Subsection 152(4.01) - Assessment to which paragraph 152(4)(a), (b) or (c) applies


Canada v. Honeywell Limited, 2007 DTC 5073, 2007 FCA 22

The Minister took the position on audit that a loan made by a Netherlands Antilles subsidiary of the taxpayer ("Honeywell N.V.") to a Netherlands subsidiary ("B.V.") of the taxpayer's U.S. parent violated the policy underlying clause 95(2)(a)(ii)(b) because that clause was intended only to avoid fapi treatment of loans made to foreign affiliates of a Canadian based multinational corporation. The Minister received a waiver respecting "interest income being reassessed under paragraph 12(1)(c) of the Income Tax Act, by reason of the application of section 245 of the Income Tax Act."

The Minister was precluded from amending his Reply (well after the expiry of the normal reassessment period) to allege that the funds lent by Honeywell N.V. to B.V. were not used in an active business of B.V., so that the exemption in clause 95(2)(a)(ii)(B) was not available irrespective of the general anti-avoidance rule in section 245. Noël J.A. stated (at p. 5077) that:

"Including interest in Honeywell's income under paragraph 12(1)(c) because of a GAAR re-characterization is entirely different from including the interest income of Honeywell N.V., its foreign affiliate, in Honeywell's income pursuant to the FAPI rules as the Crown now tries to assert ... ."

Words and Phrases

Canada v. Agazarian, 2004 DTC 6366, 2004 FCA 32

Pelletier J.A. stated (in obiter dicta at p. 6375):

"Subsection 152(4.01) restricts the right of reassessment within the extended reassessment period to the subject matter which gave rise to the right to reassess outside the normal reassessment period. It is therefore to the same effect as the final paragraphs of the former subsection 152(4)."

See Also

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

further reassessment can carryforward balances from previous reassesment not described in 152(4.01)

The reassessment in question of the taxpayer (RTA) for its 2006 taxation year was followed by a further reassessment (made within the extended-by-three-years period for transactions with foreign affiliates) to reassess RTA for foreign accrual property income for the same (2006) taxation year, so that the further reassessment reflected the additional FAPI but otherwise did not change the previous reassessment. It was agreed by all, in light of a previous decision of Favreau J addressing this point, that the further reassessment replaced the previous reassessment rather than being an additional assessment. D'Auray J rejected a submission of RTA that the effect of s. 152(4.01) was that the Minster could only reassess in the further reassessment for FAPI and was precluded from maintaining the effect of the previous denial of the SR&ED expenditures.

She stated (at paras. 258, 261, Tax Interpretations translation):

… [N]othing in subsection 152(4.01) precludes the Minister from including the amount of tax payable on the previous un-amended assessment in a reassessment made under subsections 152(4) and 152(4.01). What is apparent from subsection 152(4.01) is that the amendments should only relate to the elements set out in that subsection. ...

The legislator, by enacting subsection 152(4.01), has made the Minister, after the normal reassessment period, entitled to make assessments under subparagraphs 152(4)(a) and (b), but only with respect to the matters set out in subsection 152(4.01). This provision is not intended to eliminate the amount of previous assessments made in the normal reassessment period.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) reassessment made without a proper audit in order to beat statute-barring was valid 561
Tax Topics - Income Tax Act - Section 166 curative effect of ss. 166 and 152(8) 159

Ross v. The Queen, 2013 DTC 1250 [at 1400], 2013 TCC 333

In 2001, the first taxpayer transferred the commuted value of his entitlements under his registered pension plan to a new pension plan established by a newly-incorporated corporation which was to employ him as its only employee in a start-up business. The new business was unsuccessful, and the taxpayer only received (at most) modest employment income before the business was discontinued.

The Minister revoked the new pension plan retroactively, and added the transferred amount to the taxpayer's income for 2001, on the basis that the primary purpose of the new plan was to shelter, under s. 147.3, the transfer out of the old plan rather than to generate periodic pension benefits in respect of the services of an employee, as required by Reg. 8502(a). The reassessment was made beyond the normal reassessment period on the basis that the taxpayer (1) misrepresented to CRA the facts upon which the registration of the new plan rested, and (2) two years later, untruthfully responded to questions from CRA on audit.

Bocock J allowed the taxpayer's appeal. He reasonably intended at the time of registration in 2001 to satisfy the requirements of Reg. 8502(a).

Furthermore, his 2003 misrepresentations (made on his behalf by agents) did not open up the 2001 year for reassessment (paras. 57, 58):

[T]he misrepresentation (whether in a return or in the supply of information) affording a reassessment beyond the normal reassessment period must reasonably be regarded as relating to a return or information applicable to the reassessed tax year. Misrepresentations reasonably related to a period subsequent cannot be regarded as extending, by virtue of the limitation in subsection 152(4.01) of the Act, reassessment rights to a previous taxation year otherwise beyond normal reassessment where such facts do not relate to the basis upon which registration rested. ...

To do otherwise creates a "time machine" effect where then current statements about facts in 2003 may be applied to years and bases for decisions which are outside the normal reassessment periods notwithstanding that reasonable beliefs held and facts available in 2001 had not yet been blessed with the corrective certainty of the fullness of time.

Essentially the same approach was applied to similar facts respecting the other two taxpayers.

Fagan v. The Queen, 2012 DTC 1139 [at 3217], 2011 TCC 523

Rather than investing directly in flow-through shares of an Alberta oil and gas company ("Sierra"), for limited liability reasons the taxpayer and six colleagues incorporated an Ontario company to enter into such agreement with Sierra, with the taxpayers, in turn, entering into flow-through agreements with 991 Sierra acquired seismic data. The Minister found in an audit that the seismic data had not been used in a way that would give rise to . The Minister reassessed the taxpayer to deny the deduction by him of Canadian exploration expenses, Canadian development expenses, or Canadian oil and Gas property expenses ("CEE," "CDE," and "COGPE") that 991 had renounced to him and which Sierra had, in turn, renounced to 991. The reassessment was made beyond the normal reassessment period, pursuant to a waiver the taxpayer had filed regarding "expenditures for seismic data pertaining to the taxpayer's participation in the Sierra Joint Venture."

Angers J. found that, because seismic data only pertains to CEE, the waiver did not apply to CDE or COGPE. However, he denied the taxpayer's argument, in respect of CEE, that the taxpayer had not "participated" in Sierra because his dealings instead were with 991. Angers J. stated (at para. 52):

In addition, the phrase "participation in" was used liberally by the appellant, his accounting partner and his counsel and was understood as describing the situation adequately with respect to the 1992 seismic data expense issue....It seems to me that the subject matter of the reassessment was clear to the appellant despite the defective description of the facts [which had implied that the taxpayer's "investment" in Sierra was direct].

Fietz v. The Queen, 2011 DTC 1351 [at 1965], 2011 TCC 493

The taxpayer's waiver, which had been provided to CRA on a timely basis, allowed the Minister to reassess the taxpayer beyond the normal reassessment period even though the box on the T2029 form was left blank where the matters being waived were to be described. CRA had sent a proposal to the taxpayer describing the proposed matters to be waived. Webb J., after referring to Mitchell stated (at para. 34) that "the appropriate approach is to determine if the intention of the parties can be determined from the form and the surrounding circumstances, and concluded (at para. 45) that the proposal letter together with the T2029 form constituted a waiver. He also found (at paras. 44-45) that the proposal letter had been "filed" with the Minister, as required under s. 152(4.01)(a)(ii), given that it originated from the CRA auditor.

Chafetz v. The Queen, 2006 DTC 2119, 2005 TCC 803

After an initial review of the taxpayer's deduction of Canadian exploration expense ("CEE") in respect of the acquisition of seismic data the taxpayer signed a waiver drafted by a Revenue Canada auditor referring to "income ... as affected by application of Canadian Exploration and Development Expense". After referring (at p. 2123) to the doctrine that "where both parties know what is at issue, a technical error will not invalidate the waiver", Miller J. found that since the term CEDE in the context of a 1992/1993 waiver was in its strict technical sense an outmoded term, it should be interpreted as meaning CEE and CDE. Furthermore, even if "CEDE" could only mean pre-1974 expenditures as described in the definition of that term, the CEE claim of the taxpayer could "reasonably be regarded as relating to" CEDE given that CEDE was the statutory predecessor to CEE and CDE.

Mah v. The Queen, 2003 DTC 1312, 2003 TCC 720

On December 15, 1996 the taxpayer exchanged common shares of a company for preferred shares, of the company, and on December 20, 1996 the company redeemed a portion of the preferred shares. The taxpayer provided a waiver in respect of the first (share exchange) transaction and the Minister assessed the taxpayer under s. 86(2) in respect of that transaction. Following the filing by the taxpayer of a Notice of Objection to that reassessment, the Minister then determined that s. 86(2) did not apply to the first transaction and that s. 84(3) instead applied to deem the taxpayer to have received a dividend under the subsequent share redemption; and purported (well beyond the normal reassessment period) to reassess the taxpayer a second time on that basis.

In finding that the second reassessment was invalid, Rip J. stated (at para. 13):

"It is quite clear that the Minister cannot base a reassessment on a substantive issue that is not specified in a waiver or cannot be regarded as relating to the substantive issue that is specified in the waiver."

Placements T.S. Inc. v. The Queen, 94 DTC 1302 (TCC)

A waiver given by the taxpayer with respect to a "capital gain on disposal of rights to purchase" a specified property covered a capital gain realized by the taxpayer from the disposition of the property itself. Lamarre Proulx TCJ. noted (p. 1308) that the description of the matter at the stage of giving the waiver could not be expected to be perfect, that the assessment must relate to the transaction or matter which is the source of disagreement between Revenue Canada and the taxpayer concerning which the latter had agreed to sign the waiver, and that in this case the taxpayer was not taken by surprise by the assessment.

Paragraph 152(4.01)(a)

Subparagraph 152(4.01)(a)(ii)

See Also

Loblaw Financial Holdings Inc. v. The Queen, 2018 TCC 182

GAAR is generally a separate matter rather than being subsumed in the allegedly-misused substantive provision

The taxpayer provided waivers, drafted by CRA, that referenced the inclusion in its income of foreign accrual property income (FAPI) of a Barbados subsidiary. After finding that CRA had correctly included FAPI in the income of the taxpayer, C Miller J went on to find that such waivers did not permit CRA to assess in the alternative that such FAPI was included in the taxpayer’s income through the application of the general anti-avoidance rule. After referring to the Honeywell characterization of a waiver as relating to a bargain under which the taxpayer foregoes the benefit of the normal reassessment period and the Minister acquires the right to assess beyond that period but only respecting the specified matter, C Miller J stated (at paras. 285-286):

For an assessment to reasonably relate to a matter in a waiver … it must reasonably relate to the bargain … . There was no bargain between the parties at the time of signing the … waivers that related in any way … to a GAAR application. …

The GAAR is a powerful tool in the government’s toolbox which should only normally be viewed as a separate matter, requiring specific mention in a waiver.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1.11) requirement met where Crown knew the nature and quantum of the dispute 259
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Bank CFA qualified as a foreign bank since it was licensed under Barbados law as an international bank 117
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (a) Barbados-licensed international bank, which used Loblaw funding to invest responsively to Loblaw considerations, conducted an offside non-arm’s length business 425
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (c) employee equivalents was reduced by employee time described in s. 95(2)(b) 284
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange short-term debt securities were inventory because they were the raw material for generating swap income 124
Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) application of GAAR required the occurrence of an avoidance transaction (or series) in non-statute-barred years and the relevant previous year’s avoidance transaction did not occur as part of the series 496
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) hiring of employees 15-years previously to engage foreign bank exception to investment business definition was not part of same series as renewal of foreign bank licence 216
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) use of Barbados sub to engage in proprietary trading for Canadian parent misused the foreign bank exemption, whose purpose was promoting international competitiveness 322
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(l) purpose of s. 95(2)(l) exception was to permit non-resident subsidiaries of Canadian banks and dealers to compete internationally 184

Subsection 152(4.1) - If waiver revoked

See Also

236130 British Columbia Ltd. v. The Queen, 2006 DTC 2053, 2005 TCC 770

In finding that a notice of reassessment that the Minister mailed to the wrong address within the six-month period referred to in s. 152(4.1) should not be treated as being made within that period, Bell J found that a notice of assessment mailed to the wrong address could not be considered to have been mailed for the purposes of s. 244(14). With respect to a subsequent notice of reassessment that allegedly was mailed within the six-month period, Bell J. noted that although the Minister produced evidence of mailing procedures, no evidence of the date of mailing of the notice of reassessment was produced, with the result that the Minister had failed to meet the onus of persuading the Court that the taxpayer had been validly reassessed.

Subsection 152(4.2) - Reassessment with taxpayer’s consent


Freitas v. Canada, 2018 FCA 110

s. 152(4.2) inapplicable where reassessment, albeit in response to refund request, increased taxpayer’s liability

The taxpayer retired as a partner from Deloitte & Touche LLP in 2007. For 2008, he was allocated income from the partnership that was included in his income under ITA s. 96(1.1), but which he did not treat as income for CPP purposes. In 2009 he was assessed on the basis that this income gave rise to a required CPP contribution as provided in the applicable partnership agreement. In completing his income tax return for 2008, Mr. Freitas did not include any amount for a CPP in relation to that income, but was subsequently assessed in 2009 on the basis that that income resulted in a CPP contribution. The assessment also included a deduction in computing his income for one half of this amount payable (s. 60(e)) and a non-refundable tax credit based on the other half (s. 118.7). Almost 4 years later, he requested the Minister to reverse the CPP contribution and by also the corresponding deduction and credit. The Minister reassessed, but did not reverse the amount payable for the CPP contribution, on the basis that the taxpayer did not make this request within the four year limitation period specified in s. 38(4)(b) of the Canada Pension Plan Act (“CPP”). Following upon a notice of objection thereto of the taxpayer, he was reassessed in 2015. That reassessment (which the taxpayer appealed to the Tax Court) reflected the original assessment issued in 2009.

If the 2014 reassessment was issued under s. 152(4.2) then, as a result of s. 165(1.2), there was no right to file a notice of objection to that reassessment and then appeal to the Tax Court. In finding that s. 152(4.2) did not apply, and before finding that the 2015 reassessment (which had been issued beyond the normal reassessment period) could be appealed in light of s. 152(8), Webb JA stated:

Webb J found (at paras. 15 and 19):

…In my view, a reassessment that increases a person’s tax liability is not one that was made for the purpose of determining a refund but instead would be made for the purpose of determining that person’s liability under the ITA or CPP. Otherwise, whenever a taxpayer makes a request for a refund after the end of the normal reassessment period, the Minister …could issue a reassessment that increases that person’s tax liability regardless of whether there was any misrepresentation as described in subparagraph 152(4)(a)(i)… and that person would have no right to object to that reassessment (subsection 165(1.2)….

Since the reassessment issued on May 20, 2014 increased Mr. Freitas’ liability for 2008, this was not a reassessment that was made under 152(4.2) … .


Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) a statute-barred reassessment was valid for the purpose of being objected to and vacated on substantive grounds 192
Tax Topics - Other Legislation/Constitution - Federal - Canada Pension Plan - Section 14 s. 96(1.1) income was not from carrying on business 218
Tax Topics - Other Legislation/Constitution - Federal - Canada Pension Plan - Section 38 - Subsection 38(4) - Paragraph 38(4)(a) CRA has discretion to refund excess contributions 86
Tax Topics - Income Tax Act - Section 96 Backman statements applied to common law partnerships 188

Biles Estate v. Canada (National Revenue), 2017 FC 371

alleged settlement agreement had an implied condition that a property’s legal ownership be legally consistent therewith

The applicant, variously described as an estate and as a spousal trust, realized a capital gain on a deemed disposition of a property held by it on the death of the spouse in 2004, based on an appraisal of the property as having a fair market value (“FMV”) of $2.8 million, and then sold the property in 2008 for $2.25 million – so that it was precluded from carrying back the resulting capital loss to 2004. One month after the time limit for objecting to the assessment of the 2004 year, the applicant’s accountant requested CRA to reassess the 2004 year to reduce the capital gain based on a lower FMV. The applicant sought inter alia an Order for mandamus to require the Minister to reassess the 2004 taxation year in accordance with an “agreement” (the Proposal) alleged to have been made with CRA officials.

Phelan J found (at para. 32) the correct standard to apply in determining whether the Minister had reneged on an agreement was one of correctness rather than reasonableness, stating that:

It would offend any notion of fairness to defer to the Minister’s judgment as to whether he or she had made an agreement and reneged on it.

However, no breach of an agreement was made out. Phelan J accepted the Minister’s submission that the agreement was subject to establishing the legal ownership of the property which turned out to be different than that underlying the agreement. He stated (at paras. 46-47):

[E]ven now the parties are not “ad idem” as to the Proposal and its basis. …

[A]bsent an agreement as to the chain of title not only were the parties not in agreement about the Proposal, but the Proposal could not be legally implemented. A reassessment cannot be made contrary to law.

David Anthony v. Canada (National Revenue), 2016 FC 955

s. 152(4.2) denials are subject to judicial review

Approximately eight years after the taxation year in question, the taxpayer made a s. 152(4.2) application to CRA to allow the personal deduction by him of rental expenses that had been incurred under leases of equipment (used in his machinist business) that had been entered into in the name of his corporation (which was inactive except for entering into those leases). Before finding that the CRA rejection of this claim was not subject to reversal under an application for judicial review made under s. 18.1 of the Federal Court Act, Boswell J found that he had jurisdiction to consider the review application, stating (at para. 13) that “this Court has assumed and exercised jurisdiction to judicially review an exercise of the Minister’s discretion under subsection 152(4.2)).”

Locations of other summaries Wordcount
Tax Topics - General Concepts - Separate Existence taxpayer bound by lease agreements being contracted by his corporation rather than personally 454
Tax Topics - Income Tax Act - Section 9 - Computation of Profit matching principle not a rule of law 226

Canada (Attorney General) v. Abraham, 2012 DTC 5160 [at 7402], 2012 FCA 266, rev'g 2011 DTC 5140 [at 6126], 2011 FC 638

Minister entitled to ignore subsequent judicial developments

The taxpayers lived on a reserve and were employed at a sawmill built on former reserve land, which had been ceded for the sake of establishing the sawmill. The taxpayers' assessments for 1985-2002 were made on the basis that, as the taxpayers did not work on reserve land, their income was not exempt under s. 87 of the Indian Act. In the Boubard decision in 2008, it was found that s. 87 did apply and the taxpayers' assessments for 2000-2002 were varied. The taxpayers then applied in 2009 for discretionary relief under s. 152(4.2) of the Income Tax Act in respect of the remaining years. (The version of s. 152(4.2) in force during the relevant years did not have a limitations period.) The application was denied in respect of 1985-1998 on the basis that the Minister would presumably not have exempted the taxpayers' employment income from tax in those years.

The Federal Court judge granted the taxpayers' appeal on the basis that, because the Minister purported to ground its decision on the "state of the law" at the time, the Minister's decision was unreasonable if it was incorrect in law - which it was, on the basis of the Court's decision in Boubard.

The Court of Appeal granted the Minister's appeal. Although the question of correctness of the Minister's 1985-1998 assessments was relevant, the question in issue was whether the Minister's decision in 2009 to deny relief was reasonable. (In fact, the trial judge did base his decision on the latter question - see para. 13 of the TCC decision - but it is not clear that this issue was raised in the appeal.) Stratas J.A. stated (at paras. 44-45):

[W]here the decision-maker is considering a discretionary matter that is based primarily on factual and policy matters having very little legal content, the range of possible, acceptable outcomes open to the decision-maker can be expected to be quite broad. ...

[W]here the decision-maker is considering a discretionary matter that has greater legal content, the range of possible, acceptable outcomes open to the decision-maker might be narrower. Legal matters, as opposed to factual or policy matters, admit of fewer possible, acceptable outcomes.

The Minister's methodology and conclusions, which were based on "the state of the law" before 1999, were within this narrower range of acceptable outcomes. Stratas J.A. stated (at para. 61):

[The Minister's] methodology of conducting a year-by-year examination of the state of the law is supported by the wording of subsection 152(4.2) of the Income Tax Act. If the Delegate adopted a methodology that were contrary to subsection 152(4.2), her exercise of discretion would fall outside the range of acceptability and defensibility. But that is not the case here.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87 Minister's decision based on the prior "state of the law" in the relevant period could include the state of the jurisprudence 234

White v. Canada (Attorney General), 2011 DTC 5093 [at 5870], 2011 FC 556

taxpayer entitled to settlement on principled basis

The taxpayer participated in a government fishing licence retirement program in which he was paid a lump sum to surrender his commercial fishing licence and retire from fishing. CRA advised participants that the licence was a capital asset and therefore the entire payment was a taxable capital gain, and the taxpayer filed his return on that basis. A subsequent CRA external interpretation indicated that the payment was income from a business. CRA subsequently settled with other taxpayers on the basis that the 50% allocated to the fishing licence was a capital gain, and the other 50% was not taxable at all; a position affirmed by a subsequent Tax Court decision (the correctness of the 50/50 division between the licence and the retirement agreement had not itself been raised by either party). The taxpayer applied under s. 152(4.2) for a correction to his taxes, noting the difference in treatment.

The Assistant Director and Director at the first and second levels of the review denied the application, citing that the taxpayer could have filed an objection before the deadline and had not done so, and that CRA does not change a taxpayer's tax treatment only because of a settlement or court decision arrived at with another taxpayer. Heneghan J. found that the Director's decision should be referred back for redetermination. The decision had breached the taxpayer's right to procedural fairness, as the reasons given were not responsive to the taxpayer's claim of different treatment. In addition to the procedural problems, the decision itself "fail[ed] to meet the standard of reasonableness because the reasons lack[ed] justification, transparency, and intelligibility." (Para. 75.) Heneghan J. stated (at para. 84):

[T]he Minister is not entitled to make settlements with taxpayers that do not have a principled basis in law. In December 2003, in connection with a number of fish harvesters, the CRA offered to treat half of their [licence retirement program] payments as non-taxable, and the other half as capital gains. In order to do so, that offer must have accorded with the CRA's understanding of the Act and its application to the [licence retirement program] payments.

Costabile v. CCRA, 2008 DTC 6574, 2008 FC 943

Before going on to find that the Minister's decision not to accept amended returns was not unreasonable, Russell, J. noted (at para. 24) that "the Supreme Court of Canada in Dunsmuir v. New Brunswick, 2008 SCC 9, recently collapsed the patent unreasonableness and reasonableness simpliciter standards into one standard of reasonableness, leaving now only two standards of review: reasonableness and correctness". Russell, J. also noted that the Minister's powers to reassess after the normal reassessment period under s. 152(4.2) did not extend to corporations.

Hindle v. Canada (Customs and Revenue Agency), 2004 DTC 6378, 2004 FC 625

In the decision on behalf of the Minister not to re-open two statute-barred taxation years of the taxpayer to allow the deduction of expenses, the Minister's representative indicated that the expenses were incurred during 1991 and 1992 instead and that no taxes were owing for the 1991 taxation year. As this reasoning did not take into account that additional expenses in 1990 and 1991 would have an impact on future years for which the taxpayer had duly filed a notice of objection, the matter was referred back to the Minister for re-determination.

Plattig v. Attorney General of Canada, 2003 DTC 5601 (FCTD)

The decision of the Minister to deny the taxpayer's claim for additional expenses was remitted for reconsideration given that the Minister's representative had determined that there was no need to conduct a review of the taxpayer's materials in support of the claim on the basis of an erroneous view that the taxpayer was requesting deduction for expenses that already had been deducted.

Canada v. Barron, 97 DTC 5121 (FCA)

In reversing the trial judge, Pratte J.A. noted that the respondents were given a full opportunity to make representations to support their request and (at p. 5122) that "the law is clear that, save in exceptional cases, fairness does not require an oral hearing".

See Also

Rousseau v. Agence du revenu du Québec, 2018 QCCQ 7340

Quebec Minister advised to take steps under intergovernmental agreement to avoid double taxation

The taxpayer, who performed his work for various employers at pipeline sites outside Quebec for most of the taxation years at issue (2003 to 2011), but kept his house in Quebec, where his wife and children stayed and where he stayed as well on vacation or longer leave periods. Allen JCQ found that the taxpayer continued to reside in Quebec for those taxation years.

The taxpayer was assessed for those taxation years by the ARQ on October 24, 2013. Those years were not statute-barred as he had not filed Quebec returns for those years until returns were demanded by the ARQ. The reasons of Allen JCQ do not disclose whether the taxpayer applied for reassessments of the earlier years to vacate the Alberta tax within the 10-year time period described federally in s. 152(4.2).

Allen JCQ noted that he lacked jurisdiction to order, as requested by the taxpayer, that his Alberta taxes already paid be deducted from the assessed Quebec taxes, stating (at para. 64, TaxInterpretations translation):

[The Court’s] jurisdiction is limited to the matters set out in section 93.1.21 of the Tax Administration Act and it thus cannot order the Minister to undertake steps under the agreements between the federal government and the other provinces, including Alberta. That said … the Court is of the view the Minister should, in all equity, take steps under [such] agreements … so as to avoid this double taxation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) taxpayer, who worked mostly outside Quebec, maintained his family home and other strongest residency ties with Quebec 304
Tax Topics - Income Tax Act - Section 162 - Subsection 162(1) taxpayer established that failure to file Quebec returns was based on good faith reliance on his accountant’s view of his Alberta residency 139

DouangChanh v. The Queen, 2013 DTC 243 [at 1335], 2013 TCC 320

T1 Adjustment Request presumed not to be s. 152(4.2) application if such application would needlessly extinguish right to appeal

The taxpayer filed a timely notice of objection to a reassessment on the basis that it incorrectly denied the deduction of a charitable donation. The donation issue was common to several files, and the Minister indicated that the objection would be considered after the common issue was resolved.

The taxpayer requested, through a T1 Adjustment Request form (within the normal reassessment period), that the Minister allow carrying charges. The Minister allowed the request and issued a subsequent reassessment (which was beyond the normal reassessment period). The taxpayer did not think to object to the latest assessment, and consequently the taxpayer's right to appeal was apparently extinguished. The taxpayer applied to grant his application for an extension of time to file a notice of objection. The application was made more than one year and 90 days after the latest reassessment.

Woods J dismissed the taxpayer's appeal (as there is no basis for extending the statutory deadline for an extension application), but found that the taxpayer's initial notice of objection was still in effect. The latest reassessment had been issued outside the normal reassessment period, which only worked if the taxpayer's T1 Adjustment Request were construed as a request pursuant to s. 152(4.2). Woods J stated (at paras. 23-24):

The form was sent within the normal reassessment period and not long after the objection to the charitable donation was served. Shortly before this, the Minister had informed the applicant that no action would be taken on the file pending decisions on similar charitable donations.

In these circumstances, I would have thought it very unlikely that the applicant intended to request a reassessment to be made after the normal reassessment period thereby removing his appeal rights with respect to the charitable donation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 166.2 - Subsection 166.2(5) no discretion to extend deadline 119

Administrative Policy

15 September 2014 Internal T.I. 2014-0530981I7 F - Délai de 10 ans expiré - 152(4.2)

10-year limitation is binding even where expiry due to judicial delay/no remission order

The executors of an estate reported a deemed disposition on the death of the deceased of his right to exploit a gravel pit, whereas many years later the Quebec Court of Appeal ultimately confirmed that such right instead had been extinguished on his death. In confirming the decision that such taxation year of the estate could not be reassessed to remove the deemed gain, the Directorate stated:

[T]he time limitation fixed under subsection 152(4.2) has… expired. Although this is due to judicial delays, there are no exceptions to the 10-year time limit. Therefore, the Minister has no power to grant the application after the expiry of that period.

…[T]he Remissions and Delegations Section… are also of the view that the CRA is bound by the 10-year time limitation… .

16 March 2015 External T.I. 2014-0524371E5 F - Assessment beyond normal reassessment period

s. 152(4.2) not applicable if amount was not erroneous at time of return filing

An individual after being assessed for taxable benefits for certain years was subsequently required by his employer to reimburse the employer for the benefit amounts. Could s. 152(4.2) be applied to reverse the taxable benefit amounts in the years of assessment?

CRA noted that, in contrast to 2011-0394301I7, where "an error had been committed and there was no basis for including the amount in the computation of the taxpayer's income," here "the benefits were rightly considered taxable in the years of their grant" (TaxInterpretations translation).

Even if s. 152(4.2) applied, a deduction would not be permitted in light of s. 8(1)(n).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n) no reversal of taxable benefits if repaid in subsequent year 141

14 January 2014 Internal T.I. 2013-0514331I7 - Application of 111(1)(a) and 152(4.2)

carry-forward to subsequent year within 10 years

If the taxpayer had recognized the non-discretionary s. 34.1(3) deduction in a year that was now beyond the 10-year limitation in s. 152(4.2), it would have recognized a non-capital loss in that year. The taxpayer requested the carry-forward of this non-capital loss to a subsequent year in which it had net income within the 10-year limitation period applicable to the subsequent year. CRA stated that "the Minister may allow the deduction."

10 January 2014 Ministerial Correspondence 2013-0513401M4 F - Pertes agricoles restreintes

CRA will not reassess old years based on a new precedent

Respecting a request to reassess taxation years beyond the normal reassessment period to allow (presumably on the basis of Craig) the deduction of farm losses which originally had been assessed as being restricted, CRA first noted the 10-year limitation in s. 152(4.2), and stated (TaxInterpretations translation):

[T]he policy of the CRA is to not make a further assessment or determination when the request of the taxpayer is based solely on a judicial decision respecting another taxpayer. A court decision is based on the facts of that case.

24 October 2012 Internal T.I. 2012-0456711I7 F - Inadmissibilité à la déduction pour GC

no retroactive adjustment of capital gains exemption where claimed before the normal reassessment period

Mr. B claimed the full amount of the capital gains exemption in 2007 and then was subsequently assessed for a capital gain realized in 2006 pursuant to s. 51(2). He now wishes CRA to reassess 2007 on the basis of the capital gains exemption being withdrawn for that year, and to claim the exemption in respect of his 2006 gain. In stating that this was not possible, CRA stated (TaxInterpretations translation):

[N]othing in the Act permits the Minister to make an assessment for a taxation year after the expiration of the normal reassessment period applicable to a taxpayer for that year, if the result of the assessment is to increase the tax payable by the taxpayer for the year.

Thus, it would not be possible for the Minister to issue an assessment for the 2007 taxation year in order to cancel the capital gains deduction previously claimed by Mr. B. In addition, since he claimed the maximum amount under of the capital gains deduction in 2007, he would not be able to claim an amount for this deduction for the year 2006, even if the later year were reopened under subsection 152(4).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(7) - Paragraph 110.6(7)(b) potential application of s. 110.6(7)(b) where s. 51(2) applied 252
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) concept of a related transaction requires "more than a mere possibility"/retrospective attachment of related transaction 208

10 November 1992 Memorandum (Tax Window, No. 27, p. 7, ¶2343)

S.152(4.2) permits a taxpayer to create a non-capital loss beyond the normal reassessment period that can be applied to open years in certain circumstances.

October 1992 Central Region Rulings Directorate Tax Seminar, Q. C (May 1993 Access Letter, p. 229)

S.152(4.2) provides for the establishment of a non-capital loss in a year beyond the normal reassessment period, for example, where a taxpayer has inadvertently capitalized an item which should have been expensed, and the result of claiming the expense would be to produce a non-capital loss.

Subsection 152(4.3) - Consequential assessment


The Queen v. Bulk Transfer Systems Inc., 2005 DTC 2005 FCA 94

The Minister reassessed the taxpayer's 1987 taxation year on the basis that the replacement property rollover was not available in that year, so that the taxpayer realized a taxable capital gain in that year, and on the basis of the resulting increase in the taxpayer's RDTOH account, paid a dividend refund to the taxpayer in respect of his 1991 taxation year. The taxpayer's appeal of the 1987 taxation year assessment was subsequently allowed, and almost one year later, the Minister purported to make a reassessment under s. 152(4.3) of the taxpayer's 1991 taxation year disallowing the dividend refund.

Noël J.A. found that s. 152(4.3) was not available to accomplish this. Noël J.A. noted that the set-off provisions of s. 129(2) gave rise to an actual payment of the dividend refund, rather than to a "deemed payment" of those taxes, and that the dividend refund did not operate by way of a "tax credit."

Sherway Centre Ltd. v. Canada, 2003 DTC 5082, 2003 FCA 26

The taxpayer successfully appealed from reassessments denying the deduction of interest by it on a participating bond for its 1987 and 1988 taxation years, but did not file objections or waivers with respect to reassessments denying the deduction of interest on the bond for its 1989-1991 taxation years. Following a successful appeal for the taxpayer's 1987 and 1988 taxation years, the Minister reassessed the 1989 to 1991 taxation years to allow the deduction of non-capital losses resulting from the successful appeal, but not allowing the deduction of participating interest for those years.

The Court rejected the taxpayer's submission that s. 152(4.3) required the Minister, when determining the "balance", to go behind the dollar amount of the adjustment and to also give effect to the reason for the change in the income, namely, the deductibility of the participating interest payments made in those years. Evans J.A. stated (at p. 5087) that

"The 'balance of a taxpayer for a taxation year' suggests a sum: a numerical calculation ... To refer to the taxpayer's balance' would surely be an odd way for Parliament to express an intention that the Minister must look beyond the computation and consider the principles on which it is based."

Words and Phrases

See Also

Blackburn Radio Inc. v. The Queen, 2012 DTC 1213 [at 3580], 2012 TCC 255

no further reassessment permitted if order to vacate or vary

The taxpayer was assessed four times in respect of 1999 - in 2000, 2002, 2004, and 2009. The taxpayer appealed the 2004 reassessment, which for the first time denied the taxpayer's claimed deduction of bonuses. The Tax Court allowed the appeal in 2009 and vacated the 2004 reassessment on the basis that it was statute-barred. Seven months later the 2009 reassessment (which was a nil assessment and mirrored the 2002 reassessment) was made. Eleven months after that (and over a year following the Tax Court decision) the Minister issued consequential reassessments for 2000 and 2005 on the basis that the taxpayer's balances for those years the had been changed (e.g., an increase in the quantum of a capital gain realized in 2000.)

Woods J. found that consequential assessments could not be supported under s. 152(4.3). The 2009 assessment was statute-barred and, therefore, could not be the foundation for the consequential reassessments. The Minister argued that there was inherent authority to issue the 2009 reassessment because such reassessment was necessary in order to implement the Tax Court decision. Woods J, however, noted that where a Tax Court decision varies or (as here) vacates an assessment, "s. 171(1) does not contemplate that a further reassessment would be made" (para. 43) - nor was the 2009 reassessment required in order to authorize a refund to the taxpayer under s. 164(4.1) (para. 47). It was also irrelevant that the taxpayer did not object to the 2009 reassessment, because "Canadian Marconi is strong authority that an out-of-time reassessment is void absent an allegation of fraud or misrepresentation" (para. 62).

Woods J. also accepted the taxpayer's alternative argument that s. 152(4.3) did not apply because the 2009 assessment, even if it were valid, did not change the taxpayer's balances. The relevant change to the taxpayer's balances instead occurred seven months previously with the Tax Court decision.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 109
Tax Topics - Income Tax Act - Section 171 - Subsection 171(1) no further reassessment permitted if order to vacate or vary 173

Hill v. The Queen, 96 DTC 1399 (TCC)

S.152(4.3) apply to permit the Minister to reassess the taxpayer's 1985 taxation year by denying an s. 20(1)(j) deduction previously accorded by him to the taxpayer, where a judgment of the tax court established that the Minister had incorrectly reassessed the taxpayer under s. 15(2) for the taxpayer's 1983 and 1984 taxation years.

Administrative Policy

29 May 2017 External T.I. 2014-0537111E5 F - Consequential assessment

reassessing to increase closing inventory permits a s. 152(4.3) reassessment to change the taxes payable "balance" for the following year

An appeals officer rejected the taxpayer’s appeal of a reassessment by CRA to increase its closing inventory for Year 1. Can a reassessment be made under s. 152(4.3) to make a consequential redetermination of its opening inventory for Year 2 (an otherwise statute-barred year), thereby increasing its cost of sales for Year 2? CRA responded:

[T]he request to adjust the tax payable for Year 2 by changing the opening inventory balance can reasonably be considered to relate to the change in the "balance" of the taxpayer in Year 1.

…[A] consequential assessment could therefore be issued under subsection 152(4.3) to reflect the tax payable as a result of an adjustment to the opening inventory balance for Year 2, so that it is consistent with the Year 1 year end inventory balance, as determined by the reassessment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 10 - Subsection 10(2) reassessing to increase closing inventory permits reassessment to increase next year's COS 29

3 June 2014 Internal T.I. 2013-0489471I7 - Subsection 171(1)

no power to reassess following order to vacate or vary

Was the Minister permitted to issue a reassessment in order to give effect to a Court's order to vacate or vary an assessment under s. 171(1)? CRA stated:

In Blackburn Radio Inc. v The Queen, 2009 TCC 155…the Court correctly determined that the Minister does not have the authority to issue a reassessment to give effect to the Court's order to vacate or vary the assessment. Further, if a reassessment by the Minister is permitted or required in order to give effect to the Court's order to vacate or vary the assessment, this would render subparagraphs 171(1)(b)(i) and (ii) meaningless.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 169 - Subsection 169(1) appeal from varied assessment 100
Tax Topics - Income Tax Act - Section 171 - Subsection 171(1) no power to reassess following order to vacate or vary 99

28 January 1994 Memorandum 940050 (C.T.O. "Consequential Reassessments")

Where the district office disallowed capital losses claimed in a year on the basis that there was no disposition of the particular properties, and there was an actual disposition of the properties at a loss in another year which otherwise would be statute-barred, s. 152(4.3) applies to permit re-opening of that subsequent year to allow the capital losses (where the request is made on time).

Subsection 152(4.4)

Subsection 152(5) - Limitation on assessments


Canada v. Anchor Pointe Energy Ltd., 2003 DTC 5512, 2003 FCA 294

objection does not extend normal reassessment period

After the Minister had assessed predecessors of the taxpayer on the basis that amounts paid by them to purchase seismic data exceeded the fair market value of the data, so that the full purchase price did not qualify as CEE, the taxpayer filed Notices of Objection. The Minister then issued Notifications of Confirmation which, based on the subsequently-decided decision in Global Communications, found that none of the purchase qualified for treatment as CEE (although the Minister did not purport to increase the tax payable by the taxpayer).

Rothstein J.A. stated (at para. 33) that he was "unable to agree" with the analysis of Rip J. in the Tax Court that the expiry of the normal reassessment period was stayed or extended until the Minister took action under s. 165(5) as "the implication of such an interpretation is that because a taxpayer files a Notice of Objection, the Minister has an unlimited time to reassess the taxpayer to increase tax payable after the normal reassessment period." Although s. 165(5) allowed the Minister to reassess after the expiry of the normal reassessment period where a Notice of Objection had been filed, in light of s. 152(5) the Minister could not so reassess as to include in the taxpayer's income amounts that were not included in an assessment or reassessment made within the normal reassessment period. Here, however, the effect of the Minister's Notice of Confirmation was not to include additional amounts in the taxpayer's income.

See Also

Foster v. The Queen, 2016 DTC 1010 [at 2562], 2015 TCC 334

rectification order lead to consequential out-of-period reassessment; out-of-period assessment upheld

The taxpayer obtained a rectification order relating to the purchase for $415,000 of a fishing vessel and equipment (collectively, "the equipment") and a fishing licence. Before the rectification order, he acquired the equipment and licence on his own behalf, and a corporation he had incorporated ("KJF") then bought the equipment from him for $200,000. The Minister reassessed the taxpayer in 2012 for a $70,000 s. 15(1) benefit conferred on him by KJF on the basis that the value of the equipment was $130,000 with the licence holding the balance of the value. The taxpayer filed his notice of objection before applying for the rectification order.

The rectification order provided that the taxpayer had instead acquired the equipment on KJF's behalf. The Minister reassessed the taxpayer in 2014 on a similar basis for the $200,000 payment from KJF (although instead valuing the equipment at $150,000 and the shareholder benefit at $50,000).

The first reassessment was made on the basis of a taxpayer waiver, which the taxpayer had revoked before the 2014 assessment. He applied to the Court for a determination that, under s. 152(5), the Minister lacked the authority to issue the 2014 reassessment.

After noting (at para. 31) his agreement with the taxpayer "that reassessments made pursuant to subsection 165(3) are subject to the limitation on reassessing found in subsection 152(5)" and (at para. 35) that "in making a reassessment pursuant to subsection 165(3) after the expiry of the normal ressessment period, the Minister may not change the basis of the reassessment against the taxpayer," Paris J nonetheless went on to reject the taxpayer's application. Although the transactions referred to in the 2012 assessment were nullified, the 2014 assessment dealt with the same amounts. He stated that "the crux of the Minister's two reassessments is identical: KJF overpaid for fishing equipment, and the amount of the overpayment is a shareholder benefit of the Appellant" (para. 39).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Rectification & Rescission consequential reassessment permitted under s. 152(5) 61

Stone Container (Canada) Inc. v. The Queen, 98 DTC 1508 (TCC)

The Minister allowed the taxpayer's notice of objection to an inclusion in its taxable income of a shareholder benefit by making a reassessment, beyond the normal reassessment period, that excluded the alleged benefit but corrected an error made in a previous reassessment of the Minister by reducing the federal abatement and logging tax credits allowed to the taxpayer. Rip TCJ. found that the Minister had the authority to so reassess.

Merswolke v. The Queen, 95 DTC 821 (TCC)

Before going on to find that two reassessments issued following the normal reassessment period were void, Mogan TCJ. stated (at p. 826):

"... subsection 152(5) does not by itself authorize the Minister to make a reassessment with respect to a particular taxation year. If the Minister wants to reassess, he must find his authority under subsections 152(4), (4.2) or (4.3)."

Contonis v. The Queen, 95 DTC 511 (TCC)

In order to reassess a year outside the normal reassessment period, the initial onus lay upon the Crown to establish that the taxpayer, in filing his returns of income for that year, made a misrepresentation referred to in s. 152(4)(a)(i). Because it was admitted that there were other misrepresentations in the taxation year that justified the reopening of that year under s. 152(4)(a)(i), the initial onus of the Crown was met, and the onus reverted to the taxpayer under s. 152(5) to show that the failure to declare any other amounts added by the Minister was not attributable to negligence, carelessness or wilful default.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 25 - Subsection 25(1) 64

Administrative Policy

12 September 2014 Internal T.I. 2014-0518641I7 - Consequential Adjustments to Corporate Min Tax

CMT reassessment to reflect loss carryback to prior year

As a result of a reassessment of the 2008 taxation year (for example to reflect the application of a loss carryback), adjustments have been made to balances which impact the calculation of the CMT credit for the 2009 and subsequent taxation years. The 2009 taxation year is now statute-barred. May the balances with respect to the CMT credit for 2009 now be adjusted? CRA responded:

[S]ubsection 112(2) of the TA provides that subsections 152(4.3) and 152(4.4) of the Act apply for the purposes of the TA.

…[T]he balances that changed in the 2008 taxation year impact the calculation of the CMT credit in a subsequent taxation year (or similarly, the Ontario Transitional Tax Debits or Credits in the 2009 and subsequent taxation years). In our view, the definition of a "balance" in subsection 152(4.4) also includes these particular balances, which would impact these calculations.

…As a result, the Minister may issue a reassessment of the 2009 taxation year to reflect the changes required in the calculation of the CMT, within the timeframes specified in subsection 152(4.3)… .

9 January 1992 T.I. 913015 (December 1992 Access Letter, p. 31, ¶C144-190)

RC is not precluded from issuing a notice of determination beyond the normal reassessment. Where the determination would require the reduction of the amount of a loss reported for the purpose of an assessment made before the end of the normal reassessment period. However, that loss determination could not result in a reassessment of taxes for a year that was statute-barred.

9 January 1992 T.I. (Tax Window, No. 15, p. 15, ¶1689)

S.152(5) does not prohibit the determination or redetermination of a loss under s. 152(1.1) for a year that is statute-barred.


Pooja Samtani, "Revisiting the Limits: the Powers of the Minister Post-Objection", Tax Litigation, Vol. XVIII, No. 3, 2012, p. 1106 at 1107

While subsection 152(5), read literally, would only preclude the Minister from including additional amounts in "income" when reassessing a taxpayer under subsection 165(3), the courts have held that the restriction on the Minister is broader than that necessarily implied by the language of subsection 152(5). The cases discussed below establish the following general principles for reassessments issued pursuant to subsection 165(3):

  • the Minister cannot reassess the taxpayer to increase its tax payable;
  • reassessments following the issuance of a notice of objection are generally limited to allowing relief, but the Minister may make "mechanical" adjustments when reassessing in response to a notice of objection; and
  • the Minister may not offset a requested adjustment on one issue by making an adjustment on another issue not raised in or contemplated by the objection.

[Then discusses: Anchor Pointe Energy v. The Queen, 2003 DTC 5512 (F.C.A.); Stone Container v. The Queen, 98 DTC 1508 (T.C.C.); Gilbert c. The Queen, 2009 DTC 1364 (T.C.C.); Petro-Canada v. The Queen, 2003 DTC 94 (F.C.A.); and 943372 Ontario Inc. v. The Queen, 2007 DTC 1051 (T.C.C.)]

Subsection 152(6) - Reassessment where certain deductions claimed


Greene v. MNR, 95 DTC 5078 (FCTD), aff'd 95 DTC 5684 (FCA)

The taxpayer was successful in obtaining an order of mandamus directing the Minister to carry back a large capital loss it had reported in its 1988 income tax return to its three preceding taxation years. Revenue Canada then advised the taxpayer that it was reassessing those taxation years, but with no change to his taxable income for those years because the 1988 loss had been disallowed.

After first finding against the taxpayer on the ground that the Court had no jurisdiction to deal with the matter, Rothstein J. went on to indicate in light inter alia of the wording of s. 153(7) that the words "take into account" in s. 152(6) meant "to consider" rather than to "allow". Accordingly, the Minister was not obliged to allow the requested deduction.

Words and Phrases
take into account

Darke v. MNR, 76 DTC 6468, [1976] CTC 734 (FCTD)

The taxpayer was unable to carry back business losses because he did not file an amended return within the statutory time limit (nor at any subsequent time.)

Montreal Trust Company v. Minister of National Revenue, 62 DTC 1242, [1962] CTC 418, [1962] S.C.R. 570

Within the time limit for doing so the taxpayer filed an amended return for its 1952 taxation year in which it carried back a loss from its 1953 taxation year. In finding that the taxpayer was later precluded (following a reassessment of its 1952 taxation year and following the expiry of the time limit referred to in s. 42(4A) of the pre-1972 Act from filing a further amended return for its 1952 taxation year, Judson J. (with whom the majority concurred on this point) stated (p. 1246):

"The mere fact of a re-assessment in 1955 does not open the matter of tax liability at large and compel the Minister to re-assess in accordance with an amended return made out of time, according to the above quoted section. Under this legislation, if a taxpayer wishes to carry back business losses, he must file his amended return within the statutory time limit. Otherwise, the Minister cannot be compelled to accept the amended return."

Administrative Policy

6 April 1993 T.I. (Tax Window), No. 30, p. 7, ¶2489)

RC will accept late-filed elections provided a reassessment can be made within six years from the date of mailing of the notice of original assessment or of notification that no tax was payable for the taxation year.

28 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 27, ¶1114)

Where in its 1987 and 1988 taxation years the taxpayer has realized capital gains which it initially offset with non-capital losses, then in 1990 realized a capital loss which is large enough to offset the capital gains in 1987 and 1988, RC generally will accede to a request to substitute one type of loss (a capital loss) for another (the non-capital losses) provided the years are still open for reassessment.

86 C.R. - Q.72

Although the Minister is not required to effect an investment tax credit carryback (or any other carryback) request where it arises as a result of a non-capital loss carryback, he will exercise his discretionary authority under s. 152(4)(b) to permit both carrybacks.

85 C.R. - Q.3

Provided that a reassessment can be made with 6 years from the mailing of the original assessment, a late request to carry back a loss to that year will be accepted.

Subsection 152(7) - Assessment not dependent on return or information


Morrow v. The Queen, 92 DTC 6380 (FCA)

Heald J.A. adopted the explanation of President Thorson in Dezura v. MNR, [1947] CTC 375 at 378 (Ex Ct) of the effect of s. 152(7).

Abed Estate v. The Queen, 82 DTC 6099, [1982] CTC 115 (FCA)

The taxpayer did not file any income tax returns on the ground, later established in court to be unfounded, that he was exempt from tax. He was assessed for the taxation years 1960 to 1964, but not 1959, on the basis that a S.20(1)(n) (then, S.85B(1)(d)) reserve should be deducted from his profit from a 1959 sale of land, and included in the income of those subsequent years pursuant to s. 12(1)(e)(ii) (then, S.85B(1)(e)). It was held that because he had the option of including the full amount of the profit in his 1959 income, and the record did not disclose that there had been an assessment for the 1959 year, that no part of the profit made in 1959 could be included in his income for the subsequent years.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(e) no indication of reserve claimed in previous sale year 128
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) taxpayer did not object to Minister deducting reserve 157
Tax Topics - Treaties - Income Tax Conventions - Article 7 98

See Also

Deneschuk Building Supplies Ltd. v. The Queen, 96 DTC 1467 (TCC)

A failure of the Minister to give notice in writing that he required a form T2013 before assessing under s. 125(4) was not cured by s. 152(7). Although the Minister could assess the taxpayer while ignoring the requirements of s. 125(4), this did not change the legal effect of such failure.

Administrative Policy

11 September 2015 Internal T.I. 2015-0599851I7 - TFSA arbitrary assessment

TFSA holder can be assessed without being contacted

Under proposed changes to CRA’s procedures, any taxpayer who, having failed to remove the excess amount from his or her TFSA following a warning letter, will be subject to an automatic assessment of tax on the excess contributions. In finding that such assessments would be authorized, CRA stated:

Under subsection 207.07(1), this individual is also required to file with the Minister a return for the year… . By virtue of subsection 207.07(3)… section 152…appl[ies]… .

Subsection 152(7) clearly provides that the Minister… in making an assessment may… if no return has been filed, assess the tax payable. Therefore, notwithstanding that the taxpayer is required to file a return, we agree with your view that subsection 152(7) permits the Minister to make an assessment of tax under Part XI.01 without first contacting the taxpayer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 207.02 CRA to assess taxpayers who have overcontributed to TFSAs after only one warning letter 46

Subsection 152(8) - Assessment deemed valid and binding


Canada v. 594710 British Columbia Ltd., 2018 FCA 166

s. 152(8) cured an error in an assessment as to when the taxation year in question commenced

A partner of a real estate partnership that had realized profits from condo sales was sold on May 29, 2006, being two years before the partnership fiscal period end, to an arm’s length purchaser (Nuinsco), with most of the partnership profits then being allocated to Nuinsco on May 31, 2006 following the winding-up of Partnerco into Nuinsco. CRA assessed the Partnerco (and three other Partnercos who were similarly situated) for the notional period May 1 to June 1, 2006 in respect of the partnership income that had instead been allocated to Nuinsco (i.e., ignoring the deemed year end of May 28, 2006 that resulted from the acquisition of control of Partnerco by Nuinsco). The taxation year of Partnerco ending on May 28, 2006 was statute-barred, but not that ending on June 1, 2006. The taxpayer, in turn, was assessed under s. 160 on the basis that (following the reallocation of income to the Partnerco as described above) there was a tax liability of Partnerco that had flowed through to the taxpayer under s. 160 as a result of a stock dividend to the taxpayer and a redemption in its hands of the stock dividend shares.

In finding that the reassessment was valid in light of s. 152(8) notwithstanding that it treated the reassessed year ending June 1, 2006 as having commenced on May 1 rather than May 29, Woods JA stated (at paras. 92, 95):

It is true that the Minister was precluded from assessing the period from May 1 to 28, 2006, but the Minister has never alleged that there was any income in this period which potentially could give rise to an assessment. The assessing action by the Minister did not change the substance of the notification previously issued that there was no tax payable for the period of May 1 to 28, 2006. …

The situation is one in which the mistake should be corrected by a reassessment rather than by finding the assessment to be void. An appeal of the Partnerco assessment was not before the Tax Court or this Court and therefore the assessment cannot be corrected by the Court ordering a reassessment. That does not matter. As mentioned earlier, Holdco does not have any greater rights regarding the Partnerco assessment than Partnerco would have had if it had appealed the assessment directly.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) allocation of most partnership profits to a lossco that acquired its interest at year end without economic risk was vacuous and abused ss. 96(1)(f), 103(1) and 160 596
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) stock dividend followed by redemption of the stock dividend shares effected in combination a transfer of property for no consideration 227
Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1) s. 103(1) likely applies to the allocation of most of the partnership profits at year end to a lossco that never had significant economic interest or risk in the partnership business 311

Freitas v. Canada, 2018 FCA 110

a statute-barred reassessment was valid for the purpose of being objected to and vacated on substantive grounds

The taxpayer, a retired Deloitte partner, was assessed by CRA in 2009 to impose a CPP contribution obligation on an amount of income that was distributed to him under ITA s. 96(1.1). CRA denied the taxpayer’s request four years later for a refund of this amount on the grounds that this request had not been made within the required three-year period – and in the resulting 2014 reassessment it in fact denied some deductions/credits that had been initially allowed in its 2009 assessment.

After finding that the 2014 reassessment was not invalid under ss. 152(4.2) and 165(1.2), and in response to a further Crown argument that the 2014 reassessment was statute-barred, Webb JA noted that the reassessment was deemed by s. 152(8) to be valid subject to being vacated, stating (at para. 22):

As a result, the reassessment made on May 20, 2014 is deemed to be valid notwithstanding any error or defect or omission in the assessment or in any proceeding under the ITA relating thereto.

Accordingly it could be objected to on substantive grounds (in addition to being vacated on the grounds that a reassessment outside the normal reassessment period cannot increase the taxpayer’s liability in the absence of misrepresentation.)

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.2) s. 152(4.2) inapplicable where reassessment, albeit in response to refund request, increased taxpayer’s liability 415
Tax Topics - Other Legislation/Constitution - Federal - Canada Pension Plan - Section 14 s. 96(1.1) income was not from carrying on business 218
Tax Topics - Other Legislation/Constitution - Federal - Canada Pension Plan - Section 38 - Subsection 38(4) - Paragraph 38(4)(a) CRA has discretion to refund excess contributions 86
Tax Topics - Income Tax Act - Section 96 Backman statements applied to common law partnerships 188

Canada (National Revenue) v. JP Morgan Asset Management (Canada) Inc., 2014 DTC 5001 [at 6501], 2013 FCA 250

judicial review of Minister's decision to assess is a "tool of last resort"

The 2002 to 2008 taxation years of the taxpayer were assessed for its failure to withhold Part XIII tax. The taxpayer (in addition to objecting under s. 165) sought to have the assessments for the earlier (2002-2004) years set aside, on an application for judicial review in the Federal Court, on the basis that it was contrary to the Minister's policy to go back more than two years on audit.

Stratas JA found that each of the following grounds was a sufficient basis for dismissing the application:

  • the notice of application failed to state a "cognizable administrative law claim," as "changes in policies or departures from policies ... do not constitute an abuse of discretion..." (para. 75, similarly para. 108);
  • the Federal Court was barred from considering the claim by s. 18.5 of the Federal Courts Act, as ITA ss. 165 and 169 "constitute a complete appeal procedure that allows taxpayers to rise in the Tax Court all issues relating to the correctness of the assessments" (para. 82, similarly para. 110); and
  • the Federal Court could not grant the relief sought: "If the 'essential character' of the relief sought is the setting aside of an assessment, it must be struck" (para. 93), as "only the Tax Court can grant this relief: subsection 152(8)" (para. 111).

Stratas JA gave (at para. 98) oversight of political or racial targeting through selective assessments as "examples of judicial reviews that might avoid the three objections to judicial review," and stated (at para. 101) that judicial review "is a tool of last resort."

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Federal Court Act - Section 18.5 judicial review of Minister's decision to assess is a "tool of last resort" 242

Canada v. Roitman, 2006 DTC 6514, 2006 FCA 266

In granting a motion of the Crown to strike out a Statement of Claim of the taxpayer, which sought damages against the Crown on the basis that the Crown had engaged in deliberate conduct to deny the taxpayer the benefit of the law, Décary J.A. noted (at p. 6516) that "it is settled law that the Federal Court does not have jurisdiction to award damages or grant any other relief that is sought on the basis of an invalid reassessment of tax unless the reassessment has been overturned by the Tax Court", and that "it is settled law that the Tax Court of Canada does not have jurisdiction to set aside an assessment on the basis of abuse of process or abuse of power ...".

Friedberg v. The Queen, 2000 DTC 6248 (FCA)

error apparent on face of document

A notice of reassessment of the taxpayer for $1.3 million disclosed that figure in the refund box rather than the balance unpaid box. In finding that the taxpayer could take no refuge in s. 152(8) in seeking to recover the $1.3 million, Robertson J.A. indicated that the error was in the notice of assessment and not in an assessment; and the error was apparent on the face of the document.

The Queen v. Westbrook Management Ltd., 96 DTC 6590 (FCA)

In finding that the taxpayer was not liable under s. 159(3) following the winding-up of its subsidiary for income tax liabilities of the subsidiary that had not been reassessed within the normal reassessment period, Hugessen J.A. stated (at p. 6592):

"While it may be the case, as argued by the appellant, that a person who is made liable for the taxes due by another is able to dispute the other's liability even when the latter could no longer himself have done so, that does not alter the fact that an assessment, until validly varied, binds both the Minister and the taxpayer in respect of whom it is issued."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 159 - Subsection 159(3) 82

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

notice of assessment was sufficient to put the taxpayer on notice of the particular amount claimed

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. Joyal J stated (at p. 5480) that it thus was "sufficient to put a taxpayer on notice that a particular amount is claimed."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(3) reassessment valid notwithstanding missing particulars 82
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(1) 82

The Queen v. Erasmus, 92 DTC 6301 (FCA)

Assessments which had never been successfully attacked pursuant to the Income Tax Act could not be collaterally attacked through application for a declaration that the income in question was exempt from tax, given the provisions of s. 152(8)

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 164 - Subsection 164(1) 90

Lornport Investments Ltd. v. The Queen, 92 DTC 6231 (FCA)

In rejecting an argument on behalf of the taxpayer that a reassessment which was issued beyond the time limit established by s. 152(4) was nonetheless valid until vacated by a court order and, therefore, had the effect of nullifying a previous reassessment, Stone J.A. stated (p. 6233):

"It seems to me that [s.152(8)] is not addressed to a situation where an assessment is issued out of time but rather to a situation where an assessment is issued in time but contains an 'error, defect or omission' or that such is contained in any proceeding under the Act relating to it."

The Queen v. Regina Shoppers Mall Ltd., 91 DTC 5101 (FCA)

Notwithstanding that the Minister had reassessed previous taxation years of the taxpayer on the basis that a gain had been realized by the taxpayer on income account rather than capital account, in its 1979 taxation year the taxpayer filed its return on the basis that the inclusion of its previous year's reserve, and the deduction of a further reserve, should be done under paragraph 40(1)(a) rather than paragraph 20(1)(n). In rejecting an argument that the taxpayer was compelled in its 1979 return to accept the Minister's view of the previous sale as being on capital account, MacGuigan J. found that subsection 152(8) deals only with the correction of errors, defects or ommissions in reassessments, and does not deem all reassessments to be valid and binding.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 130

Greenwood Estate v. The Queen, 90 DTC 6690 (FCTD)

A notice of assessment was not a nullity by virtue of the fact that it was issued in the name of the estate of the taxpayer, rather than in the name of the taxpayer. The executor was not confused by the notice of assessment and understood it to relate to the taxpayer's terminal year return and not to the estate's return.

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

citing wrong section was not a substantial and fundamental error

After being reassessed by the Minister, the taxpayer correctly noted in his Notice of Objection that the reassessments were based upon a repealed provision of the Act (s.74(5)). In his Notice of Confirmation, the Minister relied on ss.3, 9(1), 152 and 248 of the Act.

After reviewing jurisprudence to the effect "that an assessment may be valid although the reason assigned by the Minister for making it may be erroneous", Jerome A.C.J. stated (at p. 6079):

"Sections 152(3), 152(8) and 166 combined clearly indicate that this error by the Minister of National Revenue is far from fatal. The cases only limit these sections where there is substantial and fundamental error ... The Minister has not committed an error of sufficient seriousness to put it into the same category as cases like Optical Recording."

In orally affirming this decision, Sone JA stated (at p. 5417) that "the Minister's mental process in making an assessment cannot affect a taxpayer's liability to pay the tax imposed by the Act itself."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) wrong section cited 83

Lavers v. Minister of Finance of B.C., 90 DTC 6017 (BCCA)

The taxpayers were assessed under s. 163(2), convicted under s. 239(1), and then challenged their assessments under s. 163(2) as being contrary to the prohibition under s. 11(h) of the Charter for being punished for the same offence "again". It was held that the taxpayers effectively had been "punished" under s. 163(2) at the time of their assessments:

"I would be hard put to accept the proposition, without authority to support it, that a taxpayer, against from a valid and binding assessment has been made and penalties imposed, which he has paid, has not been 'punished' until such time as the taxpayer exhausts all available appeal processes."

Re Norris, 89 DTC 5493 (Ont CA)

The request of a trustee in bankruptcy for Revenue Canada working papers to back up an assessment "was fully answered by the notice of assessment."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1) 94

Guaranty Properties Ltd. v. The Queen, 87 DTC 5124, [1987] 1 CTC 242 (FCTD), rev'd 90 DTC 6363 (FCA)

curative provisions cannot correct a fundamental substantive error

The issuance of a reassessment in the name of a predecessor corporation rather than the amalgamated corporation was a defect which was not cured by ss. 152(3), 152(8) or 166. Rouleau J stated (at p. 5133):

Equity alone would prevent the use of curative provisions such as those ... to correct a substantive error of this nature.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1) 98

Dominion of Canada General Insurance Co. v. The Queen, 86 DTC 6154, [1986] 1 CTC 423 (FCA)

An argument in an appeal from a reassessment of the taxpayer's 1969 income tax that since a reserve should not have been claimed in 1968, the amount of the reserve was not includible in 1969 income was found to be "not so much a direct challenge to the validity of the 1968 assessment (which was not appealed and is long since closed) as it [was] an attempt to argue a legal effect in computing 1969 income from what the appellant says ought to have been done in reporting 1968 income. I think it may be legitimately advanced notwithstanding that the 1968 taxation year of the appellant is plainly a closed book."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(e) inclusion of amount incorrectly deducted 104

Stephens v. The Queen, 84 DTC 6114, [1984] CTC 111 (FCTD)

see also 87 DTC 5024, [1987] 1 CTC 88 (FCA)

Irregularities in an assessment notice that do not either confuse or prejudice the taxpayer (such as referring to the Department of National Revenue as Revenue Canada, Taxation, and using the name of the former rather than the present Deputy Minister) do not render it invalid but in any event such irregularities would be cured by s. 152(8).

See Also

Pellerin v. Agence du revenu du Québec, 2017 QCCA 1339

statement of onus embedded in s. 152(8)

After stating (at para. 16, TaxInterpretations transalation) that s. 1014 of the Taxation Act (similar to ITA) “provides that the burden of proof rests on the taxpayer who contests a notice of assessment,” the Court rejected a submission that proof that an ARQ auditor would enjoy an increased bonus as a result of assessing the taxpayer would reverse the normal burden of proof on the taxpayer to establish prima facie proof of the incorrectness of the assessment.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Onus proof that auditors got bonuses for assessing would not change the burden of proof 131

Métaux Kitco Inc. v. ARQ and AG, 2016 QCCS 444

no presumed validity in CCAA proceedings

After finding that CRA and ARQ could not use their statutory set-off rights to set off input tax credit and input tax refund claims generated by an insolvent company after it went into protection under the CCAA against (disputed) assessments made by them in which they denied ITCs and ITRs of $313 million that the company had claimed before the CCAA proceedings, Paquette J went on to find that the statutory presumptions (e.g., ETA, s. 299(3)) that assessments are valid and binding did not apply in CCAA proceedings.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Companies' Creditors Arrangement Act - Section 21 CRA precluded from setting off assessed amount for pre-CCAA filing periods against post CCAA ITC claims of taxpayer 284
Tax Topics - Excise Tax Act - Section 318 no set-off of assessment of pre-CCAA filing periods against post CCAA ITC claims 113
Tax Topics - Excise Tax Act - Section 299 - Subsection 299(3) no presumption of validity in CCAA proceedings 119

Schnier v. Canada (Attorney General), 128 O.R. (3d) 537, 2016 ONCA 5

assessed amount under appeal not an amount payable

At the time of his bankruptcy, the taxpayer had unpaid income tax assessments of $4.478 million of which$4.424 million were under appeal to the Tax Court of Canada. At issue was whether the full assessed amount qualified as an “amount payable, within the meaning of subsection 223(1) of the Income Tax Act … by an individual,” in which case s. 172.1 of the Bankruptcy and Insolvency Act, which provided more onerous conditions for the discharge of an individual with substantial amounts of such “personal income tax debts,” would have been applicable.

In finding that the taxes under appeal did not so qualify under s. 223(1), Brown JA noted the Attorney General’s argument that ITAs. 158 deems an assessed amount to thereupon be “payable forthwith,” and s. 152(8) deems an assessment to be “valid and binding,” and stated (at paras. 41, 49-50)

Both ss. 152(8) and 248(2) indicate that until the objection or appeal process is concluded, the amount of tax the Minister can compel a taxpayer to pay cannot be known. The assessed amount can change from time to time by virtue of judicial decisions or new assessments: Terra Nova Properties [1967] 2 Ex. C.R. 46, at p. 51.

The restraints placed by ITA s. 225.1 on the enforceability of an assessed amount of tax that is under appeal are strong indicators that a claim based on those amounts would not be provable in a bankruptcy.

Consequently, where amounts of income tax assessed against an individual bankrupt taxpayer remain under appeal at the time of his discharge hearing, the existence of the outstanding appeal entitles the trustee to classify the claim based on the unpaid assessed amounts as a contingent, unprovable one.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Bankruptcy and Insolvency Act - Section 172.1 - Subsection 172.1(8) assessment under appeal is not an “amount payable” and can be classifed as unprovable 268
Tax Topics - Income Tax Act - Section 223 - Subsection 223(1) appealed assessment not an amount payable 130

Suffolk v. The Queen, 2010 DTC 1201 [at 3509], 2010 TCC 295 (Informal Procedure)

The taxpayer was assessed pursuant to a reassessment that showed the increase in her income, the corresponding amount of tax and referred to an amended T4 slip that had been issued by her employer (incorrectly referred to by the name of a successor corporation). After referring to jurisprudence indicating that the Minister was not compelled to set out the details to the revision of tax in a Notice of a Reassessment, Paris, J. found that the erroneous reference to the name of the employer was an error that was cured by the curative provisions of ss.152(3) and (8), and that the reassessment was valid.

APL Oil & Gas Ltd. v. The Queen, 96 DTC 1666 (TCC)

incorrect year referenced

An assessment that erroneously referred to the taxation year of the taxpayers ending on January 2, 1987 rather than December 31, 1986 was deemed to be valid under s. 152(8).

Regime de Rentes de Gestion R.S.T. Inc. v MNR, 93 DTC 674 (TCC)

assessment of trust rather than trustee was an error of substance not cured by s. 152(8)

The Minister assessed the appellant for a penalty under s. 162(7) for having failed to comply with the requirement under Reg. 204(1) for a fiduciary to file a return respecting income received by it in that capacity. However, Lamarre Proulx TCJ found that the appellant (being a pension plan, namely a trust) was not the fiduciary for the trust and that such fiduciary instead was another body (the “Committee”). She found that the assessment was a nullity that was not cured by s. 152(8), stating (at p. 674) that “to assess the trust rather than the fiduciary is an error of substance and not of form.”

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

s. 152(8) does not remedy substantial error

Rip TCJ. followed the Stephens decision in finding (pp. 1026-1027) that "an assessment containing a substantial error, defect or ommision is not saved by subsection 152(8)".

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) 116

Subsection 152(9) - Alternative basis for assessment


Gramiak v. Canada, 2015 FCA 40

alternative assessment based on same underlying assumed facts

At issue was whether assessing tax on the amounts in issue as “benefits” pursuant to s. 146(8), rather than by reason of acquiring a non-qualified investment and/or property below fair market value pursuant to ss. 146(9) and (10), amounted to an alternative argument that was prohibited by s. 152(9). In this regard, Noël C.J. stated (at paras. 33, 37-38):

[A]n alternative argument cannot be advanced when it would result in a reassessment being made outside the normal reassessment period set out in subsection 152(4)... . This restriction which is central to the present appeal acknowledges the fact that allowing the Minister to raise an argument based on a legal and factual basis that is different from the one underlying the assessment after the normal reassessment period has expired would in effect do away with the limitation period. ...

[T]he Tax Court judge found that the facts underlying the reassessments were that funds used to purchase the debentures having nil or nominal value were diverted to a law firm’s trust account in the course of RRSP stripping transactions… . The bottom line is that the appellant engaged in RRSP stripping transactions and that is the factual basis relied upon by the Minister in issuing the reassessments … .

This admittedly broad view of the factual basis for the reassessments finds support in the language of the letter from the auditor addressed to the appellant outlining the proposed reassessments… .

Canada v. Global Equity Fund Ltd., 2013 DTC 5007 [5526], 2012 FCA 272

The Minister invoked the general anti-avoidance rule to reassess the taxpayer on a series of surplus-stripping transactions. The taxpayer had subscribed for common shares of a new subsidiary for approximately $5.6 million, which then declared a stock dividend in the form of preferred shares having $56 of paid-up capital and a $5.6 million redemption price. Consequently, the value of the common shares was largely eliminated. The taxpayer disposed of the common shares in consideration for their depleted value and reported a business loss.

The trial judge rejected the Minister's argument that the transactions were abusive of the Income Tax Act as a whole. On appeal to the Court of Appeal, the Minister raised several new arguments, including that:

  1. the transactions were abusive of ss. 3, 4, 9 and 111, an underlying policy of which is that business loss claims should reflect actual losses;
  2. the taxpayer's purported losses were not business losses, given that the shares were not acquired as inventory or as part of and adventure or concern in the nature of trade (see "Rollover and other non-trading transactions"); and
  3. to the extent that the taxpayer had any losses, they were capital in nature.

The Court found that, pursuant to s. 152(9), the Minister was free to introduce the first argument at the Court of Appeal but not the second and third. While the first argument entailed a pure question of law, the latter arguments entailed mixed questions of fact and law "for which an evidentiary basis was not established in the Tax Court of Canada" (para. 37).

The Court of Appeal proceeded to grant the Minister's appeal based on the first argument, but awarded costs to the taxpayer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) abuse of s. 9 to recognize losses not corresponding with commercial reality 297

Toronto-Dominion Bank v. Canada, 2011 DTC 5125 [at 6061], 2011 FCA 221, [2011] 6 CTC 19

The Court of Appeal affirmed the decision at trial to allow the Minister to file a memorandum of fact and law after the hearing ended. Subsection 138(1) of the Tax Court of Canada Rules gives a judge broad discretion to "reopen a hearing before judgment has been pronounced for such purposes and upon such terms as are just." Moreover, the existence of s. 152(9) supports the notion that the Minister should be allowed to advance alternative arguments except where the taxpayer is no longer able to adduce relevant evidence or where allowing the arguments would otherwise be inappropriate. In the present circumstances, the harm to the taxpayer had been adequately addressed with a cost award.

RCI Environnement Inc.(Centres de Transbordement et de Valorisation Nord-Sud Inc.) v. The Queen, 2008 DTC 4982, 2007 TCC 647, aff'd , 2009 DTC 5940, 2008 FCA 419

After reassessing the taxpayers to include receipts for termination of a non-competition agreement in their income as business income, the Minister was entitled to amend replies to notices of appeal to, in the alternative, include three quarters of the receipts in the taxpayers' income as eligible capital amounts or as taxable capital gains. The arguments in question were announced well before the trial began and no prejudice was argued by counsel for the taxpayer (para. 35).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition negotiated damages received for breach a non-compete were in respect of the disposition (i.e., cancellation) of the non-compete 207
Tax Topics - Income Tax Act - Section 9 - Compensation Payments negotiated lump sum received for cancellation of non-compete was for diminutionin value of goodwill 59

Canada v. Honeywell Limited, 2007 DTC 5073, 2007 FCA 22

Subsection 152(9) could not be construed as allowing the Minister to make, after the expiry of the normal reassessment period, an amendment to his Reply that was not a "matter" specified in a waiver granted to him before the expiry of the normal reassessment period.

Canada v. Loewen, 2004 DTC 6321, 2004 FCA 146

The Crown was permitted to defend a reassessment it had made of the taxpayer (disallowing a portion of the taxpayer's capital cost allowance claims) on the basis of an argument that it asserted in its pleadings following the expiry of the time limit for reassessments, namely, an argument that the taxpayer was not entitled to deduct any capital cost allowance because it had not acquired its interest in the property in question for an income-producing purpose, so that the reassessment reducing the allowable capital cost allowance claims of the taxpayer was correct.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Onus 107

Canada v. Anchor Pointe Energy Ltd., 2003 DTC 5512, 2003 FCA 294

After the Minister had assessed predecessors of the taxpayer on the basis that amounts paid by them to purchase seismic data exceeded the fair market value of the data, so that the full purchase price did not qualify as CEE, the taxpayer filed Notices of Objection. The Minister then issued Notifications of Confirmation which, based on the subsequently-decided decision in Global Communications, found that none of the purchase qualified for treatment as CEE (although the Minister did not purport to increase the tax payable by the taxpayer).

In finding that s. 152(9) did not preclude the Minister from issuing a Notice of Confirmation on this basis, Rothstein J.A. noted (at para. 40) that the confirmation did not have the effect of introducing a new transaction in that the Minister instead was only relying on an additional argument in support of denial of the CEE deductions that originally had been denied by the Minister.

See Also

Keurig Canada Inc. v. Agence du revenu du Québec, 2019 QCCQ 451

ARQ did not need the equivalent of s. 152(9) to amend its pleadings

The taxpayer was assessed under the Quebec general anti-avoidance rule respecting its engaging in “Quebec bump” transactions, which used Class 12 property (namely, a coffee roaster) purchased from a supplier for $819,823 to generate a non-capital loss of $540,998,739. After the taxpayer had launched its appeal, counsel for the ARQ realized through a review of documents previously provided that the roaster might not have qualified as new equipment, and sought to amend the ARQ’s pleadings to allege that (in addition to GAAR) the appeal should fail on the ground that the roaster did not qualify as Class 12 depreciable property (and deleting the previous admission that it was Class 12 property).

After noting that the Quebec Taxation Act did not contain a provision equivalent to ITA s. 152(9), Lavigne J granted the requested amendment, stating (at paras. 27, 35, 37, TaxInterpretations translation):

The Court is of the view that the request of the ARQ to amend its defence does not entail a change to the basis for the assessment, but rather reinforces the ARQ’s argument on the illegality of the Quebec Bump planning. …

It was not for the ARQ to find the error. The burden was on the taxpayer to submit accurate tax returns. It was the return of the taxpayer according to which the properties in question were included in Class 12 which, if so established, was the source of the error of fact by the ARQ. …

It would be contrary to the interests of justice for the ARQ to be precluded from a defence based on the facts, which were erroneously presented by the plaintiff, even though the file is at the stage of an appeal from the notice of assessment.

Mammone v. The Queen, 2018 TCC 24

subsequent retroactive deregistration of RPP also retroactively validated an assessment factually made on basis of plan’s invalidity

The CRA revocation of a registered pension plan (the “New Plan”) was invalid due to inadvertent failure to comply with the 30-day notice requirement in s. 147.1(12). The taxpayer argued that this meant that the contemporaneous assessment of him under s. 56(1)(a)(i) for having purportedly transferred the commuted value of his (OMERS) pension plan to the New Plan was ill-founded at the time – and that CRA’s subsequent issuance (well beyond the normal reassessment period) of a further retroactive deregistration of the New Plan represented a new basis for reassessment that was prohibited by s. 152(9). In this regard, the taxpayer relied (at para. 23) on the statement in Gramiak “that allowing the Minister to raise an argument based on a legal and factual basis that is different from the one underlying the assessment after the normal reassessment period has expired would in effect do away with the limitation period.”

In rejecting this argument, Graham J stated (at para. 22):

The basis for reassessment is and always has been that the commuted value of the OMERS pension was transferred to a non-registered pension plan. … [D]ue to the retroactive nature of the revocation, the facts underlying that basis of reassessment were always present.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) RPP revocation beyond the normal reassessment period retroactively validated an unsupportable reassessment under s. 56(1)(a)(i) 398
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) subsequent retroactive deregistration of RPP would not establish carelessness in previous return filing 185
Tax Topics - General Concepts - Effective Date subsequent deregistration of RPP retroactively validated reassessment 223
Tax Topics - Income Tax Act - Section 147.1 - Subsection 147.1(12) subsequent deregistration of RPP beyond normal reassessment period nonetheless retroactively validated reassessment 91
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) - Subparagraph 56(1)(a)(i) valid assessment for transfer to an RPP that was retroactively deregistered 83

Walsh v. The Queen, 2008 DTC 3897, 2008 TCC 282

The Minister assessed the taxpayers, and confirmed the assessments, on the basis that the taxpayers did not make donations of shares to charitable foundations in 1996. Three weeks before trial, the Minister wrote the taxpayers' counsel that the Minister no longer disputed that they donated the shares in December 1996; but asserted that the valuation of the donated shares was still an issue. No motion was brought to amend the Minister's pleadings.

C. Miller J. held that as this new position of the Minister was so fundamentally different from the reassessments at issue and the pleadings, and resulted in a far different tax liability, that s. 152(9) could not and should not be engaged. The taxpayers' appeals were allowed.

World Corp. v. The Queen, 2003 DTC 951, 2003 TCC 494

Counsel for the Crown did not raise a submission (that had not been pleaded) that the taxpayer was controlled, as described in subsection 256(5.1), by a non-resident and, thus, was not a Canadian-controlled private corporation, until late on the final day of the hearing. In these circumstances, it would not have been appropriate for the taxpayer to have been ordered to adduce evidence on the point, and Bell T.C.J. ruled that a submission based on submission 256(5.1) could not be made.


Derrick Hosanna, "Alternative Arguments on Appeal: Does Finance Get the Last Word?", Tax For The Owner Manager, Vol. 16, No. 4, October 2016, p. 3

S. 152(9) targets Last

The court's finding in Last and in the earlier cases on which Last was based – that the prohibition of an increased assessment on appeal is to be applied on a source-by-source basis – is arguably inconsistent with other case law concerning what an assessment is (the assertion of the amount of tax owing). In an effort to overcome these results, Finance proposes to amend subsection 152(9) to provide that additional arguments can be advanced to support "all or any portion of the total amount determined on assessment."

S. 152(9) might not alter the result in Last (p. 5)

However, it is worth considering whether Finance's selected method to address Last would alter the outcome of the decision. Arguably, Finance's selected method ignores the court's finding that a reassessment was needed on a source-by-source basis. A reassessment beyond the NRP to increase tax for one source (and decrease tax for another) was not supported on the facts, and subsection 152(9) does not authorize an assessment to be issued after the NRP.

Finance disagrees with source-by-source analysis in Last (p.5)

Alternatively, by stating in Budget 2015 that an "assessment is a calculation of a taxpayer's total tax liability for a particular taxation year," Finance seems to be saying that Last and a related line of cases were wrongly decided to the extent that they applied a different concept of assessment. It is curious that Finance did not choose to address its concern with the Last line of cases more directly.

David J. Manoochehri, "An Update on Subsection 152(9): The Minister's Alternative Basis for Assessment", Tax Litigation, Vol. X, No. 1, 2002, p. 608.