Penalties For False Statements Or Omissions – Part III

Author:Mr Howard Alpert
Profession:Alpert Law Firm Professional Corporation
 
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This issue of the Legal Business Report provides current information to the clients of Alpert Law Firm on penalties under the Income Tax Act (Canada) and the possible challenges to such assessments. Alpert Law Firm is experienced in providing legal services to its clients in tax and estate planning matters, tax dispute resolution, tax litigation, corporate-commercial transactions and estate administration. Howard Alpert, C.S. is certified by the Law Society as a specialist in Corporate and Commercial Law and as a specialist in Estates and Trusts Law.

  1. RECENT DEVELOPMENTS IN THE AREA OF PENALTIES

This memorandum deals with certain important developments in the assessment of penalties. Specifically, the Courts have dealt with the assessment of penalties as they relate to: (i) the reassessment limitation period; (ii) non-capital loss carry forwards; (iii) carry back of losses; and (iv) the capital gains exemption.

(i) LIMITATION PERIOD FOR MINISTER'S ASSESSMENTS & REASSESSMENTS

As a general rule, the Minister of National Revenue (the "Minister") may only assess or reassess a taxpayer within the "normal reassessment period." Pursuant to subsection 152(3.1) of the Income Tax Act (the "Act"), the normal reassessment period differs according to the taxpayer's category. For mutual fund trusts and corporations that are non-Canadian controlled private corporations, the limitation period for reassessments is four years from the earlier of: (i) the date of mailing of a notice of original assessment; and (ii) the date of mailing the original notification that no tax is payable for the taxation year. For all other taxpayers, the reassessment period is three years from the earlier of the two dates stated above.

However, pursuant to paragraph 152(4)(a) of the Act, this limitation period does not apply when the following two factors are present: (i) there is an assessment or reassessment based upon a misrepresentation by the taxpayer; and (ii) the taxpayer or the person filing the return has made a misrepresentation that is attributable to neglect, carelessness or willful default, or has committed any fraud in filing the return or in the supplying of information. Where the Minister has performed an assessment or reassessment beyond the normal limitation period, the Minister has the burden of proving, on a balance of probabilities, misrepresentation or fraud on the part of the taxpayer.

Although the requirements for justifying subsection 163(2) penalties...

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