Words and Phrases - "nil assessment"
Canada v. 984274 Alberta Inc., 2020 FCA 125
The taxpayer (“984”) reported a capital gain on its 2003 sale of land on the basis that it had acquired it from its parent (Henro) on a rollover basis. In 2010, the Minister assessed Henro (to include an income account gain) and 984 (to reverse the previously reported capital gain and refund the capital gains tax plus interest, totalling $1.7M) on the basis that the 2003 drop-down had occurred on a non-rollover basis. On March 23, 2015, the Minister implemented a settlement agreement (effectively agreeing with 984’s and Henro’s initial filing position) by inter alia assessing 984 to claim back the 2010 payment, including the refund interest, plus arrears interest since 2010, in what Noël CJ found (contrary to the Tax Court below) to be in proper reliance on ss. 160.1(1), 160.1(3) and 164(3.1).
Noël CJ noted (at para. 68) that, although the 2010 assessment of 984 was a nil assessment:
Aside from the fundamental distinction drawn … in Okalta, an assessment that levies tax and a nil assessment have the same legal effect i.e. both start the limitation period when issued as the original notice, both replace a prior assessment or reassessment when issued as the last notice, and both fix the tax payable for the year.
Given that the 2010 nil assessment was an “assessment” including for the purposes of s. 164(1)(a)(iii), it followed “that the 2010 payment was a refund authorized to be made pursuant to subparagraph 164(1)(a)(iii)” (para. 73), from which it further followed “that the refund interest paid by the Minister to the respondent in 2010 can be recovered pursuant to subsection 164(3.1)” (para. 74).
Furthermore, it did not matter that the 2010 assessment was issued more than three years after the previous 2003 (re)assessment of 984, given that (para. 58):
A notification that no tax is payable may be issued at any time, because the three-year limit subsequently provided for under [s. 152(4)] does not apply to a notice that no tax is payable.
Finally, it also did not matter that no reassessment had been issued to bring the 2003 tax payable back from zero, as per the 2010 nil assessment, to the amount initially assessed, given that inter alia “Markevich makes it clear that an excessive refund can be assessed even if the power to issue a reassessment for the year pursuant to subsection 152(4) has expired” (para. 77).
Accordingly, the 2015 assessment for an overpayment and interest was valid.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 160.1 - Subsection 160.1(1) | ss. 160.1(1) and (3)’s application not subject to the issuance of a prior time-constrained reassessment | 489 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) | nil assessment not subject to 3-year limitation in s. 152(4) | 190 |
| Tax Topics - General Concepts - Stare Decisis | prior decision of the FCA that “manifestly overlooked [the] established line of cases” was not to be followed | 76 |
Nottawasaga Inn Ltd. v. The Queen, 2014 DTC 1021 [at at 2628], 2013 TCC 377 (Informal Procedure)
In 2011 the Minister reassessed the taxpayer's 2007 taxation year (the old reassessment) by denying the deduction of various expenses and capital cost allowance claims. After being requested to carry back subsequent losses to 2007, the Minister reassessed to reduce the tax payable in 2007 to nil. Under the new reassessment, the taxpayer was still required under s. 161(7) to pay the interest that had accrued on the additional income from 2007 before the loss carry-back. The taxpayer appealed on the basis that the old reassessment overstated the 2007 income, so that the resulting interest was too high.
Pizzitelli J found that the Tax Court lacked the jurisdiction to grant the relief the taxpayer sought on the basis that the new reassessment was a nil assessment. The interest owing did not transform the nil assessment into an assessment. Pizzitelli J stated (at para. 19):
A nil assessment does not in my mind describe circumstances where no total taxes, interest and penalties are assessed. It more properly describes the situation where no taxes are claimed.
Although the term "nil assessment" has been used to refer to an assessment that is for a nil amount (and therefore cannot be appealed), more accurately, an "assessment" for a nil amount is not an assessment at all, but rather a notice under s. 152(4) that "no tax is payable" (paras. 19-20, citing Interior Savings Credit Union and Okalta Oils). Moreover, an assessment of interest (or penalties) is distinct from an assessment of tax (paras. 22-23, citing McFadyen).
To vary an interest assessment, a taxpayer must either show that interest was computed incorrectly (which was not in issue), or show that the underlying tax was incorrect (which the taxpayer could not do because there was no assessment in effect for 2007).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) | 314 |