion to enter into this type of agreement helps fulfill the administration and enforcement of the ITA. …The agreement between the parties is not null and void and it is binding.

AFD Petroleum Ltd. v. Canada (Attorney General), 2016 FC 547

CRA cannot be compelled to consider a request to amend a return

The taxpayer filed its claim for SR&ED deductions in reliance on s. 37(11), which provided that the form can be filed up to 12 months after the taxpayer’s filing-due date. CRA rejected the filing as being incomplete, and the taxpayer was out of time to file a notice of objection to the initial assessment of its return for the year in question.

Boswell J accepted the Crown’s submission (at para. 31) that “the Applicant's SR&ED claim for its 2012 taxation year was made by way of an amendment to its T2, and that the Minister cannot be compelled to consider such a request,” and concluded (at para 33) that the CRA had not been procedurally unfair because the Applicant could have filed the Form some 12 months earlier than it did when it filed its income tax return for 2012 and thus still have had time to appeal (so that CRA had not deprived the Applicant of any procedural rights).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 37 - Subsection 37(11) missing information in T661 on technological obstacles was substantive/no remedy if T661 rejected after objection period 339

AgraCity Ltd v. Canada, 2016 DTC 5006 [at 6525], 2015 FCA 288

inconsistent assessments of related taxpayers

A Barbados corporation reported substantial profits from the sale of a herbicide to Canadian farmers, and deducted amounts paid to a non-arm’s length Canadian corporation (AgraCity – which was the taxpayer in the case) as service fees. The Crown’s pleadings in support of its assessment of AgraCity stated that the Barbados corporation did not sell any herbicide, and that the fair market value of the fees received by AgraCity should be increased by all of the profit reported by the Barbados corporation. However, in pleadings in support of an assessment of the Canadian parent of the Barbados corporation, the Crown pled that the Barbados corporation sold the herbicides to AgraCity, thereby giving rise to FAPI under s. 95(2)(a.1) to the Canadian parent.

In finding that these inconsistent pleadings were acceptable, Webb JA noted that it is inherent in separate persons (including related persons) being separate taxpayers that inconsistent assessments and, thus, inconsistent pleadings may result - and that the Crown acknowledged that it did not seek to have both assessments upheld.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) boundary between ss. 247(2)(a) and (b) is unresolved/inconsistent assessments of related taxpayers 347
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 53 inconsistent assessments of related taxpayers 228
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 82 inconsistent assessments of related taxpayers 281

McNally v. Canada (National Revenue), 2015 FC 767

CRA improperly delayed assessing return in order to discourage participation in gifting tax shelters

The taxpayer participated in a leveraged donation arrangement and filed his return on a timely basis. Two months later, he received a CRA letter stating that the return would not be assessed until the tax shelter was audited - unless his donation claim was withdrawn. Similar letters were issued to the other "GTS program" participants, as well as to participants in other gifting tax shelters. The Minister admitted that the main reason the taxpayer's return had not been assessed was "to discourage participation in these tax shelters" (para. 3, also para. 9).

Harrington J allowed the taxpayer's mandamus application, so that the Minister was required to assess the taxpayer's return within 30 days. The reasoning in Ficek was persuasive, as the decision to audit was "so tainted by the real reason for the GTS program that the audit is an excuse for delay, not a reason for delay" (para. 40). The factual differences - for example, that a taxpayer in this case could voluntarily waive the claimed credit and claim it back in subsequent years - were immaterial. Here it was "plain and obvious that Mr. McNally's rights have been trampled upon for extraneous purposes" (para. 41).

Canada v. Last, 2014 DTC 5077 [at 6998], 2014 FCA 129

Minister's inability to appeal own assessment applies to each source of income

At trial, the taxpayer argued that certain expenses should have been allowed in determining his rental income, and that his gain from the disposition of some shares was on income account rather than capital. The trial judge allowed the taxpayer's appeal to give effect to some of his expenses. She agreed that his gain from the shares was on income account, but did not order the Minister to reassess on this basis to the extent of the additional allowed expenses as the effect would be allow the Minister to reassess on the gains issue beyond the limitations period.

The Minster appealed on the basis that the increase in income from the disposition of the shares should be recognized to the extent of the additional expenses allowed, as doing so would not increase the taxes owing.

Dawson JA dismissed the Minister's appeal. Harris v. MNR ([1965] 2 Ex. C.R. 653, aff'd on other grounds [1966] S.C.R. 489) establishes that the Minister cannot appeal her own assessment, and this principle is to be applied to each source of income (para. 23). As noted on the analogous facts in Petro-Canada, 2004 FCA 158, at para. 68, the effect of the Minister's approach would be to indirectly allow the Minister to appeal her assessment on the disposition issue to the extent of such other expenses.

Ficek v. Canada (Attorney General), 2013 FC 502

audit of tax shelter was no excuse for delay, given that the primary purpose of the audit was to cause that delay

The taxpayer participated in a software licence donation arrangement under a registered tax shelter ("GLGI"), in which the taxpayer would acquire software licences at a bulk rate and donate them in order to get charitable receipts reflecting the alleged non-bulk value of the software.

By November 2012, the Minister had not processed the taxpayer's 2010 return, which allegedly was being held until an audit could be conducted on GLGI. The taxpayer applied to obtain mandamus to compel the examination of the return.

Phelan J allowed the taxpayer's application. The evidence established that the purpose of the new policy was to have a chilling effect on participation in charitable donation schemes. This breached the Minister's obligation to process the taxpayer's return with all due dispatch. He stated (at paras. 27, 33):

The method by which the Winnipeg Tax Centre thought it could achieve this purpose was to rely on the need for an audit to give legitimacy to the delay which they intended to use to discourage participation. However, it is apparent from the Record that the Centre had already determined that the donations claimed were not legitimate.


To the extent that there may have been some basis for awaiting the audit, the decision to audit is so tainted by the real reason for the New Policy that the audit is an excuse for delay not a reason for delay.

Transalta Corporation v. Canada, 2013 FCA 285

CRA cannot accept settlement offers contrary to its understanding of the ITA

The taxpayer established at the Tax Court that certain employee share bonuses were deductible after the Crown had already conceded that employee cash bonuses were deductible. The taxpayer had previously made a settlement offer on the basis that cash bonuses paid by some of its non-Canadian subsidiaries were non-deductible, with the balance of the bonuses at issue being deductible. The taxpayer argued that it was entitled to enhanced recovery of its costs running from the time of the rejected settlement offer.

In rejecting, this position Blais CJ found, following Galway, that the Minister lacked the legal ability to accept settlement offers that were incompatible with her interpretation of the Act, stating (at para. 29):

[T]he Judge correctly concluded the Crown could not compromise with respect to the share bonuses because the assessing policy of the Canada Revenue Agency was that any issuance of shares to employees of a corporation under a salary bonus or stock bonus plan constituted an agreement falling within the ambit of section 7... .As such, an employer could not deduct laid out costs incurred in respect of such an agreement (see IT-113R4). Being of this view of the law, the Minister was obliged to assess in accordance with the law as he understood it (See Cohen...).

Blais CJ also noted that there was no duty on the Minister to provide reasons for rejecting a settlement (para. 33).

Karda v. Canada, 2006 FCA 238

CRA entitled to reassess to avoid statute-barring

The taxpayer did not respond to a CRA request, made shortly before the expiry of the normal reassessment period for his 1996 year, that he provide a waiver. CRA then (barely in time) issued a reassessment which denied all the deductions claimed by him. The taxpayer argued that the reassessment was not valid as its sole purpose was to avoid statute-barring.

In the course of rejecting the taxpayer’s appeal, Noël JA stated (at para 2):

… In our view, having requested additional information from the appellant and not having received that information, and having requested a waiver from the appellant which the appellant refused to give, the Minister was clearly entitled to issue a reassessment to protect his rights prior to the expiry of the three-year period. …

Armstrong v. Canada (Attorney General), 2006 DTC 6310, 2006 FCA 119

Sharlow J.A. noted (at p. 6311) that "an amended return for a taxation year that has already been the subject of a notice of assessment does not trigger the Minister's obligation to assess with all due dispatch ..., nor does it start anew any of the statutory limitation periods that commence when an income tax return for a particular year is filed and then assessed. An amended income tax return is simply a request that the Minister reassess for that year".

Canada v. Harris, 2000 DTC 6373 (FCA)

In dismissing an appeal by the Crown of a refusal to strike a statement of claim by a member of a public interest group alleging that, in granting a ruling, Revenue Canada had acted illegally or improperly or for ulterior motives, namely, favouritism and preferential treatment by way of a covert deal, the Court indicated that it was not plain and obvious that the action could not succeed. Furthermore, it was not plain and obvious that the Minister owed no fiduciary obligation to taxpayers.

Ginsberg v. Canada, 96 DTC 6372, [1996] 3 CTC 63 (FCA)

Failure of the Minister to assess the taxpayer with all due dispatch did not invalidate the assessments ultimately made.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(3) Minister's failure to act with all due dispatch is not a basis for vacating an assessment 112
Tax Topics - Income Tax Act - Section 166 45
Tax Topics - Statutory Interpretation - Interpretation Act - Section 11 45

Schatten v. MNR, 96 DTC 6102 (FCTD)

After finding that the non-residency of the applicant was not a ground for the Minister to refuse to process her income tax returns, Reed J. issued an order of mandamus requiring the Minister to examine and process the applicant's tax returns in the usual manner.

Duthie Estate v. The Queen, 95 DTC 5376 (FCTD)

contradictory assessments may be necessary

In finding that it would not have been inappropriate for the Minister to assess the taxpayer on the basis that he had disposed of personal-use real estate in 1981 pursuant to s. 45(1)(a) as well as three years later when there was an actual disposition, Rothstein J. stated (at p. 5384):

"While obviously, as a general rule, the Minister should not issue contradictory assessments, there may be occasions where contradictory assessments will be necessary. This would especially be the case where, as here, their necessity can be attributed directly to the actions of the taxpayer."

The Queen v. Guaranty Properties Ltd., 90 DTC 6363 (FCA)

amalgamation did not extinguish predecessors for assessment purposes

An amalgamation of two corporations under the laws of Ontario did not cause the amalgamated corporations to cease to exist for purposes of their liability for tax. Accordingly, a reassessment and notice of confirmation issued, following the amalgamation, in the name of a predecessor corporation were not invalid.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(a) amalgamation did not cause predecessors to cease to exist for liability purposes 205

The Queen v. Riendeau, 90 DTC 6076 (FCTD), aff'd 91 DTC 5416 (FCA)

wrong section cited

Before finding that reassessments of the Minister were not invalid because they were based on a repealed provision of the Act (s.74(5)), rather than on the provisions which were cited in the Minister's Notice of Confirmation, Jerome A.C.J. stated:

"The Act and the cases (Belle Isle, Minden) show that an assessment can be valid even if the original reasons assigned were erroneous or because the Minister initially availed himself of one section (subsection 74(5)) instead of another (sections 3 and 9 of the Act)."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) citing wrong section was not a substantial and fundamental error 160

The Queen v. W.H. Violette Ltd., 88 DTC 6025, [1988] 1 CTC (FCTD)

Since "each taxation year must be considered independently ... it is difficult, if not impossible, to conceive how a reassessment for one taxation year can be taken to be superseded by a reassessment in respect of another taxation year." The taxpayer unsuccessfully argued that an appeal by the Crown in respect of its 1981 taxation year was a nullity because the reassessment for its 1981 taxation year had been replaced by reassessments for the 1980 and 1982 taxation years.

Interprovincial Steel and Pipe Corp. v. The Queen, 86 DTC 6583, [1986] 2 CTC 473 (FCA)

The Minister cannot use his power of assessment to collect sums that are not exigible under the Act (even though he might be entitled to those sums at common law).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 164 - Subsection 164(3.1) 21

The Queen v. Consumers' Gas Co. Ltd., 87 DTC 5008, [1987] 1 CTC 79 (FCA)

assessment is of dollar amount

It was indicated, obiter, that the Minister was not precluded from taking a position before the Trial Division that was inconsistent with the basis of his reassessment. Hugessen, J. stated: "While the word 'assessment' can bear two constructions, as being either the process by which tax is assessed or the product of that assessment, it seems to me clear, from a reading of sections 152 to 177 of the Income Tax Act, that the word is there employed in the second sense only."

Lipsey v. MNR, 85 DTC 5080, [1984] CTC 675 (FCTD)

Strayer, J., doubted that a judge would ever be in a position to direct the issuance of a notice of assessment because "to issue mandamus the Court must be satisfied that all the conditions have been met for the exercise of the power, and that in the circumstances the official in question has no discretionary power to delay or to refuse taking the step which is sought to be ordered by mandamus". Semble, that a court cannot be so satisfied with respect to s. 152(1) because the issuance of an assessment under s. 152(1) can be delayed for a reasonable period of time.

Sedgewick Co-operative Association Ltd. v. The Queen, 83 DTC 5455, [1984] CTC 14 (FCTD)

"[I]f the Minister has admitted through the assessment that certain facts exist, he cannot later withdraw that admission." However, as was the case here "if the Minister's assessment were based on a certain view of the law the court cannot be prevented, by this 'admission' or otherwise, from coming to its own conclusion as to what the law means."

Cohen v. The Queen, 80 DTC 6250, [1980] CTC 318 (FCA)

settlement agreement required to accord with law

The Minister has a statutory duty to assess the amount of tax payable on the facts as he finds them in accordance with the law as he understands it. An alleged agreement whereby the Minister agreed to assess income tax otherwise than in accordance with the law, i.e., treating business profits for certain taxation years from the disposition of lands as capital gains, thus was illegal and non-binding.

Brown v. The Queen, 79 DTC 5421, [1979] CTC 476 (FCTD)

It was suggested that it was "an unwarranted interference by the Minister in the conduct of the affairs of [a] trust by the trustee", where, out of "altruistic motives", he reassessed the trust by deducting amounts that the trust had deliberately refrained from claiming.

Hutterian Brethren Church of Wilson v. The Queen, 79 DTC 5052, [1979] CTC 1 (FCTD), aff'd 79 DTC 5474, [1980] CTC 1 (FCA)

aff'd on other grounds 79 DTC 5474, [1980] CTC 1 (FCA)

It was reasonable for the Minister to delay assessing incorporated Hutterian colonies pending the disposition of an appeal process concerning the colonies' individual members. The "due despatch" requirement had been met.

Rodman Construction Inc. v. The Queen, 75 DTC 5038, [1975] CTC 73 (FCTD)

The non-resident taxpayer received payments on a non-interest bearing mortgage between 1964 and 1969 after showing the deed to a Revenue Canada assessor, who indicated that s. 16(1) would not apply. In 1971 Revenue Canada assessed on the basis that ss.16(1) and 214(2) applied. Decary, J. stated in obiter dicta: "It cannot be said in the present instance that due despatch has been used by the Minister: 7 years after the deed, 2 years after the last instalment. Despatch means promptitude, speed."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 16 - Subsection 16(1) not applicable where purchase price at FMV 101

Galway v. M.N.R., 74 DTC 6355, [1974] C.T.C. 454 (FCA)

requirement to assess in accordance with law

After a finding at trial that a $200,500 amount was includible in the taxpayer's income, the Court of Appeal lacked the jurisdiction to grant a consent judgment the effect of which would be to set aside the judgment of the Trial Division and refer the assessment back to the Minister to reassess the taxpayer's tax and interest in the total amount of $100,000. Jackett, C.J. stated: "the Minister has a statutory duty to assess the amount of tax payable on the facts as he finds them in accordance with the law as he understands it. It follows that he cannot assess for some amount designed to implement a compromise settlement and that, when the Trial Division, or this Court on appeal, refers an assessment back to the Minister for re-assessment, it must be for re-assessment on the facts in accordance with the law and not to implement a compromise settlement."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 177 - Subparagraph 177(b)(iv) 149

Western Minerals Ltd. v. Minister of National Revenue, 62 DTC 1163, [1962] CTC 270, [1962] S.C.R. 592

The Minister initially assessed the taxpayer for the amount shown as payable in its return and subsequently reassessed for additional tax plus interest thereon. In rejecting a submission of the taxpayer that interest did not run from the time of the initial assessment to the time of the reassessment because a decision was made, at the time of the initial assessment, to conduct a further examination of the taxpayer's return, Martland J. stated (p. 1166):

"In my opinion there can be a valid assessment made even though a further examination of the return is intended."

See Also

Express Gold Refining Ltd. v. Canada (National Revenue), 2020 FC 614

"with all due dispatch" requires performance of audit in a reasonable time

ETA s. 229(1) requires that a net tax refund claimed in a return is to be paid “with all due dispatch after the return is filed.” Pentney J found that this provision required that the Minister proceed “with all due dispatch” in determining whether the refund should be paid (i.e., if CRA so chooses, it can apply an “audit first with all due dispatch, then pay” system, rather than a “pay right away, audit later” system, as argued by the registrant.)

Here, the registrant claimed a net refund claim of $9.13 million in its August 2018 return, and then, on December 6, 2018 - which was only two months after having been notified by CRA that that return would be audited and that, in the meantime, no refund would be paid - made an application for a mandamus order to compel the Minister to pay the net refund. This was found not to have been a reasonable time in which to require an audit to be performed.

Pentney J stated (at para. 104):

I have concluded that the Applicant brought its application before a reasonable time for the performance of the [“with all due dispatch”] duty had elapsed, and so I am dismissing the application. In doing so, it is worth underlining that if the Applicant has or obtains evidence that the CRA is acting for an ulterior purpose, or that the audit is being continuously expanded in bad faith, or otherwise not proceeding in a reasonable time-frame, it can bring another motion.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 229 - Subsection 229(1) a taxpayer can bring a mandamus motion if CRA drags out an audit of GST/HST refund claims for ulterior or strategic reasons 499

Commissioner of Taxation v Resource Capital Fund IV LP Commissioner of Taxation v Resource Capital Fund IV LP, [2019] FCAFC 51

assessment must bring to the attention of the assessed person that it has been assessed to tax

After concluding (contrary to the finding below) that two Cayman LPs (RCF IV and RCF V) who had received assessment notices were themselves taxable entities for the relevant Australian income tax purposes, the Court went on to also find that, even if this conclusion were not correct, such assessments made in the name of the partnerships were to be taken as assessments of the partners. In this regard, the Court referenced (at para. 45) the statement in Federal Commissioner of Taxation v Prestige Motors Pty Ltd (1994) 181 CLR 1 that “it is necessary that the notice should bring to the attention of the person on whom it is served that the assessment to which it relates is an assessment of that person to tax,” and then stated (at paras. 46-47):

Here, if our earlier conclusion that RCF IV and RCF V are competent to be assessed be incorrect, then the “assessments” issued to each were misconceived. That is because each of the Commissioner’s notices of assessment failed to be served on a taxpayer, and no notice was given, by sending the notices to RCF IV and RCF V, of “an assessment of that person to tax”, to use the language of Prestige Motors.

In our view, it is also not possible to read each assessment as having been served on each partner, or on the partners collectively. The partners, some of whom reside in the United States, were not, as a fact, served with any assessment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(ii) source of gain was in Australia because the sale occurred pursuant to an Australian Scheme of Arrangement 305
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxable Canadian Property - Paragraph (d) mine assets included processing operations 412

Finucane, Re Application for Judicial Review (Northern Ireland), [2019] UKSC 7

government was required to demonstrate that it resiled from an undertaking based on genuine policy grounds

The applicant’s husband, a solicitor, was murdered in the presence of her and their children by Irish “loyalist” terrorists but with the help of collusion by government security forces. She claimed that she had a legitimate expectation that a public inquiry would be held respecting the government collusion in her husband’s murder because of an unequivocal assurance given to her.The Court held that she did have a legitimate expectation that there would be a public inquiry but that she had not shown that the government’s decision not to fulfill this promise was made in bad faith or that it was not based on genuine policy grounds. Lord Kerr stated (at paras. 62, 76):

[W]here a clear and unambiguous undertaking has been made, the authority giving the undertaking will not be allowed to depart from it unless it is shown that it is fair to do so. The court is the arbiter of fairness in this context. And a matter sounding on the question of fairness is whether the alteration in policy frustrates any reliance which the person or group has placed on it. …

Where political issues overtake a promise or undertaking given by government, and where contemporary considerations impel a different course, provided a bona fide decision is taken on genuine policy grounds not to adhere to the original undertaking, it will be difficult for a person who holds a legitimate expectation to enforce compliance with it.

Delia v. Agence du revenu du Québec, 2018 QCCQ 9487

dissolved corporation could not be assessed for QST assessed pursuant to an audit that commenced after its dissolution

The ARQ commenced a QST audit of a corporation (Motostar) after its voluntary dissolution by its sole individual shareholder (Delia) and assessed Motostar for some unremitted QST – and then assessed Delia for the same amount under the Quebec equivalent of ETA s. 323(1) (and ITA s. 227.1(1).) Cameron JCQ found that the assessment of Motostar was void given that the equivalent provision in the Quebec BCA to CBCA s. 226(2) did not (unlike s. 226(2)) provide that a proceeding may be brought against the dissolved corporation within X years after its dissolution, and instead merely provided that “judicial or administrative proceedings to which the corporation was a party” are continued against its shareholder on the dissolution. (As noted, the “administrative proceedings,” i.e., audit, were commenced after the dissolution, and Wesdome was distinguished on the basis that there the dissolution had commenced before the dissolution.)

Nonetheless, the assessment against Delia was valid but for the due diligence defence (which he found to be available) given that the Quebec equivalent of ETA s. 323(2)(b) (and of ITA s. 227.1(2)(b)) merely required that the corporation have been dissolved (or was in the process of dissolution proceedings) and did not require that a claim for the corporation’s liability have been proved.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Canada Business Corporations Act - Section 226 - Subsection 226(2) assessment against dissolved corporation was void because audit commenced after its dissolution 315
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(3) there was no lack of diligence of the director in considering that the accounts accurately reflected no QST payable 367
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(3) director exercised due diligence in relying on the accuracy of company accounts 232
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(1) assessment could be made of director for unremitted QST even though assessment therfor of dissolved corporation was void 340
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(1) QBCA did not provide that audit or other proceedings could be commenced against a dissolved corporation 125

CBS Canada Holdings Co. v. The Queen, 2018 TCC 188, aff'd 2020 FCA 4

settlement agreement was grounded in reality

The Justice Department entered into a settlement agreement with the taxpayer in which it agreed to permit the taxpayer to carryforward an agreed portion of a $23.4M non-capital loss – and then promptly sought to repudiate the agreement on the basis that CRA had discovered that the non-capital loss in question did not exist, so that implementing the settlement would be contrary to law (and, thus, contrary toGalway and CIBC).

Lyons J quoted University Hill (“the Court will only interfere if the agreed‑upon facts clearly have no bearing to reality” - para. 62) and then found (at para. 78) that here “the agreed fact in the Minutes - that the $24,366,301 is available - is grounded in objective reality.” Accordingly, the Minister was bound by the settlement agreement.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 169 - Subsection 169(3) CRA could repudiate a settlement based on factual inaccuracy only where that agreed fact had “no bearing to reality” 319

ARQ v. Wesdome Gold Mines Ltd., 2018 QCCA 518 (Queb. C.A.)

a reassessment of a wound-up and dissolved sub bound its parent

The ARQ reassessed the taxpayer for its 2006 and 2007 taxation years a few days after the taxpayer had been dissolved (on March 14, 2011) in connection with voluntary dissolution proceedings for the winding-up of the taxpayer into its wholly-owning parent. S. 306 of the Business Corporations Act (Quebec) (which did not apply to this type of dissolution proceeding) and s. 313 (which did) provided, respectively:

Despite its dissolution, a corporation remains a party to any judicial or administrative proceeding to which it was a party before its dissolution, and a proceeding may be brought against it within three years after its dissolution.

As of the dissolution of the corporation, its rights and obligations become those of the shareholder, and the shareholder becomes a party to any judicial or administrative proceeding to which the corporation was a party.

In reversing the finding of Godbout J below that each reassessment was invalid “as the Agency had not addressed such Notice of Assessment to the right legal entity,” Levesque JCA stated (at paras. 66-70, TaxInterpretations translation):

In this case, the question is not whether the notice of reassessment issued after the dissolution of the corporation was actionable by the sole shareholder by reason of the dissolution. The judge did not comment on the time when the tax debt arose [then, by footnote, citing Simard-Beaudry for the proposition that a tax debt arises as the taxable income is generated].

It also is not a question of determining if a procedure of an administrative nature had been commenced before the dissolution of Wesdome since the judge had concluded that an audit procedure was in progress at the time of its dissolution.

The question to which it is necessary to respond is whether the provision of creditor protection measures in BCA section 313 is limited solely to claims, recourse and administrative or judicial proceedings against the sole shareholder. I consider that this question must be responded to in the negative.

It is unsurprising the notice of assessment was sent to Wesdome. T.A. section 1008 is explicit: “the Minister shall send a notice of assessment to the person by whom the fiscal return was filed.”

The dissolution of Wesdome was effected on March 14, 2011. This did not have the effect of obliterating the tax debt of Wesdome and of annulling the debt. That debt was assumed in conformity with B.C.A. section 313 by the respondent, the sole shareholder of the corporation that had ceased to exist.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (f) - Subparagraph (vi) successful exploration from mine that had ceased commercial production did not extend a mine 582
Tax Topics - Other Legislation/Constitution - Federal - Canada Business Corporations Act - Section 226 - Subsection 226(2) assessment issued in name of sub after its dissolution but also after its audit bound and was appealable by parent 242

6094350 Canada Inc. and Genex Communications Inc.v. Agence du revenu du Québec, 2018 QCCQ 556, aff'd in part (rev'd on statute-barring issue) sub nom.Demers v. Agence du revenu du Québec, 2020 QCCA 681

CRA treatment of taxpayer’s players as independent contractors was not binding on the ARQ

The taxpayer, the former owner of a hockey team, argued that it was contrary to the principles of natural justice for the ARQ to assess it for failure to remit source deductions for Quebec health tax purposes given that the CRA had accepted that its players were independent contractors. In rejecting this submission, Cotnam JCQ noted that CRA had been provided with misleading and incomplete information. Before so concluding, she noted the statement in the Patenaude case (2008 QCCQ 5827) that Quebec courts are not bound by federal taxation decisions.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1) hockey players were employees of the team 385
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(3) tax advice that was based on clearly flawed factual assumptions could not be relied upon for defence 423

Resource Capital Fund IV LP v Commissioner of Taxation, [2018] FCA 41 (Federal Court of Australia), rev'd on various grounds [2019] FCAFC 51

assessment of partnership was assessment of partners

After concluding (contrary to the understanding of the Commissioner) that two Caymen LPs were not themselves taxable entities for the relevant Australian income tax purposes, Pagone J went on to find (at para. 21) that assessments made in the name of the partnership were to be taken as assessments of the partners, stating:

The assessments and the other procedural steps taken in this proceeding should similarly be understood as assessments to, and as steps undertaken by, the partners by reference to their partnership name.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares private equity fund LP with 5-year holding objective realized share gain on income account 167
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(ii) gains of a NR PE fund from disposals of Australian share investments that were managed in part in Australia were derived from Australia 411
Tax Topics - Treaties - Income Tax Conventions - Article 3 each U.S.-resident partner of a Caymans PE LP carried on a U.S. “enterprise” 222
Tax Topics 386
Tax Topics - Treaties - Income Tax Conventions - Article 13 exclusion in Art. 13 of Aust.-U.S. Treaty for real property dispositions extended to shares of Australian holding company holding mining leases through grandchild
Tax Topics - General Concepts - Stare Decisis lower court not bound by a point of law that was assumed rather than examined by a higher court 272
Tax Topics - Treaties - Income Tax Conventions - Article 6 Art. 6 extends common law meaning of real property 180
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxable Canadian Property - Paragraph (d) shares of lithium mining and processing company were derived principally from the processing rather than mining operation and, thus, were not taxable Australian real property 500
Tax Topics - Income Tax Act - Section 218.3 - Subsection 218.3(1) - Canadian Property Mutual Fund Investment shares of Australian mining company were primarily attributable to the processing rather than mining operations 140
Tax Topics - General Concepts - Fair Market Value - Other processing assets of mining company were more valuable than its mining assets 234

Revenue and Customs Commissioners v. Hutchinson, [2017] EWCA Civ 1075

UK Revenue could change its published policy respecting taxpayers whose only reliance had been to claim unlooked-for losses

After reporting the exercise of some share options in his returns for his 1998/9 and 1999/2000 taxation years, the decision in Mansworth v Jelley [2003] STC 53 came down, with HMRC then publishing guidance which indicated to the taxpayer that he could claim additional losses respecting the already-reported transactions as well as subsequent transactions. The 2003 guidance gave rise to a legitimate expectation that HMRC would be bound by that guidance. However, on 2 June 2003, HMRC opened enquiries into the taxpayer’s claims, warning him that they did not accept his additional losses. In 2009, HMRC issued corrected guidance (RCBs 30/09 and 60/09) stating that it would not accept the additional losses unless (primarily) there had been reasonable detrimental reliance on the 2003 guidance. HMRC did not consider that the respondent had shown this and denied the losses. HMRC appealed a court decision quashing these denials. The essential question on this appeal was whether HMRC could resile from their previously expressed view in the 2003 guidance in the circumstances of this case.

Arden LJ found (at paras 62, 63, 64 and 65):

… The view that a policy may be changed if there is good reason to do so is supported by the judgment of Lord Dyson in WL Congo …, by Elias LJ in Lewisham…, and by Bhatt Murphy… .

As Bingham LJ put it in MFK, the taxpayer's only legitimate expectation is that he will be taxed according to statute, not concession or a wrong view of the law… .

… In the present case taxpayers with Mansworth v Jelley losses were not in the same position if they were in open years as opposed to closed years. For the latter group, HMRC had no power to reopen their affairs and to remove the ability to utilise the Mansworth v Jelley loss. The position was entirely different for those whose years were open, including the respondent. Therefore this ground of unfairness was not available to the judge.

I therefore conclude that in law the RCBs in 2009, withdrawing the 2003 guidance for Mansworth v Jelley losses in open years, did not involve comparative unfairness of which the respondent could properly complain. HMRC were not precluded from changing its policy by the fact that not every taxpayer's losses could be reopened.

Arden LJ further found (at paras 72, 73, and 85):

… [T]he question is whether or not there has been sufficient unfairness to prevent correction of the mistake. It is clear from the authorities that the unfairness has to reach a very high level: see, in particular, the holding of Simon Brown LJ in Unilever where he held that it … had to be outrageously or conspicuously unfair. …

Arden LJ allowed HMRC’s appeal and dismissed the taxpayer’s notice, finding (at para 90):

… [T]he respondent has to show conspicuous unfairness. … I consider that this is not shown… . The respondent was returned to the same position as he was in when he committed himself to the transactions which gave rise to the capital losses. Moreover he had been clearly warned by HMRC in the letter of 2 June 2003 that they did not accept his additional Mansworth v Jelley losses.

Rio Tinto Alcan Inc. v. The Queen, 2017 CCI 67

reassessment made without a proper audit in order to beat statute-barring was valid

The taxpayer (“RTA”) carried on scientific research and experimental development (“SR&ED”) directly and also as a result of SR&ED carried out by a closely-held Canadian corporation ("AAI") on behalf of it and the other AAI shareholders. AAI was being audited by the Québec Tax Services Office ("TSO") of CRA, whereas RTA was audited by the Montreal TSO.

The audit by the Québec TSO of the AAI expenditures (reported as SR&ED) for 2006 and 2007 had not yet been completed when (in 2011) the end of the normal reassessment period for the 2006 taxation year was getting close. The Montreal TSO requested that RTA execute a “waiver” for the 2006 and 2007 years, which was in highly unusual form (i.e., it contemplated that RTA’s SR&ED claims for its share of all the relevant AAI expenditures would be denied, and contemplated that RTA would be further reassessed following completion of the Québec TSO audit of AAI to allow whatever portion of its share of those expenditures that was indicated by that audit.) RTA refused to sign the waiver, as it would have required RTA to file notices of objection to protect its rights - and its proposal that a waiver in conventional form be provided was rejected.

CRA then proceeded to reassess the RTA 2006 and 2007 taxation years within the normal reassessment periods. The reassessments allowed directly incurred SR&ED expenditures of RTA (thereby implementing a previous accord with RTA), but denied RTA’s share of all the expenditures incurred through AAI. RTA filed notices of objection following the expiry of the 90-day periods in s. 169(1)(b), contending that the reassessments were invalid.

In response to an RTA submission that the Minister, before reassessing, had not yet commenced an examination of RTA’s SR&ED expenditures incurred through AAI, as required by s. 152(1), D'Auray J:

  • found that an examination of the 2006 and 2007 AAI expenditures claimed as SR&ED had commenced in the sense that, two years before the reassessments, the Québec TSO had requested SR&ED-related information from AAI which AAI had not yet provided (on the grounds that it was duplicative of information already provided respecting audits of previous years);
  • stated (at paras. 134, 140) that in Golini v. The Queen, 2013 TCC 293, C. Miller J: “had concluded that a reassessment will be considered valid if the intention of the Minister at the time of [its] making…was to pursue verification;” and had found that that “there is no law…to the effect that a protective assessment is invalid if issued for the sole purpose of leaving the door open to conduct or continue an audit” (- and she went on to indicate that Karda was similiar); and
  • noted (at para. 129) that it was necessary to issue the reassessments in order to implement the accord with RTA respecting its directly incurred SR&ED expenditures.

Respecting an RTA submisssion that, under s. 152(1), the MInister was required to make a determination of the amount of tax before issuing the reassessments, D'Auray J stated (at para 154, Tax Interpretations translation):

In my view, RTA confuses the validity and correctness of an assessment. … [I]n ... Golini ... Miller J. … explained that in the Anchor Pointe decision the Federal Court of Appeal considered the correctness of the assessment as the product of the examination, and not the validity of the assessment as the process. …

Accordingly, the reassessments were valid.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 166 curative effect of ss. 166 and 152(8) 159
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.01) further reassessment can carryforward balances from previous reassesment not described in 152(4.01) 235

Sifto Canada Corp. v. The Queen, 2017 TCC 37

MAP agreement concurred in by taxpayer was binding on the Minister as it was not “indefensible”

CRA accepted a voluntary disclosure by Sifto Canada that it had undercharged on its sales of rock salt to a U.S. affiliate, and reassessed accordingly. Sifto Canada and the parent of its U.S. affiliate (which used consolidated returns) then applied to the Canadian and U.S. competent authorities for the higher transfer price to be accepted, so that the income of the U.S. parent could be reduced accordingly. The two competent authorities agreed to this, and CRA then entered into a letter agreement with Sifto Canada where it agreed with the adjustment. Only then did CRA audit Sifto Canada, which resulted in it reassessing Sifto Canada on the basis that the transfer prices should have been even higher. CRA asserted that the competent authority proceedings did not result in binding agreements between Sifto Canada and CRA and, even if they did, they did not fix the arm’s length transfer price – so that CRA was not only authorized, but was required, by the ITA to issue the post-audit reassessments once in possession of the new audit information.

In finding that the agreements were binding on CRA, Owen J stated (at para. 140) that “the Court in Galway simply acknowledges that the terms of the settlement must be such that a court could give a judgment on the same basis as the settlement,” and (at para. 142) that ”I can see no basis on which to conclude that the agreement reached by the Minister and the IRS was indefensible on the facts and the law.”

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 9 agreement with the U.S. competent authority re a VDP-adjusted transfer price binds CRA even if it had not yet audited the taxpayer 569
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) TNMN method was reasonable 205
Tax Topics - Income Tax Act - Section 115.1 - Subsection 115.1(1) 115.1 not germane to subsequent inconsistent CRA assessment 197

Sood v. Canada (National Revenue), 2015 FC 857

settlement agreement not according with law required to be revoked

The applicant objected to the denial of his claim to the Ontario new housing rebate, and he then accepted a CRA offer to refund the difference between his claim and amounts previously credited to him. When CRA tried to implement this settlement agreement, it discovered that the applicant was not entitled to any further rebate as he had purchased the house before the relevant entitlement date (June 18, 2009). The applicant filed an application under the Federal Court Act for enforcement of the settlement agreement.

After finding that he lacked the jurisdiction to consider the application (as it represented a "collateral attack on the validity of the tax reassessment"), Gascon J referred to the Galway and Cohen line of cases, and stated (at para. 54) that "the Agency was required to revoke the settlement agreement since no legal or factual basis supports Mr. Sood's claim to the provincial new housing rebate."

See summary under Federal Court Act, s. 18.5.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(1) settlement agreement not according with law required to be revoked 155
Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 18.5 requested enforcement of settlement agreement was collateral attack on assessment 148

Wesdome Gold Mines Ltd. v. ARQ, 2014 QCCQ 8444, partially aff'd 2018 QCCA 518

assessments invalid as made against dissolved subsidiary rather than parent, which was liable for the subsidiary’s obligations under QBCA, s. 313

Assessments made by the ARQ of the taxpayer for its 2006 and 2007 taxation years, after it had been dissolved in connection with voluntary dissolution proceedings for its winding-up into its parent, were invalid. Godbout J stated (at paras. 31, 45-48, TI translation):

[I]n this case, when the Enterprise Registrar issued a certificate of dissolution in accordance with the provisions of the Business Corporations Act certifying that the business corporation Mines d'Or Wesdome Inc. had ceased to exist on March 14, 2011, it no longer existed. …

It is provided that in such a case, by virtue of the dissolution of a business corporation, its rights and obligations become those of its sole shareholder, which becomes a party to any judicial or administrative proceeding to which the dissolved corporation was a party.

It is section 313 [of the QBCA] which so provides…[and under] which the legislator effects an indemnity obligation on the sole shareholder respecting the dissolved corporation.

When the Revenue Agency issued its Notice of Assessment of March 15, 2011 of Mines d'Or Wesdome Inc., it thereby issued a Notice of Assessment of a business corporation which no longer existed at that time, and it could not ignore that it was held by a sole shareholder at that time, Wesdome Gold Mines Ltd.

The Court must therefore pronounce its invalidity as the Agency had not addressed such Notice of Assessment to the right legal entity.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Quebec - Business Corporations Act - Section 313 parent of dissolved corporation should have been assessed for its taxes 81

Bolton Steel Tube Co. Ltd. v. The Queen, 2014 DTC 1102 [at 3202], 2014 TCC 94

reassessment to add fictitious income was void

In 2007 the Minister reassessed the 1994 to 1997 taxation years of the taxpayer ("Bolton"). For 1996, the Minister added $602,998 in alleged unreported sales to Bolton's reported income of $1,260,074 (for a total of $1,863,072) but later conceded, in the Notice of Reply, that Bolton's income had been overstated by $403,219 at most.

Bolton offered to settle on the basis of the Minister vacating the reassessments of its 1994, 1995 and 1997 taxation years, and varying the reassessment for 1996 "in order to add $403,219 to Bolton's income." The Minister treated "Bolton's income" as referring to its income as reassessed rather than as reported, and accordingly reassessed in 2012 by adding $403,219 to the $1,863,072 of income assessed in 2007.

Campbell J vacated the 2012 reassessment, and varied the (reinstated) 2007 assessment to reduce the income inclusion from $602,998 to $403,219. The 2012 reassessment was void on any of the following bases:

  • As per Galway and CIBC, the Minister had no authority to assess a taxpayer for an amount lacking a "factual or legal basis" (para. 22).
  • The Minister had no authority to issue the 2012 reassessment, as "the principle that the Minister may not increase tax from a previous reassessment, is a general limitation placed on the Minister's ability, as well as the Court's, to increase an assessment of tax" (para. 33).
  • Having regard to the "factual matrix, surrounding the settlement offer," the Minister's interpretation of its terms could not prevail - so that Bolton's agreement under the settlement agreement did not satisfy the requirement under s. 169(3) for it to consent to the addition of the phantom income to its income (para. 44).

The settlement was enforceable in its own right. The Minister argued (in the alternative) that there was no "meeting of the minds" to form a settlement contract, but Campbell J held the Minister to what she had objectively negotiated for and agreed to, which was Bolton's interpretation (para. 47). As per the terms of the settlement, the reassessments for the 1994, 1995 and 1997 years were vacated.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence terms of agreement established with regard to "factual matrix" 110
Tax Topics - Income Tax Act - Section 169 - Subsection 169(3) s. 169(3) reassessment cannot increase quantum of previous assessment 202

Gallant v. The Queen, 2012 DTC 1140 [at 3233], 2012 TCC 119 (Informal Procedure)

Woods J. found that the Crown was not estopped from applying s. 118.61(4) to reduce the taxpayer's unused tuition, textbook and education tax credits, even though relevant tax form (T1 schedule 11) had failed to include that subsection in its computations and even though it appeared that many taxpayers had, because of the error in the form, avoided having their credits reduced by operation of that subsection. Estoppel can bind the Crown on a misrepresentation of fact, but not of law (para. 15). Moreover, estoppel cannot preclude an exercise of statutory duty (para. 17). Woods J. dismissed the taxpayer's appeal but recommended he apply for discretionary relief.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.61 103

R (Davies) v. Revenue and Customs Commissioners, [2012] 1 All ER 1048, [2011] UKSC 47

concessions for non-collection with overall revenue enhancement objective

The taxpayers submitted that the court should give effect to their legitimate expectation that the test as to individual residency contained in an Inland Revenue booklet, which was more favourable than that in the ordinary law, should be applied to them. This submission was rejected on the ground that the booklet communicated a requirement for "a distinct break" from the UK (para. 45), which the taxpayers had not satisfied. Before so concluding , Lord Wilson SCJ discussed the power of the Commissioners to make administrative concessions, stating (at para. 26):

The primary duty of the Revenue is to collect taxes which are properly payable in accordance with current legislation but it is also responsible for managing the tax system: see s 1 of the Taxes Management Act 1970. Inherent in the duty of management is a wide discretion. Although the discretion is bound by the primary duty, ... it is lawful for the Revenue to make concessions in relation to individual cases or types of case which will, or may, result in the non-collection of tax lawfully due provided that they are made with a view to obtaining overall for the national exchequer the highest net practicable return: see IRC v National Federation of Self-Employed and Small Businesses Ltd. [1981] 2 All ER 93 at 101, [1982] AC 617 at 636 per Lord Diplock.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) 497

Cooper v. The Queen, 2009 DTC 800, 2009 TCC 236 (Informal Procedure)

The Court had the jurisdiction to consider the computation of the payment of interest on refunds payable under the Act to the taxpayer in connection with an appeal from an assessment of Part XIII tax and interest.

Kruco Inc. v. The Queen, 2001 DTC 668 (TCC), aff'd 2003 FCA 284

Dussault T.C.J. indicated (at p. 690) that accepting the administrative policy of the Minister in that case respecting the computation of safe income (a policy that was not clearly based on the terms used by Parliament) would be tantamount to an inappropriate attribution of a legislative character to departmental directives, and would have the effect of inappropriately treating the Minister as having the power to apply an administrative policy as though it were an independent source of law.

Mierins v. The Queen, 96 DTC 1140 (TCC)

Bonner TCJ. found that the "with all due dispatch" requirement contained in s. 152(1) applied only to the initial examination of the taxpayer's return and the initial assessment of tax for that taxation year, and not to reassessments made pursuant to waivers (although he went on to indicate that he could think of no good reason that a waiver ought to be construed as conferring on the Minister a right to defer reassessing action beyond the period reasonably in all the circumstances of the case).

D'Amico v. The Queen, 95 DTC 622 (TCC)

The taxpayers, along with numerous other individuals, had in their 1986 taxation years, purchased interest in limited partnerships whose units were marketed to them by a tax promoter. They waited approximately three years for a reassessment following an initial assessment which disallowed their share of the partnership losses and which followed notification by Revenue Canada that their returns would be held in abeyance pending verification of such losses. This delay was found to be acceptable given that the taxpayers had voluntarily entered into the "maze" represented by the partnerships, given that the promoter had stalled throughout the audits and failed to supply documents and information requested by Revenue Canada and that, when the taxpayers finally asked for their reassessments, they got them in a timely fashion and in a valid form.

Taylor v. The Queen, 95 DTC 591 (TCC)

Before going on to find that the Minister could not be estopped from assessing the taxpayer for interest and penalties properly payable by the taxpayer pursuant to ss.161(1) and 163(2), Sobier TCJ. quoted s. 152(1) and stated (at p. 596):

"These words are mandatory and impose an obligation on the Minister to assess not only taxes but penalties and interest as well."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Estoppel 29

Ginsberg v. The Queen, 94 DTC 430 (TCC), rev'd supra.

Before finding that a delay of one and one-half years in assessing the taxpayer's return did not satisfy the "with all due dispatch" requirement in the absence of any evidence of special circumstances relating to the taxpayer's return that would justify a delay of this length, Christie A.C.J. stated (p. 1437):

"I believe that if there is a delay that prima facie indicates a failure to examine and assess a return with all due dispatch as required under subsection 152(1) of the Act there is an onus on their respondent to establish by evidence pertaining to the manner in which that return was dealt with that the delay was not unreasonable."

Van Leenen v. MNR, 91 DTC 1265 (TCC)

In dealing with a submission that a Revenue Canada official had given the taxpayer some assurance that the taxpayer would not be assessed under s. 227.1, Mogan J. stated (p. 1270):

"... I doubt that any official of Revenue Canada has authority to promise a taxpayer that he will not be assessed under a specific section of the Income Tax Act if, upon a fair review of the facts, that taxpayer appears to be liable under that specific section."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(3) 89

McConnachie v. MNR, 91 DTC 873 (TCC)

Bonner TCJ. questioned the validity of purported notices of assessment of the taxpayer (under section 227.1) which were uninformative and somewhat misleading.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(4) 107

Leung v. MNR, 91 DTC 1020 (TCC), rev'd 93 DTC 5467 (FCTD)

In vacating an assessment of the taxpayer pursuant to s. 227.1 of the Act and corresponding provisions of the Income Tax Act (Ontario), the Unemployment Insurance Act (Canada) and the Canada Pension Plan Act which informed the taxpayer of the aggregate sum assessed under those statutes without giving a breakdown, Rip TCJ. stated (p. 1027):

"... in enacting section 152 of the Act, Parliament required the notice of assessment to inform the person to whom it is sent of the amount of the tax the Minister has assessed under authority of that statute. ... An assessment, therefore, is not complete unless the notice is given in such manner that the taxpayer knows the amount of tax assessed under the appropriate statute."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) s. 152(8) does not remedy substantial error 25

Inland Revenue Commissioners v. Nuttall, [1990] BTC 107 (C.A.)

discretion to informally compromise

In finding that the Inland Revenue had the power to compromise claims for back duty where no assessment had been mailed and appealed against, notwithstanding the absence of an explicit statement in the relevant legislation of its power to do so, Bingham L.J. stated (pages 118-119):

"If in an appropriate case the Revenue reasonably considers that the public interest in collecting taxes will be better served by informal compromise with the taxpayer than by exercising the full rigour of its coercive powers, such compromise seems to me to fall well within the wide managerial discretion of the body to whose care and management the collection of tax is committed."

[C.R: 220(1)]

B.M. Enterprises Ltd. v. MNR, 90 DTC 1037 (TCC)

An assessment issued pursuant to s. 227(10) by a supervisor within a collections branch was invalid, as the individual was not one of the individuals designated in Regulation 900.

R. v. I.R. Commrs., ex parte MFK Underwriting Agencies Ltd., [1989] BTC 561 (D.C.)

full details not communicated

Inland Revenue correspondence respecting whether the uplift on redemption of certain U.S.-dollar index-linked bonds would be taxable on income account or capital account, which was communicated without the knowledge of the Inland Revenue among Lloyd's underwriters, did not bind the Inland Revenue with respect to transactions not described in the correspondence. In order for a statement by Revenue of its position to be binding upon it, the taxpayer "must give full details of the specific transaction on which he seeks the Revenue's ruling," the taxpayer "should indicate the use he intends to make of any ruling given," and "it is necessary that the ruling or statement relied upon should be clear, unambiguous and devoid of relevant qualification."

J. Stollar Construction Ltd. v. MNR, 89 DTC 134 (TCC)

An original assessment which was made more than six years after the mailing by the taxpayer of its return was vacated in the absence of any evidence to explain this delay. "[S]ubsection 152(1) is a provision which is intended primarily to protect the individual taxpayer by bringing certainty to his financial affairs at the earliest reasonably possible time."

R. v. IRC Ex parte Preston, [1985] BTC 208 (HL)

estoppel by representation

Lord Templeman stated: "that the Commissioners are guilty of 'unfairness' amounting to an abuse of power if by taking [special assessment] action under sec. 460 their conduct would, in the case of an authority other than Crown authority, entitle the appellant to an injunction or damages based on breach of contract or estoppel by representation. In principle I see no reason why the appellant should not be entitled to judicial review of a decision taken by the Commissioners if that decision is unfair to the appellant because the conduct of the Commissioners is equivalent to a breach of contract or a breach of representation."

Air Canada v. Turner, [1984] 6 WWR 346 (BCSC)

When the Legislature imposes a tax, it is the duty of the authorized officer (subject to administrative common sense) to assess that tax upon all those who are liable to it by law. Although amendments to the Gasoline Tax Act (B.C.) imposed a special retroactive tax to be paid by every purchaser of gasoline for his own use, no attempt was made to collect the tax from anyone other than Air Canada and two other airlines. The assessment of Air Canada accordingly was capricious, discriminatory and "unsporting", and was quashed as being illegal.

Administrative Policy

2020 IFA-YIN Seminar on COVID-19 Guidelines, Q. 13

CRA now emails and will be starting to do video discussions

As part of a more general response to a query as to how practitioners should contact CRA during periods impacted by COVID-19, CRA indicated that it has relaxed restrictions on email communications and with the right protocols and consent (i.e., there is a caveat that CRA will read to make sure people understand the risk of emails) email communications between the representative and CRA can occur.

Having discussions by video was cleared at the beginning of August, 2020.

The maximum size of file-uploads on My Business Account has been greatly increased, so it should now be straightforward to provide large volumes of documentation through the account.

COVID-19: Information for Canada Revenue Agency employees: 30 March 2020: Work restrictions for critical and non-critical services

Previous COVID-19 work arrangement

On March 15, 2020 we announced that because of the COVID-19 pandemic, only employees performing critical services would be required to continue to work until April 5, 2020.

Extension of arrangement to May 1, 2020 for Category 1

Effective today, March 30, 2020 and until May 1, 2020, employees who perform critical services will be asked to continue working as has been the case since March 15, 2020, but we are changing some of the work restrictions for other employees. To make sure you know what is expected , we have categorized your work into 3 groups:

  • Category 1: You perform a critical service

You are expected to continue to work, preferably from home, to deliver critical services for Canadians as defined in the National COVID-19 Business Continuity Plan. If working from home is not possible, we ask that you continue to report to the office. We are continuing to implement measures to ensure the health and safety of all employees who support critical services in the workplace, including more stringent disinfection protocols and arrangements to enable physical distancing.

  • Category 2: Your work, while important, has not been identified as a critical service, but you are equipped to work from home

You can work from home, but only if you do not create work for others who are performing critical services as defined in the National COVID-19 Business Continuity Plan.

  • Category 3: You do not perform a critical service identified in Category 1 and you are not equipped to work from home, OR you are not able to work because you have to care for children during school closures, for individuals who are sick, or for other dependents

You should stay home and enter your time away ... .. For those who are not equipped to work from home, you may be contacted by your manager to come into the office to pick up equipment ... .

Collections, audit, objections and appeals: CRA and COVID-19 28 May 2020 CRA Webpage

suspension duiring COVID-19 of responding to most Objections

Suspension of reviews of most Objections

Objections related to Canadians' entitlement to benefits and credits have been identified as a critical service and will continue to be delivered during COVID-19. There should not be any delays with the processing of these objections.

For objections related to other tax matters filed by individuals and businesses, the CRA is currently holding these accounts in abeyance. No collection action will be taken with respect to these accounts at this time.

For objections that are due between March 18, 2020 and June 30, 2020, we are effectively extending the deadline to June 30, 2020.

The Tax Court of Canada is currently closed. ...

Taxpayers who are unable to file a return or make a payment by the tax-filing and payment deadlines because of COVID-19 can request the cancellation of penalty and interest charged to their account. Penalties and interest will not be charged if the new deadlines that the government has announced to tax-filing and payments are met.

Once business operations resume, the Taxpayer Relief Program will review requests related to COVID-19 on a priority basis.

AD-19-01 Audit Agreement and Waiver of Objection Rights Guidelines 2019-02-19

Binding nature of audit agreements recognized

An audit agreement is an agreement between the CRA and a taxpayer where the parties set out the terms under which one or more audit issues will be assessed based on a common understanding and interpretation of the facts, audit policy and law applicable at that time. …

Rosenberg … addresses the binding nature of an agreement reached between the CRA and a taxpayer provided that neither party breaks their commitment to the agreement, and provided that the fact pattern relied upon in reaching the agreement does not change.

Binding audit agreement requires full disclosure and waiver

For the audit agreement to be binding, the taxpayer must:

  • disclose all material facts in elections, returns, applications, and other submissions as applicable, related to the issue(s) dealt within the audit agreement;
  • waive their right to object to the assessment of the issue(s) and provide a signed copy of the Waiver of Objection Rights to the CRA; and
  • in some instances, agree to pay the resulting taxes, penalties and interest owing as a result of the agreed upon assessment within the timeframes specified in the audit agreement.

… The waiver is a statement voluntarily signed by a taxpayer, or an authorized representative, to the effect that the taxpayer gives up both the right to object to, and to appeal, one or more issues identified in the audit agreement and set out in the waiver. More specifically, subsection 165(1.2) of the Income Tax Act (ITA) and subsection 301(1.6) of the Excise Tax Act (ETA) restrict a taxpayer from objecting to the assessment of an issue where the right of objection has been waived in writing. Further, subsection 169(2.2) of the ITA and subsection 306.1(2) of the ETA restrict a taxpayer from appealing the assessment of an issue where the right of objection or appeal has been waived in writing.

Waiver signifies that no further recourse

The waiver must contain statements to the effect that:… the impact of … subsection 165(1.2) of the ITA or subsection 301(1.6) of the ETA … have been explained and are understood to mean that no further recourse to any authority with respect to the assessment by the CRA of the waived issues is available upon signing the waiver.

Recognition of Galway principle

Auditors cannot contravene provisions of the ITA or ETA in negotiating and finalizing an audit agreement. They must assess taxes on the basis of the facts as determined, in accordance with legislation and CRA policies. This means that audit agreements normally relate to subjective audit issues.

Taxpayer penalty or interest relief requests

Taxpayer relief requests are to be dealt with on their own merit separately and solely on the basis of the taxpayer relief provisions. Relief requests related to transfer pricing should be referred to the Transfer Pricing Review Committee.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 169 - Subsection 169(2.2) 446

27 November 2018 CTF Roundtable Q. 8, 2018-0779961C6 - RPI and Risk-Based Audits

IRAS (Tier I risk assessment)

CRA uses an integrated risk-based approach to large business compliance to identify and address the highest risk cases nationally (the Approach to Large Business Compliance or “ALBC”). On an annual basis the large business population is subject to a comprehensive integrated risk assessment process using CRA’s Integrated Risk Assessment System (IRAS). This automated system applies risk algorithms that run on the CRA’s databases to identify risk issues and generate a risk ranking of the large business population. This is known as Tier I risk assessment.

27 November 2018 CTF Roundtable Q. 7, 2018-0779951C6 - Recent Negligence Cases

CRA positions on plain vanilla domestic structures may not be portable to offshore structures

A general response to a query as to whether negligence actions brought against CRA had affected tax administration, included statements that:

[W]here reliance is placed on a published view regarding a plain vanilla domestic tax arrangement, taxpayers should not be surprised that the CRA might take the view that the underlying facts and issues in an offshore structure would be sufficiently distinguishable to result in a challenge to taxpayer’s self-reported assessment of tax. …

[T]he CRA is committed to:

  • Arriving at reasonable assessing positions that are timely and transparent;
  • Communication to taxpayers when adopting positions that deviate from long standing interpretations, especially when there are publicly stated positions …

CRA also referenced its “commitment … to resolve disputes at the earliest possible stage.”

5 December 2017 Roundtable, 2017-0734831C6 - 2017 TEI – Question B5

incomplete applications rejected/meeting within 4 weeks/90 business-day service standard made more flexible

The Minister of National Revenue’s report to the Finance Committee dated May 29, 2017 indicated that a number of key changes would be implemented before the end of the year, being March 31, 2018, including the following:

  • More frequent and better communications between the taxpayer and the CRA, including a meeting with taxpayers to be held no later than within four weeks of receipt of an ATR request. …
  • Amend the current 90-day service standard for ATRs to address complex tax policy issues that cannot typically be completed within a 90-day period, namely, those that require a formal referral to the CRA’s General Anti-Avoidance Rule Committee, the Department of Finance or the Department of Justice. …
  • Close an ATR file where the ATR request is not properly prepared or supported with adequate representations or where the taxpayer has not responded to a request for additional information within 30 calendar days.

The goal of this key change is to thwart taxpayers from hurriedly submitting an incomplete submission in order to get an advantageous “spot in the queue”. Once an ATR file is closed, a follow-up submission will not receive any greater priority than any other ATR requests.

21 November 2017 CTF Roundtable Q. 13, 2017-0724271C6 - Online Authorization Process

CRA validation of online authorization through matching with names on file

Under CRA’s new online authorization process, it requires that certain information contained in the request matches information it already has on file (e.g., authorized signing officer). The correspondent noted that this can create problems where employees regularly leave the company. CRA stated:

[W]hen a representative is requesting an electronic authorization for a business client in Represent a Client, they will be asked to provide the business owner/Delegate Authority's (DA) name. The name will be automatically validated with what the CRA has on record as the signing authority. …

If the name does not match after several attempts then the authorization will be denied and they will be presented with a message for the owner to contact the CRA. The owner can then update their information with the CRA records and the representative can start a new electronic authorization request with the correct business owner/DA's information.

6 October 2017 APFF Roundtable Q. 18, 2017-0721691C6 F - APFF 2017 - Question 18

DTS update

Over the next few weeks, access to the dedicated telephone service for those with small practices will be gradually expanded until 3,000 participants are registered.

2 February 2017 Quebec CPA Individual Taxation Roundtable Q. 1.2, 2017-0682711C6 F - Dedicated Telephone Service for Income Tax Service

telephone service for those with complex technical tax issues will initially be limited to Ontario and Quebec CPAs

The Dedicated Telephone Service ("DTS") for tax service providers, which will launch in July 2017 as a pilot project, will initially be limited to Ontario and Quebec CPAs. The line will be staffed with “experienced CRA staff to assist… in resolving more complex technical tax issues than those typically handled by CRA's general telephone service staff.” CRA stated:

The DTS will be a technical resource for tax service providers rather than a problem solving line. DTS agents will therefore not have access to taxpayer accounts. It should also be noted that the DTS is not intended for specialized tax professionals whose services are focused on complex tax planning. They should continue to direct their tax queries through requests for technical interpretations, advance rulings, or pre-ruling consultations.

11 August 2015 External T.I. 2014-0527291E5 F - Remboursement de frais médicaux-CIMAD

correction in CRA position not applied on a retroactive basis

After finding that the reversal by 2013-0490901I7 of 2001-0113237 (respecting the Ontario Healthy Homes Renovation Tax Credit) also applied to the Quebec Tax Credit for Home-Support Services for Seniors ("CIMAD"), so that the CIMAD also was not considered to reduce the amount of eligible medical expenses for the Medical Expenses Tax Credit, CRA stated:

When a change of position is issued in a technical interpretation, and that change is for the benefit of the taxpayer, it usually applies to present and future assessments and reassessments. Thus, an individual who has already filed tax returns for the tax years 2013 and 2014 and treated a CIMAD as a medical expense reimbursement for purposes of paragraph 118.2(3)(b), may obtain, within the normal reassessment period, a correction for a tax return already filed for those years.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.2 - Subsection 118.2(3) - Paragraph 118.2(3)(b) Quebec Tax Credit for Home-Support Services for Seniors does not reduce METC 220

11 April 2016 CRA Press Release “Government of Canada cracks down on tax evasion”

expansion of audit review of aggressive tax avoidance and evasion/embedded lawyers

[T]he Government of Canada will invest over $444 million to enhance the Canada Revenue Agency’s (CRA) ability to detect, audit, and prosecute tax evasion – both at home and abroad.

…This will result in a twelve-fold increase in the number of tax schemes examined by the CRA…[and] will increase the number of examinations focused on high-risk taxpayers – from 600 per year to 3000 per year – and will bring in $432 million in new tax revenue. In addition, the new government funding will help the CRA bring in 100 additional auditors to investigate high-risk multinational corporations, a strategy that will collect an additional $500 million in revenue over five years.

…To make sure these investments deliver results, the CRA will embed legal counsel within investigation teams, so that cases can be quickly brought to court.

8 March 2016 CRA Press Release

CRA response to Press reports on the KPMG Isle of Man cases and re offshore tax evasion and aggressive tax avoidance

Recent media coverage has focused on the Canada Revenue Agency's (CRA) actions to address aggressive tax avoidance and offshore tax evasion, particularly by clients of the accounting firm KPMG… .

The Income Tax Act protects the confidential information of taxpayers by prohibiting the CRA and former employees of the CRA from speaking about a particular taxpayer or case, beyond what is on the public record. …

...15 of KPMG's clients whose identities were sought by the CRA in the Federal Court have identified themselves, and the Agency is auditing and re-assessing these individuals.

The CRA has taken legal action to obtain the identities of all remaining KPMG LLP clients who have not been identified to date.

The KPMG case is an active file and the CRA's work is not concluded. The Agency will pursue this case to the fullest extent possible, as we do with all other cases of aggressive non-compliance. …

The CRA believes firmly that all participants in offshore tax evasion and tax avoidance schemes must be identified and brought into full compliance with their tax obligations.

The CRA also takes action against tax professionals who offer, assist or create opportunities for clients to participate in offshore tax evasion and tax avoidance schemes. The willful failure to follow tax laws or to counsel others to evade taxes has serious consequences and penalties and could lead to prosecution. The CRA will pursue these to the fullest extent possible, based on the law and the facts of each case.

…There is no preferred treatment of certain taxpayers who are non-compliant over others. …

…Where appropriate, including with matters before the courts, and in consultation with the Department of Justice, the CRA seeks to resolve matters through a settlement offer that is based on facts and in accordance with the law. Early dispute resolution, where appropriate, is in the public interest… .

The use of confidentiality clauses in negotiated settlement agreements is on a case by case basis and is typical in legal proceedings involving CRA audit and enforcement programs.

…CRA auditors conduct over 120,000 audits every year that result in more than $11 billion in additional taxes assessed as well as penalties and interest. Over $7 billion of that amount – about two-thirds – involves international and large business aggressive tax planning, including high net worth individuals and multi-nationals.

9 October 2015 APFF Roundtable Q. 25, 2015-0598321C6 F - Omission of deducting a dividend under 112(1)

IC 75-7R3 still applies to requests for refunds for errors made in already-filed returns

In response to the specific example of a corporation which discovered that it had failed to claim the intercorporate dividend deduction in a return for which the 90-day objection period has expired, CRA noted that it still stands by IC 75-7R3, dated July 9, 1984, respecting the circumstances in which it will make a reassessment for a reduction in tax payable – so that such an adjustment would be available provided that the normal reassessment period does not expire without the giving of a waiver.

May 2014 Alberta CPA Roundtable, Plenary Q.2

respective roles of ITRD and LAS/provision of LAS memos

What are the respective functions of the Legislative Application Section (LAS) and the ITRD? Is the full text of the applicable LAS technical analysis available to the taxpayer? CRA responded:

The Legislative Application Section (LAS) is found within the…Compliance Programs Branch (CPB)…[and] provides technical assistance to large case auditors in the application of the ITA to specific facts and issues identified in the context of an income tax audit. CPB is responsible for administering the provisions of the Income Tax Act and audit policies and guidelines. This is accomplished, in part, through the technical interpretation services received from the Income Tax Rulings Directorate (ITRD).

…ITRD’s interaction with the auditors focuses on interpretive issues.

The LAS issues its memoranda directly to the auditor with that memo being distributed at the discretion of the auditor. However, the taxpayer may formally request a severed copy of the memo under the Access to Information procedure or (preferably) informally request a copy.

Toronto Centre Canada Revenue Agency & Professionals Group Newsletter, Vol. 13

Issue 4, December 2014

…Pilot project: Pre-ruling consultations Framework

The Income Tax Rulings Directorate (ITRD) is offering…[t]he pre-ruling consultation [which] will allow the Applicant to discuss with ITRD professionals (the ITRD Representatives) any unique, new technical issue that is critical to the structuring of seriously proposed transactions in advance of submitting a ruling request. This service will generally be provided via teleconference, although a meeting may be arranged, by exception. ...


An Applicant must submit a request in writing using… Application for a pre-ruling consultation.

Appended to the Application will be…:

  1. the name(s) of the taxpayer(s);
  2. all relevant facts and proposed transactions related to the unique, new technical issue(s);
  3. an explanation of the issue(s); and
  4. the Applicant's views in relation to the issue(s), including the research… .

…Subject to operational requirements, ITRD will schedule a teleconference within 3 weeks from the date on which a complete Application is received. …

Agreement to participate in a pre-ruling consultation does not constitute the commencement of the ruling process and it will not give priority if an advance income tax ruling request is ultimately submitted.

Pre-ruling consultation

A reasonable number of representatives on behalf of the Applicant may participate in the teleconference.

The Applicant agrees in the Application not to record the teleconference.


The ITRD Representatives will inform the Applicant of whether ITRD would consider the issue further in the context of an advance income tax ruling. …

Any comments provided by ITRD Representatives will not be binding on the Canada Revenue Agency.

Any information provided to ITRD may be shared with other Branches of the Canada Revenue Agency or the Department of Finance, within the limits of section 241 of the Income Tax Act.

5 October 2012 Roundtable, 2012-0454191C6 F - Policy on Facts in a Ruling Request

CRA is not confined by requested rulings and submitted facts, where it has concerns

Can the CRA explain to us its policy regarding the facts submitted by the taxpayer in support of the taxpayer’s request and the questioning of the facts? CRA responded:

(a) if the ITRD is satisfied for example that a corporation is not a CCPC on the basis of the submitted documents, it will inform the taxpayer (or its representative) and refuse to rule favorably in regards to provisions of the Act requiring CCPC status to apply (for example, the capital gains deduction in subsection 110.6(2.1) resulting from the disposition of “qualified small business corporation shares”.

(b) in cases where the scope of a document is debatable or uncertain, in general, ITRD will give a favorable advance ruling with a proviso or restriction. For example, a favorable ruling regarding the application of the capital gains deduction by virtue of subsection 110.6(2.1) could be given provided the exception under paragraph 110.6(14)(b) applies to a right under paragraph 251(5)(b) that is provided under a purchase and sale agreement.

(c) the ITRD can also add to the rulings given warnings or comments to inform the reader of the document of ITRD’s position with respect to, inter alia, the tax consequences resulting from the facts, the proposed transactions, the rulings given or a provision of the Act whether or not it is the subject of a ruling.

14 January 2010 Internal T.I. 2009-0323991I7 F - Débenture échangeable et opération à terme

CRA position of applying changes in published policy prospectively

In determining that the treatment of a cash premium paid by the taxpayer in settling an exchangeable debenture issued by a predecessor should be determined in accordance with a pre-2010 policy of CRA, the Directorate stated:

This is consistent with the Agency's normal practice when revising an interpretation or position in a Bulletin, where the new interpretation or position is not to the benefit of taxpayers, it will generally apply only to the taxation year of the change and subsequent taxation years, or it will apply to transactions entered into after the date of the announcement of the change.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(f) only ½ deduction under s. 20(1)(f)(ii) for premium paid on cash-settling an exchangeable debenture under pre-2010 policy, and no s. 20(1)(f) deduction for cash settlement of forward 337
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Futures/Forwards/Hedges premium was paid on capital account in closing out a cash-settled forward entered into in order to monetize a shareholding 221
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) full deduction of amounts only partly, or not, deductible under s. 20(1)(f) would have caught the eye of a wise and prudent person reviewing the return 134

7 December 1999 External T.I. 1999-0006715 - Right to object and appeal

assessment of dissolved corp

What is Revenue Canada's position in respect of the shareholder's rights to file a Notice of Objection where the corporation has been dissolved? Revenue Canada responded:

Once… a certificate of dissolution is issued…[u]nder section 226 of the CBCA, a civil, criminal, or administrative action or proceeding may be brought against the dissolved corporation within two years after its dissolution as if the corporation had not been dissolved. However, the period of time during which actions can be brought against a corporation differs between jurisdictions… .

460354 Ontario Inc. (92 DTC 6534) and Hadi Saraf… (94 DTC 6229)…[involving] the Ontario Business Corporations Act, held that an assessment is an administrative action and therefore a dissolved corporation may be assessed or reassessed, provided the relevant time limit has not expired. This assessment would be under section 152 of the Income Tax Act and would be served in the name of the dissolved corporation on the last known director or other officer of the corporation.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Ontario - Business Corporations Act - Section 242 assessment of dissolved corp 165

28 May 1998 Internal T.I. 9811667 - PARTS I AND I.3 - NOTICE OF REASSESSMENT

An assessment under each Part of the Act is regarded as a separate assessment notwithstanding that RC may use a single notice of assessment to inform a taxpayer of assessments under more than one Part. Accordingly, where a fresh notice of reassessment is issued to reflect changes in a taxpayer's non-capital losses under Part I, with the amount shown for Part I.3 tax being unchanged, there will not be considered to have been a new assessment of Part I.3 tax.

11 August 1995 Internal T.I. 9518017 - NIL ASSESSMENTS AND LOSS DETERMINATIONS

The fact that a return is now statute-barred does not negate the taxpayer's entitlement to request a determination under 152 (1.1), nor does the wording of the provision preclude the Minister from ascertaining a loss where the loss was not previously recognized at all

88 C.R. - Q.73

An ideal referral to the Head Office should contain a statement of facts agreed to by the District Office and the taxpayer, and arguments of each side which had been reviewed by the other.

86 C.R. - Q.34:

The "due dispatch" requirement leaves RC with discretion, as justified by the circumstances and reasons of good administration.


Canada’s COVID-19 Economic Response Plan: Support for Canadians and Businesses 18 March 2020

Flexibility for Businesses Filing Taxes

The Canada Revenue Agency will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

The Canada Revenue Agency will not contact any small or medium (SME) businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For the vast majority of businesses, the Canada Revenue Agency will temporarily suspend audit interaction with taxpayers and representatives.


Colin Campbell, "Liability for the Tax on SIFT Partnerships: A Rejoinder", 2011 Canadian Tax Journal, Vol 59, p. 709:

Suggests that the phrase "liable to" can create a liability to tax; and that, in any event, the creation of liability to tax, viewed as merely an inchoate obligation to pay tax, then is crystallized through the assessment process.

Words and Phrases
liable to

Joel A. Nitikman, "The Legal Nature of Revenue Canada's Advance Rulings", Tax Litigation, Vol. VI, L. 2, 1998, p. 379.

Subsection 152(1.1) - Determination of losses


Armstrong v. Canada (Attorney General), 2006 DTC 6310, 2006 FCA 119

S.152(1.1) did not cover the circumstances of the taxpayer's case because no non-capital loss initially was reported on his return for the relevant year. Instead, non-capital losses were only reported when he attempted to file an amended return for that year.

Burnett v. MNR, 98 DTC 6205 (FCA)

More than four years after the initial assessment of her 1987 return, the taxpayer requested a determination of her non-capital loss for that year on the basis that a loss on a disposition of a property that initially had been entirely claimed by her husband was, as to 50%, her non-capital loss. Létourneau J.A. found that two subsequent letters of the Department dealing with this request and suggesting that if her husband's appeal from an assessment for his 1987 year resulted in there being a loss on income account, the taxpayer's one-half share would be a non-capital loss, represented an ascertainment of her loss for that year for purposes of s. 152(1.1).

Words and Phrases

See Also

Aallcann Wood Suppliers Inc. v. The Queen, 94 DTC 1475 (TCC)

The Minister had not been correct in taking the position that because the taxpayer had not requested a loss determination for its 1988 taxation year under s. 152(1.1), it was precluded from challenging the Minister's computation of its 1988 loss for purposes of determining the amount of its taxable income for its 1985, 1986, 1987 and 1989 taxation years.

Administrative Policy

18 November 2014 TEI Roundtable, 2014-0550351C6 - 2014 TEI Liaison Meeting, Q.E1

no loss determination available on return filing

After the questioner noted that "Finance would support an interpretation of subsection 152(1.1) that allowed a taxpayer to request that the amount of a loss be determined when the taxpayer files its return," CRA stated that the taxpayer can only request a s. 152(1.1) loss determination where "the Minister ascertains the amount of a taxpayer's non-capital loss for a taxation year to be an amount that differs from the one reported in the taxpayer's income tax return," so that such determination is unavailable "when a taxpayer files its return of income and the Minister accepts the return as filed."

27 November 1995 External T.I. 9519775 - NOTICE OF DETERMINATION OF LOSSES

In response to a query as to whether it was possible to utilize investment tax credits, once they had expired, by requesting a determination of loss for a taxation year and reducing other permissive deductions in that year to create sufficient taxable income, and taxes to utilize the investment tax credits, RC stated that "where a taxpayer reports a loss unless the department ascertains a different amount the taxpayer will not be permitted to request a determination of loss. Where circumstances exist such that a determination of loss(es) has been issued the department will not allow any change(s) to a taxpayer's permissive deductions (or ITC's) for the year unless the time period for filing a notice of objection has not otherwise expired."

11 August 1995 Internal T.I. 9518017 - NIL ASSESSMENTS AND LOSS DETERMINATIONS

There are no legislated time limits on a taxpayer's request for a loss determination under s. 152(1.1). No notification that no tax is payable is required where a loss balance is recalculated in a statute-barred return.

IT-512 "Determination and Redetermination of Losses" (cancelled)

4. Where at the initial assessing stage or as a consequence of a reassessment arising from an audit or other investigative action by the Department the Minister ascertains a loss in an amount other than that reported by the taxpayer, a notice of assessment or reassessment (including a notice of "nil" assessment or reassessment) will be issued with an explanation of the changes. As well, the notice will inform the taxpayer that upon request the Minister will make a determination of the loss so ascertained and issue a notice of determination/redetermination. In this context, the Minister will not be considered to have ascertained that the amount of a loss differs from an amount reported by the taxpayer where the difference fully reflects a change requested by the taxpayer as a result of amended or new information.

86 C.R. - Q.27

Requests should be made to the district office; and loss determinations will only be provided when the loss as filed by the taxpayer has been changed by RC.


Shelley Griffiths, "'No discretion should be uncontrained'", ; Considering the 'care and management' of Taxes and the Settlement of Tax Disputes in New Zealand and the UK," [2012] British Tax Review, No. 2, p. 167, at 183:

"The care and management discretions of the UK and New Zealand revenue authorities are quite different, notwithstanding the fact that they are couched in the same core language."

Subsection 152(1.11)

Administrative Policy

2015 Ruling 2015-0604051R3 - Internal Reorganization

s. 55(3)(a) rulings conditional on U.S. parents accepting GAAR assessments to reduce their outside basis

CRA provided s. 55(3)(a) rulings conditional on the U.S. parents receiving, and waiving the right to object, to GAAR assessments to reduce outside Canadian basis that they “paid for” by paying 5% Canadian withholding tax

In particular, the proposed transactions entailed the U.S. parent (XXXco1) of a Canadian corporation (Canco1) transferring a portion of its Class A common shares of Canco1 to a U.S. subsidiary (USco3) of XXXco1, and then having Canco1 pay a stock dividend on its Class A common shares (now held on a pro rata basis by XXXco1 and USco3) consisting of a new class of Class B common shares, so that the existing Class A common shares were diluted down to a nominal value, and the value of the newly issued Class B common shares (now embedding most of the value in the stack) being subject to 5% withholding tax.

Focusing on the fact that the Class A common shares of Canco1 held by XXXco1 and USco3 still had significant basis notwithstanding that they now had nominal value, CRA ruled that s. 245(2) would apply to deny the tax benefit arising from such ACB to USco3 and XXXco1, and made its rulings conditional on XXXco1 and USco3 receiving a GAAR assessment under s. 152(1.11) to reduce their ACB to a nominal amount and waiving under s. 165(1.2) their right to object thereto.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) - Subparagraph 55(3)(a)(iii) note resulting from share redemption required to be vapourized on amalgamation/GAAR assessment required to reduce outside Canadian basis that US parents “paid for” by paying 5% Canadian withholding tax/rep re pubco share value being unaffected 899
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.1) pro-rata highly dilutive stock dividend 117
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(2) extensive reps required re series of transactions 47

Subsection 152(1.12) - When determination not to be made

See Also

Collins & Aikman Products Co. v. The Queen, 2009 DTC 1179 [at 958], 2009 TCC 299, aff'd 2010 DTC 5164 [at 7293], 2010 FCA 251

The Minister made an assessment under s. 152(1.11) on the basis that the GAAR applied to reduce the paid-up capital of shares of a Canadian holding company ("Holdings") from $167 million to $475,000, and about ten days later assessed on the basis that previous purported distributions of about $104 million of paid-up capital ("PUC") by Holdings were subject to Part XIII tax.

Boyle, J. intimated in obiter dicta that he would have been inclined to find that s. 152(1.12) precluded the assessment under s. 152(1.11). Respecting the Minister's argument that the Minister's redetermination of PUC was not relevant only to the preceding taxation years as it had the effect of eliminating $62.5 million of PUC otherwise available for future transactions, Boyle, J. stated (at para. 27) that "the contrary argument is that the determined amount, being $475,000, was relevant only for the prior years since the entire $475,000 determined PUC amount had been fully returned in prior years." Furthermore, "instinctively, it seems that retroactive determinations, like retroactive tax legislation, should be avoided except in cases where the legislator has clearly and unambiguously set out its intent to impose or permit the tax to be imposed retroactively."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt payment by direction 133
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) limited scope of PUC provisions reflected a policy choice 283
Tax Topics - Statutory Interpretation - Retroactivity/Retrospectivity 68

Subsection 152(1.2) - Provisions applicable

See Also

IncoLimited v. The Queen, 2004 TCC 373, aff'd 2005 DTC 5110, 2005 FCA 44

The taxpayer took the position that a letter of Revenue Canada indicating the amount of non-capital losses of the taxpayer for specified years, which were the amounts as filed by the taxpayer, was a determination of loss made under s. 152(1.2), with the result that such determination was binding on the Minister. Sarchuk J. found that neither s. 152(1.2) nor s. 152(4) empowered the Minister to issue a notice of loss determination. Such a notice could only be issued under s. 152(1.1) where the determination of the Minister differed from that of the taxpayer. S.152(1.1) had clearly been intended to deal with the scenario where a nil assessment had been issued so that, in the absence of s. 152(1.1), the taxpayer would have no right of appeal from a nil assessment.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Drafting Style 81

Administrative Policy

29 November 2016 Internal T.I. 2016-0648571I7 - Determination in respect of a partnership

s. 152(4) statute-barring rules assimilated into s. 152(1.4)

CRA considers that because s. 152(1.2) effectively indicates that various of the Division I rules, including the statute-barring rules in s. 152(4), also apply for notice of determination purposes under s. 152(1.4), the 3-year limitation in s. 152(1.4) does not apply where a partnership's T5013 contained a misrepresentation attributable to neglect etc.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1.4) 3-year deadline can be extended under s. 152(4)(a)(i) 147

6 March 2012 External T.I. 2011-0420751E5 - Ability to Object to a Denial of a Dividend Refund

S. 152(1.2) permits the filing of a notice of objection to the determination of a dividend refund under s. 129 even if the amount of such determination is nil.

Subsection 152(1.4) - Determination in respect of a partnership

See Also

2078970 Ontario Inc. v. The Queen, 2018 TCC 141, 2018 TCC 214

CRA cannot issue a s. 152(1.4) notice of determination denying partnership losses on the basis that the partnership did not exist

The Lux Operating Limited Partnership and the Lux Investor Limited Partnership both filed information returns reporting business losses in their 2006, 2007 and 2008 fiscal periods. The Minister concluded that neither partnership was a valid partnership on the basis that the partnerships’ members did not carry on business in common with a view to profit. Consequently, the Minister issued Notices of Determination to the partnerships indicating that they had nil losses in the relevant fiscal periods.

Graham J accepted the submission of the applicants (the designated partners of the partnerships) in connection with a Rule 58 determination that the Minister could not issue a valid Notice of Determination if the Minister had concluded that the partnership in question did not exist – so that the Notices of Determination were invalid.

As part of an extended analysis, Graham J referred approvingly (at para. 73) to the applicants’ analysis that:

[O]nce the Minister or a court has concluded that the partnership does not exist, the underlying determination and redeterminations become unenforceable (since there are no longer any partners to bind) and, thus, there is no longer anything left to object to or appeal from. In essence, the collective objection and appeal rights of the partnership disappear as soon as there is a conclusion that the partnership did not exist. They are replaced by the individual objection and appeal rights of the purported partners. If a purported partner’s relevant year still falls within the normal reassessment period, the Minister simply reassesses the purported partner and the objection and appeal process proceeds normally for each partner individually. If the purported partner’s relevant year is beyond the normal reassessment period, the Minister relies on subsection 152(1.8) to reassess the purported partner. The purported partner may then follow the usual objection and appeal processes.

The contrary approach of the Crown of treating a determination under s. 152(1.4) of a partnership’s non-existence as valid required him to “believe that Parliament intended to create a process with unnecessary redundancy, unnecessary language, unnecessary exclusions, unnecessary limitations and unnecessary contradictory provisions” para. 82) including respecting the operation of s. 152(1.8).

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Tax Topics - Income Tax Act - Section 152 - Subsection 152(1.8) s. 152(1.8) cannot be utilized if previous notice of determination was made after CRA had concluded that the partnership did not exist 182

Administrative Policy

5 October 2018 APFF Roundtable Q. 6, 2018-0768771C6 F - Determination for a foreign partnership

CRA cannot make a partnership income or loss determination where the partnership has not T5013 filing obligation

Reg. 229 does not require a T5013 return to be filed respecting a partnership which does not carry on a business in Canada, and is not a Canadian partnership or SIFT partnership. Thus, a Canadian partner can be a partner of a partnership that has not filed such a return. Pursuant to s. 152(1.4), the Minister may determine the income of a partnership for a fiscal period respecting a partner for the three years following the later of the day on or before which a partner would be required under Reg. 229 to file the return, and the day of such filing.

How does CRA apply the statute-barring rules respecting a Canadian partner of a partnership for which no information return under Reg. 229 was required? CRA responded:

The long-standing position of the CRA is that the Minister cannot make a determination where the partners of the partnership are not required to file a T5013 under ITR section 229, given that the conditions provided for in paragraphs 152(1.4)(a) and (b) cannot then be satisfied.

However, the Minister could instead make an assessment under the general rules in subsection 152(4) of, where applicable, the tax, interest or penalties to be paid by the Canadian partner for its taxation year. Thus, a Canadian partner who did not declare the partner’s share of the partnership's income could, for instance, be considered to have made a misrepresentation that is attributable to neglect, carelessness or wilful default or to have committed a fraud in filing the return, and the Minister could then assess that taxpayer at any time under subparagraph 152(4)(a)(i).

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Tax Topics - Income Tax Regulations - Regulation 229 - Subsection 229(5) where no T5013 obligation, CRA will assess the partners directly within the s. 152(4) limitations 107

17 April 2018 Internal T.I. 2017-0734751I7 - 152(1.4) - Statute barred partnership return

a non-statute-barred partner can be assessed directly where the s. 152(1.4) partnership loss determination period is exceeded

Can the Minister may make a determination respecting a partnership information return for a fiscal year beyond the limitation period provided by s. 152(1.4) where no determination was made prior to the end of this period? CRA responded:

In situations where the partnership return has been filed and the Minister has not made a determination within the timeframe provided by subsection 152(1.4), a determination can only be made if one of the exceptions in 152(4) is applicable. In that regard, if a waiver is filed under subparagraph 152(4)(a)(ii) within the three-year period provided by subsection 152(1.4), the period within which the Minister may make a determination may be extended.

…In our view, as noted in our document 2005-011196, the Minister may reassess a partner’s return of income without making a determination in respect of the partnership under 152(1.4) of the Act provided the partner’s taxation year is not statute-barred.

17 April 2018 Internal T.I. 2018-0739141I7 - Amending a statute barred partnership return

CRA can treat a late request for a T5013 amendment (which cannot be dealt with under s. 152(1.4)) as a request to assess the partner returns directly

The partnership with three principal partners (Partners 1, 2 and 3, all corporations) filed its T5013 for 2012 without the Minister making a determination or issuing a Notice of Determination under to the partnership within the three-year period required by s. 152(1.4). Following that period, an amended T5013 was filed requesting an increase in capital cost allowance and cumulative eligible capital deductions, so as to change the partnership’s reported income to a loss for 2012. CRA made no such determination.

The partners requested that their respective 2012 returns be amended to reflect their share of the partnership loss. CRA only accepted this request for Partner 2 whose taxation year (unlike Partners 1 and 3) was not statute-barred.

Was CRA required to accept the request to amend the T5013? The Directorate responded:

In situations where the Minister has not made a determination and the three-year limitation period in subsection 152(1.4) has expired, the Minister may only make a determination in respect of the partnership where one of the exceptions in subsection 152(4) applies, which would include a waiver filed under subparagraph 152(4)(a)(ii) within the three-year period provided by subsection 152(1.4).

In general, where an amended T5013 is received beyond the three-year period provided by subsection 152(1.4), the Minister is not obligated to accept it. … Any notification sent to the partnership in this circumstance would merely be an acknowledgement that the information has been received and recorded. However, the Minister may use the information contained in the amended T5013 to reassess one or more of the partners provided that the taxation year of the particular partner or partners is not statute-barred. …

[T]he Minister may reassess the return of income of a member of a partnership without making a determination of the partnership under subsection 152(1.4) of the Act provided the partner’s particular taxation year is not statute-barred. … Accordingly … the Minister had the authority to issue the reassessment for Partner 2.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) CRA can treat late T5013 amendment request as one for direct partner assessments/partner returns generally can be amended beyond three years if no change in tax payable 304

29 November 2016 Internal T.I. 2016-0648571I7 - Determination in respect of a partnership

3-year deadline can be extended under s. 152(4)(a)(i)

A T5013 contains a misrepresentation attributable to neglect etc. Can the Minister make a determination under s. 152(1.4) beyond the 3-year period described therein? CRA responded:

[P]ursuant to subsection 152(1.2)… as it applies with such modifications to a determination in respect of a partnership under subsection 152(1.4)…, the Minister may determine any income or loss of a partnership for a fiscal period and any deduction or other amount, or any other matter in respect of the partnership for the fiscal period beyond the three year period described therein where any of the exceptions described in subsection 152(4) of the Act apply.

Accordingly…where it is established that a partnership or person filing the partnership return made any misrepresentation that is attributable to neglect [etc.]…, a determination in respect of the partnership for a fiscal period may be made beyond the three-year period….

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1.2) s. 152(4) statute-barring rules assimilated into s. 152(1.4) 50

23 April 2015 Internal T.I. 2014-0562271I7 - Amending a partnership return - limitation period

CRA will not accept an amended partnership return beyond statute-barred period

Will CRA accept an amended partnership return after the statute-barred date (where no waiver was produced within the three-year determination period under s. 152(1.4))? The Directorate responded:

[S]ubsection 152(1.9) must be read in conjunction with subsection 152(1.2), which means that a waiver would have to be produced within the three-year limitation period within which the Minister may make a determination. … [In particular] the time limitations in subsections 152(3.1) and (4) apply to returns that are determined rather than assessed. … [Therefore] the rule in subparagraph 152(4)(a)(ii) applies to waivers regarding determinations, meaning that the waiver would have to be produced within the three year period set out in subsection 152(1.4). …

As such, we agree with your conclusion that the Minister cannot accept an amended partnership return after the statute-barred date of the partnership.


Anthony V. Strawson, "Should Partnership Information Returns be Filed as a Matter of Course?", Tax for the Owner-Manager, Vol. 9, No. 4, October, 2009, p. 4.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 229 0

Subsection 152(1.5)

Administrative Policy

18 October 2016 Internal T.I. 2016-0640321I7 - Subsections 152(1.5) and 244(20)

requirement satisfied by delivery to partnership address

S. 244(20) and Menzies applied to deem the s. 152(1.5) notice requirement to be satisfied by sending the notice of determination to the latest known partnership address.

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Tax Topics - Income Tax Act - Section 244 - Subsection 244(20) notice of determination need not be sent to each partner 182

Subsection 152(1.6)


Menzies v. The Queen, 2016 TCC 73 (Informal Procedure)

receipt of notice of redetermination of loss by limited partner not relevant

After finding that the presumption in s. 244(20), that notice to the general partner of an LP is notice to all the partners, is conclusive rather than rebuttable, so that a limited partner would not have succeeded even were she able to establish that she had not received notices of determination and redetermination of loss which had been received by the GP, Lafleur J went on to find that even if the s. 244(2) presumption were rebuttable, “the language of subsection 152(1.6) of the Act is clear – whether one or more limited partners have received the notice of determination or not is not relevant for the validity of a notice of determination issued in accordance with subsection 152(1.4) of the Act.” In any event, the taxpayer was not credible in her assertion that she did not receive the notices, so that CRA did not have to prove that they had been sent.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 244 - Subsection 244(20) notice provided to a GP is irrebuttably notice to all the limited partners 150

Subsection 152(1.7) - Binding effect of determination

See Also

Stewart v. The Queen, 2018 TCC 75, rev'd on TCCA s. 16.2/no abuse of process grounds 2019 FCA 235

partners were not necessarily precluded under the s. 152(1.7) “binding” rule from arguing that a partnership determination of loss was statute-barred

The appellants were partners of a limited partnership (“TSI”). On March 29, 2006, the Minister issued Notices of Determination pursuant to s. 152(1.4) disallowing losses claimed by TSI for its 2000 and 2001 taxation years, respectively. Both TSI and each partner filed a Notice of Appeal. However, TSI filed a Notice of Discontinuance on May 2, 2016 and the appeal was deemed to be dismissed on June 24, 2016 pursuant to s. 16.2(2) of the Tax Court of Canada Act (the “TCC Act”). The respondent filed a Motion to strike the Notices of Appeal of the appellants on the basis, who were now arguing that the Notices of Determination had been statute-barred, that it would be an abuse of the Court’s process to allow the appellants to continue with their appeals.

After noting (at para. 35) the appellants’ submission that s. “152(1.7) … only binds the partners with respect to the correctness of the amounts determined by the Minister,” D’Auray J indicated (at para. 38):

I agree with the appellants that taking into account the wording of subsection 152(1.7) … it is not clear that this provision binds the appellants with respect to the procedural provisions of the ITA, namely the stature-barred issue. …

Locations of other summaries Wordcount
Tax Topics - General Concepts - Abuse of Process abuse of process for partners to raise arguments that could have been raised by their partnership prior to its filing a discontinuance 307
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 16.2 - Subsection 16.2(2) discontinuance has equivalent effect to dismissal by court itself 195

Cummings v. The Queen, 2009 DTC 953, 2009 TCC 310

The taxpayer was a member of a partnership which, through its counsel, entered into a settlement agreement with the Minister on March 31, 2004 (the last day on which the CRA could issue a determination pursuant to s. 152(1.4)) with the CRA issuing such determination on the same day. The partnership filed a Notice of Objection to the March determination, withdrew the objection on November 10, 2004 and then on August 22, 2005, the CRA issued notices of reassessment against the taxpayer.

The taxpayer was unsuccessful in his submission that his rights to object to the determination "expired or were determined" on March 31, 2004, so that the reassessment made on August 22, 2005 was more than one year later and out of time. After noting that the settlement letter of March 31, 2004 was prior to the Minister's determination (at para. 16), it was "difficult to see how a right of objection or appeal can be said to have 'expired' or been 'determined' before it has ever even come into existence", Hugessen, D.J. noted (at para. 18) that one would not talk of something expiring... if that thing had never come into being in the first place". Furthermore, the Settlement Agreement did not bind the Minister nor the taxpayer.

Subsection 152(1.8)

See Also

2078970 Ontario Inc. v. The Queen, 2018 TCC 141, 2018 TCC 214

s. 152(1.8) cannot be utilized if previous notice of determination was made after CRA had concluded that the partnership did not exist

The Minister determined that two limited partnerships did not exist because their partners were not carrying on business in common with a view to profit, and issued notices of determination to the partnerships under s. 152(1.4) determining that losses reported by the purported partnerships were, for this reason, nil. On a Rule 58 determination, Graham J accepted the partners’ submission that once CRA has determined that a partnership does not exist, any purported notice of determination that it thereafter issued to the partnership was invalid.

He went on to indicate obiter that the Minister was now precluded from relying on s. 152(1.8) to reassess, beyond the normal reassessment period, the purported partners directly, stating (at para. 117):

[I]f the Minister concluded from the outset that a partnership did not exist but nonetheless issued a Notice of Determination, the Minister is not able to take advantage of the provisions of subsection 152(1.8) to reassess purported partners beyond the normal reassessment period. As discussed above, subsection 152(1.8) only applies if the Minister issued a Notice of Determination and, at a subsequent time, concluded that the partnership did not exist.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1.4) CRA cannot issue a s. 152(1.4) notice of determination denying partnership losses on the basis that the partnership did not exist 344

Subsection 152(2) - Notice of assessment


Flanagan v. The Queen, 87 DTC 5390 (FCA)

A reassessment notice was not 'sent' within the meaning of this provision when (during a postal strike) a Revenue Canada employee attended at the office and then the home of the taxpayer with the notice, and then returned to the Revenue Canada office because the taxpayer could not be found. "In law the Notice never left the Minister's possession. The Minister cannot at one and the same time both send and retain a Notice of Reassessment."

Stephens v. The Queen, 87 DTC 5024, [1987] 1 CTC 88 (FCA)

assessment must make the taxpayer clearly aware of its liability

The requirements of s. 152(2) were satisfied when a reassessment bore the words "Revenue Canada Taxation" (rather than the Department of National Revenue) and the printed signature of a former Deputy Minister. Paratte J stated (at p. 5025):

The form of the notice does not matter and ... the subsection merely requires that the notice be expressed in terms that will clearly make the taxpayer aware of the assessment made by the Minister. ... As was decided by the judge below ... the use of that "publicly well known appellation" could in no way mislead the taxpayer "into thinking that these fomrs did not emantate from the Department of National Revenue".

Re Charron, 84 DTC 6241, [1984] CTC 237 (FCTD)

"All that Section 152(2) of the Income Tax Act requires is that the Minister 'shall send a Notice of Assessment' ... . It was quite properly sent to the address of the taxpayer as shown in his return and if he happened to be in jail at the time and it was not forwarded to him, this is not the responsibility of the Minister. Even if the representatives of the Minister were aware that he was in jail, there would be no obligation to send the Notice to him there ... ."

Burroughs v. The Queen, 82 DTC 6340, [1982] CTC 414 (FCTD)

A reassessment notice was sent when, during a Canadian postal strike, it was mailed to the taxpayer from a United States Post Office.

Jobin v. The Queen, 78 DTC 6538, [1978] CTC 493 (FCTD)

The Minister is not limited to pleading sections of the Act to which he referred in his Notice of Assessment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 246 - Subsection 246(2) 75

See Also

McIntyre v. MNR, 93 DTC 999 (TCC)

Notices of reassessment that were sent by registered mail by the Minister were returned by the post office, with the envelopes marked "unclaimed". After the period for reassessment expired, Revenue Canada sent out the notices of reassessment by ordinary mail with an explanation that the notices, when originally mailed, had been undeliverable "due to an address change". In fact, the taxpayer at all relevant times had been at the same address.

In these circumstances, Teskey J. found that "the onus is on the Minister to prove that the Notices were sent to the proper address", which he had failed to do. Accordingly, the taxpayer had not been reassessed within the period for doing so.

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Tax Topics - Income Tax Act - Section 244 - Subsection 244(14) 114

Subsection 152(3) - Liability not dependent on assessment


The Queen v. Leung, 93 DTC 5467 (FCTD)

reassessment valid notwithstanding missing particulars

A reassessment of a director in respect of the aggregate amount of source deductions which the corporation had failed to make under the Act and three other statutes which did not separately disclose the amounts purportedly owing under each statute, and that referred for further details to an assessment which had been made on the corporation, nonetheless was valid in light of ss.152(3) and (8) of the Act and the fact that it contained all the essential ingredients for a notice of assessment.

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Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) notice of assessment was sufficient to put the taxpayer on notice of the particular amount claimed 104
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(1) 82

Subsection 152(3.1)

Administrative Policy

10 March 2016 Internal T.I. 2015-0614161I7 - Extended reassessment period 152(4)(b)

normal reassessment period ends on the assessment anniversary date

Where Canadian-controlled private corporation was issued an original notice of assessment for a particular taxation year on December 31, 2013, the normal reassessment period would end at the end of December 31, 2016, consistently with 27(3) of the Interpretation Act.

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Tax Topics - Statutory Interpretation - Interpretation Act - Section 27 - Subsection 27(3) normal or extended reassessment period ends on the anniversary date 200
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(b) extended reassessment period ends on the assessment anniversary date 44

29 April 2014 Internal T.I. 2013-0481581I7 - Under Remittance of Part XIII Tax

normal reassessment period for Part XIII tax

The normal reassessment period for failure to withhold at the proper rate will commence to run once an amount has been assessed under s. 227(10)(d). However, the acceptance by the Minister of a Part XIII tax remittance is not an assessment of Part XIII tax.

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Tax Topics - Income Tax Act - Section 227 - Subsection 227(10) - Paragraph 227(10)(d) acceptance by CRA of remittance and resulting notification is not an assessment 164

31 October 1994 Internal T.I. 9412337 - REASSESSMENT OF STATUTE BARRED RETURN

Where an original notice of "nil" assessment is statute-barred, the Department nonetheless is entitled to revise the loss as long as it does not create taxes payable so that a notice of reassessment is required.


Joint Committee, "COVID-19 Measures", 1 June 2020 Joint Committee Submission

Expansion of scope of specified extendible deadlines

It is recommended that Column 2 to the Schedule to the draft Time Limits and Other Periods Act (COVID-19) (the “Proposals”) replace the reference in column 2 to “subsection 37(11), paragraph (m) of the definition investment tax credit in subsection 127(9)” by “any provision of the Act or the Income Tax Regulations that requires or permits a taxpayer or a partnership to do something by a particular time or date or within or during a particular period, or that provides for consequences arising if something is not done by a particular time or date or within or during a particular period”.

Expected scope of exercise of discretion re extension of normal and other reassessment periods

Regarding ITA ss. 152(3.1) and (4) and ETA ss. 298(1) and (2), and based on informal discussions with CRA officials, it is understood that the “Minister would likely exercise the authorities provided under s. 7 of the Proposals in a manner that would not displace acquired rights by reopening administrative proceedings which had achieved finality before the announcement of the Proposals, nor in a manner that could be duplicative or inordinately disruptive of certainty in proceedings and the rule of law, or not justified by the need to avoid unfair or undesirable effects of the COVID-19 crisis.” The following observations give shape to our understanding of these expectations:

  • Where the reassessment periods contemplated in ITA ss. 152(3.1) and (4) and ETA ss. 298(1) and (2) had expired before the announcement of the Proposals, no such order would permit an assessment without the taxpayer’s consent, nor would an order pursuant to s. 7(4) of the Proposals cancel or vary the effect of the Minister’s failure to assess or reassess prior to the expiry of a normal reassessment period that ended prior to the announcement of the Proposals.
  • For audits that had not been materially disrupted by COVID-19, an order issued by the Minister would extend such a reassessment period.
  • Any order(s) would not result in a total prolongation exceeding six months.
  • Any such order would not suspend or extend any such reassessment period which would otherwise expire within a reasonable amount of time after September 13, 2020.

Paragraph 152(3.1)(b)


6075240 Canada Inc. v. Canada (National Revenue), 2019 FC 642

s. 152(3.1), unlike its Quebec equivalent, does not give a taxpayer longer to respond to an arbitrary assessment than a normal assessment

The Minister made arbitrary assessments of the taxpayer following its failure to file some annual returns. In refusing to review the refusal of the Minister to process returns for those years filed more than three years after those assessments, Grammond J. stated that the normal reassessment period “applies to all assessments, whether they were issued following the filing of a tax return or not” (para. 11).

After noting that s. 152(3.1), unlike the equivalent Quebec provision, “does not provide that the normal reassessment period can begin at the time when the taxpayer files a tax return, if that time is after a first notice of assessment is sent,” Grammond J. stated (at para. 16)

[T]he Quebec statute cannot be used to interpret the federal statute. I agree that this lack of consistency between the two statutes may be a source of confusion for Quebec taxpayers and that it might be considered a source of unfairness, but it is not my role to rewrite the Act to avoid such an outcome.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) normal reassessment period also starts running following an arbitrary assessment 337