Subsection 156(1) - Other individuals
Paquette v. MNR, 90 DTC 1474 (TCC)
As a result of a September real estate sale, the taxpayer ceased to be exempt from the obligation to make quarterly instalments as a result of less than 75% of his income for the year being subject to source deductions. However, the taxpayer was not subject to interest in respect of his failure to make instalment payments in March and June of that year because it was impossible for him to know at those times that the September real estate transaction would take place. "[S]ubsection 156(1) does not expressly provide that the legislator intends to require the impossible of anyone." (p. 1475)
In 2014-0526591C6, CRA noted that under its current administrative practices, penalties and interest would not be assessed where an inter vivos trust failed to make sufficient instalment payments but this was under review in light of the new trust rules. Where does this stand?
CRA responded that it will continue to not assess interest and penalties for insufficient instalments paid by trusts.
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Does CRA assess instalment interest and penalties where an inter vivos trust has not made instalment payments required under s. 156? CRA stated:
Under current administrative practices, the CRA does not assess penalties or interest where an inter vivos trust fails to make sufficient instalment payments. …[A]ny changes to these practices will be introduced in conjunction with the new [Budget 2014] rules and communicated in a clear and transparent manner.
Budget 2014 proposed…that testamentary trusts (other than estates for their first 36 months) and grandfathered inter vivos trusts will not benefit from the exemption from the tax instalment rules …[for] the 2016 and subsequent years.
25 January 1992 T.I. (Tax Window, No. 16, p. 21, ¶1718)
RC's administrative practice for the 1991 calendar year is not to require inter vivos trusts to pay tax instalments.
91 C.R. - Q.65
It is RC's practice not to require individuals to make instalments for the very first year that they are required by the Act to do so, and until 30 days after a Notice of Assessment informing them of the requirement to make the instalments.
90 C.R. - Q.57
RC will not apply the Paquette case in view of the introduction of s. 161(2.2).