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TAX APPEALS: HOW TO DEAL WITH AN
INCOME TAX, GST OR PAYROLL ASSESSMENT
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These materials were prepared by Kurt Wintermute, of MacPherson Leslie & Tyerman LLP law firm .
Saskatoon, Saskatchewan for the Saskatchewan Legal Education Society Inc. seminar, Tax Tips &
Traps; October 2003.
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TAX APPEALS: HOW TO DEAL WITH AN INCOME TAX,
GST OR PAYROLL ASSESSMENT
TABLE OF CONTENTS
I.
TAX APPEALS: HOW TO DEAL WITH AN INCOME TAX, GST OR PAYROLL ASSESSMENT .. 1
A. INTRODUCTION
1
II.
2
III.
OVERVIEW OF THE TAX APPEAL PROCESS: INCOME TAX, GST AND CPP/EI
PRE-AUDIT STAGE AND FILING OF RETURNS
3
A. RETURN OF INCOME AND ASSESSMENTS UNDER THE ITA
Nonnal Reassessment Period
Misrepresentation or Fraud
Extended Nonnal Reassessment Period
Nil assessments and Loss Detenninations
Other Types of Assessments under the ITA
Third Party Liability Assessments - Section 160
Non-resident Withholding Tax Assessments - Part XIII - Subsection 227 (10)
Directors' Liability Assessments- Section 227(1)
B. GST RETURNS AND ASSESSMENTS UNDER THE EXCISE TAX ACT
Assessment of Rebate - Section 297
Directors' Liability Assessment- Subsection 323(4)
Third Party Liability Assessment - Subsection 325(1)
C. ASSESSMENTS AND RULINGS UNDER THE CPP ACT AND EI ACT
Basic Provisions and Assessments
Rulings
3
4
5
5
5
6
6
7
7
7
8
8
9
9
9
10
IV.
11
V.
THE AUDIT STAGE - THE ROLE OF THE LAWYER
Proposal Letter................................................................................................................................
13
NOTICE OF OBJECTION STAGE
15
A. NOTICE OF OBJECTION UNDER THE INCOME TAX ACT
Large Corporations
Application for Extension of Time to File a Notice of Objection
Collection Restrictions under the ITA
B. NOTICE OF OBJECTION UNDER THE EXCISE TAX ACT
"Specified Persons"
Application for Extension of Time to File a Notice of Objection
C. NOTICE OF APPEAL TO THE MINISTER UNDER THE CPP ACT AND EI ACT
VI.
'
NOTICE OF APPEAL STAGE
A. APPEALS TO THE TAX COURT OF CANADA UNDER THE ITA
Infonnal Procedure
General Procedure
B. APPEALS TO THE TAX COURT OF CANADA UNDER THE EXCISE TAX ACT
General Procedure
C. APPEALS TO THE TAX COURT OF CAANDA UNDER THE CPP ACT AND EI ACT..
:
15
20
21
22
23
25
26
27
30
30
30
34
35
37
38
Schedule 1 - Notice of Objection
Schedule 2 - Privacy Act Request and related documents
Schedule 3 - Access to Information Request and related documents
Schedule 4 - Notice of Objection (GST 159)
Schedule 5-Appeal under the Canada Pension Plan and/or Employment Insurance Act (CPT 100)
Schedule 6 - Notice of Appeal under the Income Tax Act
I.
TAX APPEALS: HOW TO DEAL WITH AN INCOME TAX, GST OR
PAYROLL ASSESSMENT
A.
Introduction
There are a number of situations which may arise where a practitioner will be asked to provide
advice to a client concerning "tax issues" and how to deal with Canada Customs and Revenue
Agency (CCRA). While the majority of the "tax issues" raised by clients may concern an
assessment or reassessment of income tax under the Income Tax Act (the "ITA"), clients may
also seek advice from their lawyer concerning assessments of net tax or GST payable under the
Excise Tax Act (the "ETA") or a ruling or assessment issued pursuant to the Canada Pension
Plan (the "CPP Act") or the Employment Insurance Act (the "EI Act").
As the CCRA is
responsible for administering and issuing assessments with respect to all of these Acts, the first
step for a practitioner is to determine what type of assessment has been issued to the client. This
step becomes particularly important for a practitioner when it is considered that it is not
uncommon for a client to be issued more than one assessment under more than one Act within a
short time frame.
The first step of determining what type of assessment has been issued to a client will also assist
the practitioner in determining the proper process to be followed in disputing the assessments.
Although the process involved in disputing assessments issued under the ITA, ETA, CPP Act
and EI Act is very similar, each type of assessment has a separate process mandated by the
governing legislation which must be followed and which requires separate documents to be filed
in order to dispute the assessment. As well, a practitioner should be aware of the differences in
each process for disputing an assessment depending on the Act under which the assessment was
issued.
II.
OVERVIEW OF THE TAX APPEAL PROCESS: INCOME TAX, GST AND
CPPIEI
The process involved in tax litigation under the ITA, ETA and CPPIEI Acts can generally be
summarized as follows:
EXCISE TAX ACT
INCOME TAX ACT
CPP ACT and EI ACT
I Notice of Assessment I
I
Audit
Audit/Compliance
Review
I
Notice of
Request for
Ruling
Notice of Assessment
Ruling
Assessmen~eassessment
I
Notice of Objection
Notice of Reassessment or
Confirmation
I
Tax Court Appeal
Payroll
Audit
Notice of
Assessment
Notice of Objection
Notice of Appeal
to the Minister
Notice of Decision and/or
Reassessment
Notice of Decision and/or
Reassessment
Tax Court Appeal
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I
Tax Court Appeal
I
There are a number of strategies or "tips" that will assist practitioners in representing their clients
at each stage of the litigation process. There are also a number of "traps" or issues that a
practitioner should be aware of in each stage so as not to prejudice the rights and interests of
their clients. Each step along the way provides an opportunity for settlement but also involves
risks and costs which need to be assessed by the practitioner with their client. A settlement can
often achieve results which would not otherwise be obtainable in Tax Court because in many
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circumstances the issue is "all or nothing", whereas compromise settlements may achieve a
middle ground. However, unlike civil disputes where settlements can be achieved on the basis of
practical or economic considerations, any settlement with CCRA must have a factual and legal
basis in accordance with the applicable legislation. l
Regardless of what stage of the proceeding, it is important for the practitioner to obtain as much
information as possible from CCRA respecting its assumptions of fact and position in law for the
following reasons:
a) to assess the strengths and weaknesses of the client's case;
b) to provide evidence to CCRA that can prove their assumptions are inaccurate; or
c) if the issue is a legal one, to provide CCRA with submissions as to the law.
III.
PRE-AUDIT STAGE AND FILING OF RETURNS
Although a practitioner is typically not involved in. assisting clients with the preparation of
income tax returns, GST returns or payroll returns, a practitioner must have a basic
understanding as to how the system works as it is the returns which will be reviewed by CCRA
in the context of an audit and which will form the basis for an assessment subsequently issued to
the taxpayer. There are also certain dates involved in the pre-audit stage which a practitioner
must be aware of as they become significant later in the appeal process.
A.
Return of Income and Assessments Under the ITA
The requirement to file a "return of income" which is more commonly known as an income tax
return is contained in subsection 150(1) of the ITA. A taxpayer is required to file a return of
income with the Minister in the prescribed form containing the prescribed information for each
taxation year. The deadlines for filing a tax return and the form of tax return vary depending on
the type oftaxpayer. The prescribed forms and deadlines are as follows:
l
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I Cohen v. Her Majesty the Queen 80 CTC 6250 (FCA) and In Re Galway v. Her Majesty the Queen 74DTC 6355
(FCA)
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Taxpayer
Time Limit
Form
Individuals
April 30 of the following year if the individual does not carryon
business or June 15 if the individual carries on business
T1
Deceased
persons
If death occurs after October of the taxation year and before the
filing due date (April 30 or June 15) the later of six months after
the day of death and the day on which the return would
otherwise be required to be filed
T1
Corporations
Six months after year-end
T2
Trust
90 days after year-end
T3
Under subsection 152(1) the Minister shall, with all due dispatch, examine the taxpayer's return
and assess the tax for the taxation year together with interest and penalties, if any.
After
examination ofthe return, the Minister is required to send a Notice of Assessment to the taxpayer
who filed the return pursuant to subsection 152(2).
The original Notice of Assessment is sometimes called a "quick assessment" as it is essentially a
check of mathematical accuracy and an examination to ensure that information filed with the
.return conforms to the requirements of the Act. However, the mailing date referred to in the
original Notice of Assessment is extremely important as it is this date which generally
determines the limitation period for the Minister to reassess, make additional assessments, or
assess tax, interest or penalties for a taxpayer with respect to a particular taxation year.
Normal Reassessment Period
In general, subsection 152(4) of the ITA provides that the Minister may not reassess, make an
additional assessment or assess tax, interest or penalties beyond the "normal reassessment
period", subject to certain exceptions.
The "normal reassessment period" is defined in
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subsection 152(3.1) of the ITA. For mutual funds, trusts or corporations other than Canadian-
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controlled private corporations (CCPC's), the normal reassessment period ends "four years after
the day of mailing of a notice of an original assessment. ..or the day of mailing of a notification
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that no tax is payable". For all others including individuals, personal trusts and CCPC's, the
normal reassessment period is three years from the mailing date of the original Notice of
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Assessment. Pursuant to subsection 244(14) the date ofmailing is presumed to be the date of
notice or notification. However, this presumption can be rebutted by adducing evidence to the
contrary.2
Misrepresentation or Fraud
Pursuant to subparagraph 152(4)(a)(i) of the ITA, where a taxpayer or person filing the return
has made a misrepresentation that is attributable to "neglect, carelessness or wilful default", or
has committed any fraud in filing the return or supplying any information under the Act, the
Minister may, at any time, reassess or make an additional assessment or assess tax, interest or
penalties as the circumstances require.
Extended Normal Reassessment Period
In some circumstances, the "normal reassessment period" may be extended to six or seven years.
Paragraph 152(4)(b) permits an assessment, reassessment or additional assessment to be made
after the taxpayer's normal reassessment period if it is made before the day that is three years
after the normal reassessment period and one of the conditions set out in subparagraphs
152(4)(b)(i) to (vi) is met. In general, the extended "normal reassessment period" applies where
certain losses and income tax credits may be carried back three preceding years or where a
reassessment results from transactions involving a taxpayer and a non-resident whom the
taxpayer was not dealing at arm's length.
Nil assessments and Loss Determinations
In some cases, a taxpayer will incur a loss and will have no tax payable for a particular taxation
year. A notification that no tax is payable will be sent to the taxpayer. This notification is
commonly referred to as a "nil assessment". It has generally
b~en
held by the Courts that a
taxpayer has no right to object or appeal a nil assessment. 3
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The effect of a nil assessment or notification that no tax is payable often leads to some confusion
among taxpayers and practitioners.
Once the nil assessment is mailed to the taxpayer, the
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limitation period for further assessments or reassessments by the Minister commences to run
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2
3
Hughes v. MNR 87 DTC 635 (TCC).
Irving Oil v. The Queen 88 DTC 6401 (FCTD); affirmed 91 DTC 5106 (FCA).
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from the date of mailing of such notice. However, a nil assessment may continue to have
significant effects for a taxpayer in subsequent taxation years. For example, the Minister is not
bound by the assessment of a loss in a statute-bared year when reassessing the loss carryforward
in subsequent years, even if that loss is applied after the normal reassessment period. The
Minister may recalculate the original loss if the loss is claimed in subsequent taxation years.
In order to limit a taxpayer's exposure to the risk of a loss being recalculated in subsequent
years, a taxpayer may file a request with the Minister to determine the amount of certain losses
that have been incurred by the taxpayer.
Pursuant to subsection 152(1.1) of the ITA, loss
determination requests may be made in respect of non-capital losses, net-capital losses, restricted
farm losses, farm losses and limited partnership losses. The request for a loss determination
must be made to the Minister in writing, although there is no prescribed form. There is no
limitation period within which a taxpayer may request a loss determination.
Upon requesting a loss determination, the Minister will issue a Notice of Determination of a
Loss. A taxpayer then has the usual rights of objection and appeal and will be subject to the
same time limitations applicable to objections and appeals in respect of an assessment (discussed
below). In this manner, subsection 152(1.1) gives the taxpayer an opportunity to challenge a "nil
assessment" and the amount of the loss where the taxpayer would not otherwise have a right to
file an objection.
Other Types of Assessments under the ITA
There are also numerous other types of assessments that may be issued by the Minister under
different sections or Parts of the ITA. Some of the more common types of other assessments
under the ITA that a practitioner should be aware of include the following:
Third Party Liability Assessments - Section 160
Applies where a tax debtor transfers property for less than fair market value to his or her
spouse, a person who is under 18 years of age or a person who the tax debtor does not
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deal at arm's length. In this situation, the transferee may be assessed pursuant to
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subsection 160(2) for the lesser of the transferor's income tax liability and the value of
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the property received in excess the value of the consideration given. There is no t i m e >
limit for an assessment made under section 160.
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Non-resident 'VithhoJding Tax Assessments - Part XIII - Subsection 227 (10)
The Minister may assess tax at any time under Part XIII. Part XIII places a tax on nonresidents of Canada who earn certain types of income in Canada and then imposes an
obligation on the Canadian payer to deduct and remit the tax. Under subsection 227(10),
the Minister may assess the Canadian resident payer at any time for an amount payable
under Part XIII and may assess the non-resident at any time under subsection 227(10.1).
Directors' Liability Assessments- Section 227(1)
A director of a corporate taxpayer may be held liable under section 227.1 of the ITA for
unremitted source deductions including income tax, CPP and EI or non-resident
withholding tax. A directors' liability assessment under section 227.1 must be issued
within two years after the director ceases to be a director of the corporation and is subject
to the defence of "due diligence".
B.
GST RETURNS AND ASSESSMENTS UNDER THE EXCISE TAX ACT
A "registrant" under the ETA is required pursuant to section 228 and subsections 238(1) and (4)
of the ETA to file a GST return in the prescribed form and manner showing the net tax (GST
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payable less input tax credits) for the reporting period and to remit that amount or claim a net tax
refund for each reporting period. A registrant's reporting period may be the registrant's fiscal
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month, fiscal quarter or fiscal year depending on the level of the registrant's annual taxable
supplies. Where the registrant's reporting period is the fiscal year, a GST return must be filed
within three months after the end of the year. In every other case, a registrant must file a GST
return within one month after the end of the reporting period.
However, unlike an original Notice of Assessment issued under the ITA which routinely follows
the filing of an income tax return, a Notice of Assessment under the ETA is not automatically
issued after a GST return has been filed. Rather, a Notice of Assessment under the ETA is
typically only issued following an audit and only if the net tax payable is determined to be other
than that originally reported by the registrant.
Subsection 296(1) of the ETA is the basic
provision permitting the Minister to assess an amount that is owing under the ETA. However,
while subsection 152(1) of the ITA provides that the Minister "shall" assess a taxpayer's income
tax for the year, the opening words of subsection 296(1) of the ETA state that the Minister "may"
assess.
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Under subsection 298(1) of the ETA, the general limitation period for assessing the net tax
payable of a person for a reporting period is four years after the later of the day on or before
which the person was required to file a return for the reporting period and the day the return was
actually filed. However, pursuant to subsection 298(4) of the ETA, an assessment in respect of
any matter under the ETA may be made at any time where the person to be assessed has, in
respect of that matter, made a misrepresentation attributable to "neglect, carelessness or wilful
default" or has committed a fraud in making or filing a return.
Once an assessment is made under the ETA, the Minister is required to send a Notice of
Assessment to the person pursuant to subsection 300(1) of the ETA. A Notice of Assessment
issued under subsection 300(1) of the ETA may include an assessment in respect of more than
one reporting periods.
It should also be noted that there are different types of Notices of Assessment that may be issued
under different sections of the ETA. Practitioners should be aware of these different types of
assessments as each type of assessment has different implications for the person being assessed.
Some of the more common types of assessment that may be issued under the ETA are as follows:
Assessment of Rebate - Section 297
There are certain provisions of the ETA which allow a person to apply for a rebate of net
tax paid. For example, a person may apply for a rebate under subsection 261 of the ETA
where a payment of net tax has been made in error, subject to certain restrictions.
Pursuant to subsection 297(1) of the ETA, on receipt of an application made by a person
for a rebate, the Minister is required with all due dispatch to consider the application and
assess the amount of the rebate, if any, payable to the person. However, pursuant to
subsection 298(2) of the ETA, a reassessment or additional assessment of a rebate shall
not be made more than four years after the application for rebate was originally filed.
Directors' Liability Assessment- Subsection 323(4)
Where a corporation fails to remit an amount of net tax as required under the ETA, the
directors of the corporation at the time the corporation was required to remit the amount
are jointly and severally liable, together with the corporation, to pay that amount and any
interest or penalties relating thereto. The Minister may issue a Notice of Assessment to a
director of a corporation for such liability provided the assessment is not made more than
two years after the person last ceased to be a director of the corporation. As well, there
are certain requirements that must be met before an assessment under subsection 323(4)
of the ETA can be issued to a director and the director is permitted to raise the defence of
"due diligence".
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Third Party Liability Assessment - Subsection 325(1)
Similar to section 160 of the ITA, pursuant to section 325 of the ETA, where a person
who is liable for net tax under the ETA transfers property for less than fair market value
to a spouse, an individual under 18 years of age or to a non-arm's length party, the
transferee is liable for the lesser of the amount by which the fair market value of the
property exceeds the consideration given by the transferee and the amount that the
transferor is liable to pay under the ETA for the reporting period or any preceding
reporting period. An assessment under subsection 296(1) may be issued at any time
pursuant to subsection 325(2) of the ETA.
C.
ASSESSMENTS AND RULINGS UNDER THE CPP ACT AND EI ACT
Basic Provisions and Assessments
There are two separate processes under both the CPP Act and the EI Act which give rise to rights .
of objection an appeal: a ruling and an assessment. A ruling states whether a worker is an
employee or self-employed independent contractor and whether or not that worker's employment
is pensionable or insurable. It may also indicate the amount of pensionable or insurable earnings
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of a worker and whether or not CPP contributions and EI premiums must be paid.
An
assessment sets out the amount of CPP contributions and EI premiums payable by an employer
under the CPP Act and EI Act.
Section 21 of the CPP Act requires that every employer paying remuneration to a person
employed in "pensionable employment" deduct and remit both the employer's and employee's
contribution as prescribed under the CPP Act. Similarly, section 82 of the EI Act requires that
every employer paying remuneration to a person engaged in "insurable employment" deduct and
remit both the employer's and employee's premium as prescribed by the EI Act.
Section 22 of the CPP Act allows the Minister to assess an employer for any amount payable
under the CPP Act (including both the employer's and employee's contributions) for up to four
preceding years from the date when the contribution should have been made.
Where the
employer has made any misrepresentation or committed any fraud in filing the return or in
supplying any information, the limitation period does not apply.
Section 85 of the EI Act allows the Minister to assess an employer for any amount payable under
the Act (including both the employer's and employee's premiums) for up to three years from the
end of the year in which the premiums should have been paid. Accordingly, an assessment for
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premiums under the EI Act may include premiums payable for the four preceding years. There
is no limitation period where the employer has made a misrepresentation or committed a fraud in
filing a return or supplying information about the return under the EI Act.
Similar to assessments under the ETA, a Notice of Assessment is not typically issued to an
employer immediately upon filing a payroll return. Rather, a Notice of Assessment under the
Cpp Act and EI Act is normally only issued following a payroll audit or a ruling.
Rulings
The ruling procedure that exists under both the CPP Act and the EI Act apart from the
assessment process allows an employer, employee or person claiming to be an employer or
employee, or the Minister of Human Resources Development Canada ("HRDC"), to request that
an officer of the CCRA make a ruling on any of the following questions:
a) whether an employment is insurable/pensionable;
b) how long an employment lasts, including the dates in which it begins and ends;
c) what is the amount of any earnings from pension/insurable employment;
d) whether a contribution/premium is payable;
e) what is the amount of a contribution/premium that is payable;
f) who is the employer of a person in pensionable/insurable employment.
Requests for rulings under the CPP Act are made under section 26.1 and requests for rulings
under the EI Act are made under section 90. A request for a ruling may be made by HRDC at
any time, but a request by any other person must be made before June 30 of the year after the
year in respect of which the question relates. The authorized Rulings Officer of the CCRA is
required to make a ruling within a reasonable time after receiving a ruling request.
It should be noted that there are provisions in both the CPP Act and EI Act which specifically
state that the provisions dealing with requests for rulings do not restrict the authority of the
Minister to make an assessment under either section 22 of the CPP Act or section 85 of the EI
Act. Both assessments made pursuant to section 22 of the CPP Act and section 85 of the EI Act
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and rulings issued under section 26.1 of the CPP Act and section 90 of the EI Act give rise to
rights of appeal to the Minister from the ruling or assessment, as the case may be.
A typical situation where a request for a ruling may arise occurs where a person applies to
HRDC for EI or CPP benefits and it is not clear whether the person was engaged in pensionable
or insurable employment. It is common for HRDC in these circumstances to refer the matter to
CCRA for a ruling as to whether the person was engaged in insurable and/or pensionable
employment and, if so, to calculate the amount of the insurable or pensionable earnings.
Once a ruling is issued by CCRA, notice of the ruling will be sent to the "employer" or "hirer",
the worker and HRDC. Where no appeal to the Minister is made from the ruling, CCRA may
then proceed to conduct a full payroll audit of the hirer and issue a Notice of Assessment to the
hirer for both the employer's and employee's portion of the required premiums and contributions
payable. The payroll audit may also expand to cover not only the worker who was the subject of
the ruling, but other workers having a similar working relationship with the hirer.
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Accordingly, a single request by an employee, employer or HRDC for a ruling to determine
whether a worker was engaged in insurable or pensionable employment during the past year may
result in a Notice of Assessment being issued to a client for both the employer's and employee's
portion of the premiums and contributions payable under the CPP Act and EI Act for several
employees for up to four years, as well as interest and penalties. Therefore, a simple request for
a ruling by a worker may have a potentially devastating impact on a client.
A practitioner who is informed by a client that they have been notified by CCRA that a request
for a ruling has been made with respect to a particular worker is well advised to review the
potential implications that the ruling may have with the client and the process of addressing the
request for a ruling.
IV.
THE AUDIT STAGE - THE ROLE OF THE LAWYER
An audit typically begins with a letter being sent by CCRA to a client advising that an audit is
being conducted with respect to a particular taxation year or reporting period and requesting a
date that the auditor may attend at the client's premises to review and inspect the books and
records of the client. The selection of a particular client for an audit may occur for a variety of
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reasons, including: random selection, anonymous tips, specific CCRA projects, particular
transactions reported in a return, special computer programs at CCRA which "red flag" certain
returns based particular features, inaccuracies or miscalculations contained in the return filed or
due to an earlier audit involving the same taxpayer and the same issues. For larger clients, audits
are conducted by CCRA on an on-going basis pursuant to established protocols developed
between the client and CCRA. It is when a client receives notice from CCRA that they are going
to be subject to an audit that a lawyer may be contacted by the client for advice.
The early stages of an audit typically involve the auditor engaging in an "information gathering"
process in order to verify the completeness and accuracy of the return and to identify any issues
which warrant further investigation. It is important at the audit stage that the auditor obtain
sufficient information in order to have an accurate and complete understanding of the facts.
When the auditor requires explanations regarding certain transactions that have occurred or how
they were reported, the person having the most knowledge of the transaction should provide the
necessary explanations to the auditor. If further documentation is requested by the auditor, such
documentation should be provided, subject to any claims of privilege which may attach to the
documents.
A taxpayer should keep a record and copy all documentation provided to the auditor so that the
legal advisor will not be at a disadvantage if required to respond to certain queries presented by
the auditor. Where the auditor attends at the taxpayer's premises to review documentation, the
taxpayer or a representative should be present during the review of documents so that the
taxpayer is aware of the nature of the documents the auditor is most interested in. Whenever
possible, a taxpayer should request that the auditor submit any questions in writing so that
written responses can be provided by the taxpayer. The purpose of requesting written queries
and providing written responses is to avoid ''miscommunications'' between the taxpayer and the
auditor and to establish a record that can later be used in Tax Court if necessary.
If an auditor does present the client with a query or questionnaire containing a series of
questions, the taxpayer and the practitioner providing advice must be aware that the questions
will have been designed by the auditor to elicit relevant facts from the taxpayer based on the
legal tests that have developed with respect to a particular tax issue. Some of the questions may
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be "leading" or "misleading" or involve legal tests which are no longer applicable or which are
based on an internal CCRA policy rather than the current state of the law. Therefore, careful
consideration should be given in responding to the questions presented and it may be advisable
for the practitioner to assist the client in preparing the responses. In general, the responses to the
questions should be direct, specific and not argumentative. Furthermore, the responses should
not volunteer information which is not requested as such additional information may lead the
auditor to a new line of inquiry.
A practitioner should be familiar with the provisions of the ITA which provide the auditor with
broad investigative powers in conducting an audit in order to properly advise a client. In general,
these provisions are found in sections 231.1 - 231.7 of the ITA. A practitioner should also be
familiar with limitations imposed on the investigative powers with respect to documents subject
to solicitor client privilege and the relief that may be available from the client's obligations to
provide information pursuant to the Charter ofRights and Freedoms.
Generally, it is important for the taxpayer and their representative to be generally cooperative
with the auditor subject to the legal limits prescribed by the ITA. In requesting information and
having discussions with the taxpayer concerning particular issues, the auditor will be assessing
the credibility of the taxpayer and making a determination as to whether all of the relevant facts
are being disclosed. It is therefore important to advise the client to be forthright with the auditor
and be responsive to the auditor's requests for additional information.
Proposal Letter
Once an auditor has completed its audit and has determined to reassess the taxpayer, the auditor
will provide the taxpayer with a letter proposing to reassess the taxpayer with respect to one or
more issues and providing the taxpayer with an opportunity (usually 30 days) to respond to the
proposed adjustments.
Particular attention should be given to proposal letter to determine
whether the facts and assumptions relied upon by the auditor are accurate. If the proposal letter
does not set out the facts and assumptions made by the auditor or the law upon which the auditor
relies, clarification should be requested from the auditor in writing.
- 13 -
It is at the proposal letter stage that a detennination must be made as to whether to provide
further infonnation and representations to the auditor.
This decision should involve a
consideration of a number of factors, including:
a) Are the issues factually based and can they be clarified by providing supporting
material? Can a taxpayer provide sufficient evidence to the auditor which will
disprove the assumptions of facts relied on?
b) Do the issues involved concern questions oflaw and does the auditor's interpretation
of the law differ from yours? Is your position more supportable than the position of
the auditor in law? Does the auditor seem to have a "closed mind" respecting their
position as to the proper law to be applied with respect to the issues?
c) Do the issues involve questions of mixed fact and law and can further submissionsbe
made with respect to either the law or the facts which will support your position?
d) Do the issues involve questions of quantification or valuation that can be easily
verified or corrected by further documentation?
e) Does the auditor doubt your client's credibility?
f) Does the auditor seem willing to settle all the issues on a global basis or provide some
accommodation with respect to certain issues and not others?
g) Would further representations potentially lead the auditor to discovering other issues
that may result in further adjustments?
h) Is the auditor willing to consider an alternate basis for reassessing the client which
may have a significant advantage for the client?
i) Are there any other adjustments that the auditor may be willing to consider which
would have the effect of reducing the impact of the proposed adjustment?
In making the detennination as to whether further submissions should be made to the auditor, a
clear understanding of the facts and assumptions relied upon by the auditor must be obtained. It
may be necessary to request disclosure from the auditor of notes of conversations between the
auditor and third parties and/or the working papers of the auditor to understand the basis for the
)
auditor's proposed assessment. It may also be useful to request a meeting with the auditor
shortly after the proposal letter to be able to assess the auditor's position and the concerns that
the auditor may have and the willingness of the auditor to change their position or consider an
alternative basis for an adjustment with respect to a particular issue.
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Where the auditor has concerns regarding the credibility of the client, appears to have a lack of
understanding of the applicable law or seems unlikely to change their assessing position
regardless of the additional information or facts presented, it may be in the interest of the client
to hold offmaking submissions or supplying additional information until the Notice of Objection
stage. It is possible that an Appeals Officer reviewing the assessing positionof the auditor with
additional information or representations will take a different assessing position than the auditor.
There should also be consideration given to who would be in the best position to make the
representations to the auditor. Where the issues are more of a quantitative nature, it may be more
appropriate for representations to be made by the accountant.
However, where the issues
concern facts that require the collection of evidence or legal issues requiring research to be
submitted, the representations may be more appropriately made by the lawyer. It would be most
prudent for the accountant, lawyer and client to meet to review to the proposed assessment and
the issues raised and to determine who is in the best position to address the issues.
If additional time is required in order to respond to the proposal letter, an extension of time
should be requested from the auditor in writing.
)
.
)
It is quite common for auditors to grant
reasonable extensions of time when requested. However, if no extension is requested and no
further contact is made with the auditor following the proposal letter, a Notice of Reassessment
based on the proposal letter will be issued very shortly after the expiry ofthe 30 day time period.
v.
NOTICE OF OBJECTION STAGE
A.
NOTICE OF OBJECTION UNDER THE INCOME TAX ACT
Once a Notice of Assessment/Reassessment has been issued, a taxpayer may file a Notice of
Objection under subsection 165(1) of the ITA. The limitation periods for filing a Notice of
Objection are as follows:
•
Individuals and testamentary trusts: within 90 days of the date of mailing of the
Notice of Assessment or within one year of the taxpayer's "filing due date",
whichever is later.
•
All other taxpayers: within 90 days of the date of mailing of the Notice of
Assessment.
- 15 -
Immediately after a Notice of Assessment/Reassessment is issued, a practitioner should compute
the time deadline for filing a Notice of Objection and place the limitation period in a diarization
system that will ensure compliance. When consulted by a client, one of the first documents that
the practitioner should request from the client is a copy of the original Notice of Assessment as
well as any subsequent Notices of Reassessment with respect to each taxation year.
The date on the most recent Notice of Reassessment will not only determine the length of time
that a taxpayer has to file a Notice of Objection, but will also indicate whether any reassessment
is statute barred as having been issued outside the "normal reassessment period".
In calculating the time limit for filing a Notice of Objection, the mailing date of the most recent
Notice of Reassessment is excluded pursuant to subsections 27(2) and (5) of the Interpretation
Act. If the final day of the filing period falls on a holiday as defined in subsection 35(1) of the
Interpretation Act (which includes a Sunday but not a Saturday), then the Notice of Objection
may be filed on the next day that is not a holiday under section 26 of the Interpretation Act.
A separate Notice of Reassessment will be issued to a taxpayer with respect to each taxation year
and a separate Notice of Objection must be filed with respect to each disputed Notice of
Reassessment. Typically, a Notice of Reassessment has the effect of cancelling a previous
Notice of Assessment or Reassessment. It is not uncommon for CCRA to reassess more than
one taxation year at the same time in separate Notices of Reassessment and it is therefore
important that a practitioner obtain copies of all Notices of Reassessment and file a Notice of
Objection with respect to each Notice of Reassessment that the client wishes to dispute.
A Notice of Objection is required to be in writing and delivered or mailed to the Chief of
Appeals at the local CCRA District Taxation Office. The Notice of Objection is not required to
be filed in a prescribed form. However, CCRA recommends that Form T400A be used for filing
a Notice of Objection.
Subsection 165(1) of the ITA states that a Notice of Objection must set out the reasons for the
objection and all relevant facts. A Notice of Objection should also contain the address and
telephone number of the taxpayer as well as the taxpayer's business number or social insurance
number, the date of the Notice of Assessment or Reassessment being disputed, the assessment or
- 16 -
reassessment number and the relevant taxation year.
A copy of the relevant Notice of
Assessment or Reassessment should also be attached to the Notice of Objection. The name of
the representative of the taxpayer and telephone number should also be specified. The Notice of
Objection should be signed by the individual taxpayer or, if a corporation, by the president,
secretary or treasurer of the corporation or any other authorized person on behalf of the
corporation.
In preparing a Notice of Objection, it is important for a practitioner to understand the onus of
proof that the taxpayer bears where there has been a tax reassessment. The general proposition
in income tax matters is that the taxpayer bears the onus of proving that the facts and
assumptions relied on by the Minister are erroneous. The Minister has a duty to disclose the
precise basis for the assessment. To discharge the burden of proof, the taxpayer has three
options or ways of attacking the assessment:
a) to prove on a balance of probabilities that the findings of fact and assumptions of
the Minister are erroneous; or
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b) to prove that the Minister did not make the assumptions it said it did; or
.)
c) to prove on a balance of probabilities that the findings of fact and assumptions do
not support the assessment issued in any event.
If the taxpayer succeeds on any of the foregoing, the Minister then bears the onus of proving, on
a balance of probability, the necessary facts to support the assessment. The Minister may raise
other facts not relied on in the assessment, but in that event, the onus is on the Minister to prove
such facts. Where the onus is on the taxpayer, that onus relates to the facts and not the issues of
law. The responsibility to determine the validity of an assessment as a matter of law rests with
the Tax Court and no party bears the onus with respect to the law.
The Notice of Objection should therefore be prepared in a manner to meet the burden imposed
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on a taxpayer by putting in issue the facts and assumptions alleged be erroneous and providing a
statement of the facts and assumptions, as they exist to support the taxpayer's position. The
statement of facts' contained in the Notice of Objection should be brief and should not include a
recitation of the evidence.
The Notice of Objection should also refer to all possible legal
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arguments or reasons for objection and refer to the relevant provisions of the ITA which are
applicable. An example of a Notice of Objection is attached as Schedule 1.
Before preparing a Notice of Objection, a practitioner requires a complete understanding of the
facts and assumptions of the Minister as well as the facts from the taxpayer's perspective and the
evidence available to support those facts. In order to gain a clear understanding of the facts and
assumptions relied on by the Minister, a prudent practitioner should request a copy of the T20
auditor's report prior to filing the Notice of Objection. A request may be made from the auditor
to provide a copy of the report. As this request will occur before a Notice of Objection has been
filed, it· will be necessary to provide the auditor with an authorization from the taxpayer
appointing the practitioner as the taxpayer's representative and authorizing the practitioner to
receive the information. The form of authorization appointing a representative is TI03E and is
available on the CCRA website.
In some situations, the taxpayer may not have retained copies of their income tax return, GST
returns or payroll documents. As these documents need to be reviewed by the practitioner in
preparing the Notice of Objection, requests can be made to CCRA to provide copies of the
relevant documents by having the client fill out a Business Consent Form (RC59 E)
As
previously mentioned, it is also essential that the practitioner have copies of all Notices of
Assessment or Reassessment that have been issued to the taxpayer for each taxation year.
If CCRA is unable or unwilling to provide the information requested, it may be necessary for the
practitioner to make a formal request under the Access to Information Act ("AlA '/ or the Privacy
Act ("PA '/.
In general, requests under the PA are used to obtain personal information
maintained by the government with respect to an individual. The types of information that may
be obtained include copies of the auditor's report, appeals officer report, any records or notes of
communications between the auditor and the client, the auditor's working papers as well as
internal documents and memoranda.
The request for information under the PA or AlA should be signed by the taxpayer or a duly
authorized officer on behalf of a corporate taxpayer. The practitioner may request that the
information requested be provided directly to the practitioner, in which case a consent on behalf
of the taxpayer should be filed with the application. If the request for information will involve
- 18 -
the disclosure of infonnation concerning third parties, consents on behalf of those third parties
should also be filed with the application. There is no filing fee associated with making a request
on behalf on an individual under the PA. Once the application is submitted, the government
institution from which the infonnation is requested has 30 days to respond to the request, but the
time for response can be extended for a further 30 days. As the time period for filing a Notice of
Objection is typically 90 days from the mailing date of the Notice of Reassessment, it is
important to make a PA request immediately after the Notice of Reassessment is issued if the
required infonnation can not be obtained through infonnal means.
Where the infonnation required to prepare the Notice of Objection is on behalf of a corporation,
the request for infonnation should be made under the AlA. The request is made in a similar
fashion to a request under the PA. However, a $5 application fee is required to be filed with the
application under the AlA and additional costs may be charged for providing copies of the
infonnation. The taxpayer or his representative will be notified in advance of the additional
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costs and a request for a deposit may be made if these costs are substantial. The government
institution has 30 days to respond to a request under the AlA, which may be extended for an
additional 30 days.
There are numerous grounds upon which certain categories of documents may be exempted from
the right to access under PA and AlA and these Acts should be reviewed to detennine whether
)
the exemptions may apply to the infonnation being requested.
One of the more important
exemptions is contained in section 23 of the AlA and section 27 of the PA which restricts
disclosure of infonnation subject to solicitor-client privilege. In the context of tax litigation,
CCRA is considered to be the client and the Department of Justice is CCRA's lawyer.
Therefore, documents prepared by the Department of Justice for CCRA are privileged and
correspondence or opinions provided by the Department of Justice to CCRA may be excepted
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from disclosure.
Examples of requests for infonnation under the PA and AlA and related documents are attached
as Schedules 2 and 3, respectively.
Once the Notice of Objection is prepared, it should be served by delivering or mailing it to the
local District Taxation Office of CCRA. Although it is not necessary to send the Notice of
- 19 -
Objection by registered mail it is prudent to do so. The envelope for the Notice of Objection
should be addressed to the "Chief of Appeals" at the local District Taxation Office. If the Notice
of Objection is hand delivered, a request should be made from the person receiving the objection
at the District Taxation Office to date stamp or acknowledge service on a duplicate copy of the
Notice of Objection or cover letter. The acknowledgement of receipt should be maintained for
the taxpayer in the event that a dispute arises as to whether the Notice of Objection was served
within the applicable time limit.
The Notice of Objection forms a part of the record that goes to the Tax Court of Canada and will
be reviewed by the trial judge. If it is thought to be unlikely that the issues will be resolved at
the Notice of Objection stage, it is recommended that the Notice of Objection be prepared by
legal counsel.
The Notice of Objection is a form of pleading that may bind the types of
arguments capable of being raised at the Tax Court. There is some jurisprudence that questions
whether or not new arguments can be made at the Tax Court level that have not been made in the
Notice of Objection4 • However, generally the taxpayer is not estopped from raising issues on an
appeal of the assessment to the Tax Court that were not raised in the Notice of Objection. This,
however, does not apply to large corporations (see discussion below).
Large Corporations
There are additional obligations and limitations imposed upon a "large corporation" in filing the
Notice of Objection which are found in subsections 165(1.11) to (1.14) and subsection 169(2.1).
A corporation is a "large corporation" pursuant to subsection 225.1(8) of the ITA if Part 1.3 tax is
payable by it for that taxation year or would have been payable but for the credit under
subsection 181.1(4). A corporation is also a "large corporation" in a taxation year ifis related at
the end of the year to a corporation that is itself a large corporation in its taxation year that
includes the end of that year.
Subsection 165(1.11) of the ITA imposes three additional requirements for filing a Notice of
Objection on behalf of a large corporation: (1) it must reasonably describe each issue to be
decided; (2) it must set out the facts and reasons relied upon with respect to each issue and (3) it
See Forand Auto Ltee v. MNR 66 DTC 184 (TRE); Rosenberg v. MNR 68 DTC 830 (TAB); Abugov v. MNR 72
DTC 1493 (TAB); Boivin v. MNR 79 DTC 50 (TRE); but see Midwest Oil Production Ltd. v. Her Majesty the Queen
1982 CTC 107 (FCTD) to the contrary.
·4
- 20-
must specify the relief sought in respect of each issue expressed as the amount of a change in a
"balance". A "balance" is defined in subsection 152(4.4) as: income, taxable income, taxable
income earned in Canada, any loss, tax or any amount payable, any amount refundable, or any
amount deemed to have been paid or to have been paid as an overpayment.
A Notice of Objection for a large corporation will only be valid if it complies with these
requirements.
Subsection 165(1.12) effectively extends the time limit for compliance with
subsection 165(1.11) if the Minister requests in writing that the corporation provide the required
information and such information is provided within 60 days after the request is made.
However, there is no obligation on the Minister to make such a request for information and it is
possible that no such request will be made and the Notice of Objection and subsequent Notice of
Appeal may be held to be invalid once the matter is before the Tax Court.
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It is recommended that legal counsel always prepare a Notice of Objection on behalf of a large
corporation. The preparation of a Notice of Objection on behalf of a large corporation becomes
particularly significant if matters can not be resolved at the objection stage as a large corporation
)
is limited by subsection 169(2.1) to appealing only those issues in respect of which the
)
corporation has complied with subsection 165(1.11) in the Notice of Objection.
Application for Extension of Time to File a Notice of Objection
In many cases, a taxpayer will only seek legal advice after the time limit for filing a Notice of
Objection with respect to a Notice of Reassessment has expired. However, pursuant to section
166.1 of the ITA a taxpayer may apply to the Minister to extend the time for serving a Notice of
Objection. An extension may be granted where the taxpayer is able to demonstrate:
(1) The application is made within one year after the expiration of the time otherwise
limited by the ITA for serving a Notice of Objection;
(2) That within the time otherwise limited for serving a notice, the taxpayer was
unable to act or to instruct someone to do so, or had a bona fide intention to
object to the assessment;
(3) That it would be just and equitable to grant the application; and
(4) That the application was made as soon as circumstances permitted.
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The application is made by forwarding a letter addressed to the Chief of Appeals in the
appropriate District Taxation Office ofCCRA accompanied by a copy of the Notice of Objection
for which the extension is being sought. The letter should address each of the requirements set
out in section 166.1. The application must be made within one year after the expiration of the
time otherwise limited by the ITA for serving a notice of objection. Therefore, a taxpayer may
have one year and 90 days from the date of the Notice of Reassessment to apply for an extension
of time to file a Notice of Objection.
CCRA is generally very accommodating in granting applications for an extension of time to file
a Notice of Objection provided the application complies with all the requirements and is made
within the required time frame. If the application for an extension is refused, the taxpayer may
then apply to the Tax Court under section 166.2 to have the time limit extended. The taxpayer
may also apply to the Tax Court if the Minister has not responded to the application within 90
. days of service of the application. The basis for granting an extension of time by the Tax Court
is identical to the basis upon which the Minister will grant an extension of time. Information
supporting the application for an extension which was not filed with CCRA should be included
in the documents filed with the Tax Court at the time the application is made.
Collection Restrictions under the ITA
A number of restrictions are placed on the collection mechanisms in the ITA available to CCRA,
although interest continues to accrue at the prescribed rate on any taxes, interest, penalties and
other amounts payable under the ITA. Therefore, prudent practitioners should always advise their
clients that interest will continue to accrue while disputed amounts are under objection or appeal
and that payment of the amount in dispute will stop interest from accruing and will not constitute
an admission of liability.
Under subsection 225.1(1), the Minister cannot invoke any collection measures before the day that
is 90 days after the day of mailing of the Notice of Assessment. This is to give the taxpayer time to
decide whether he or she should object to the Assessment.
Subsections 225.1(2) and (3) go on to place further restrictions on the Minister's power to take
collection action where the taxpayer serves a Notice of Objection or institutes an appeal to the Tax
- 22-
Court of Canada. In the fonner case, the Minister cannot collect before the day that is 90 days after
the day on which the Notice confinning or varying the assessment is mailed to the taxpayer. This
is to give the taxpayer time to decide whether he or she should appeal the Minister's decision to the
Tax Court of Canada. If an appeal is instituted, the Minister cannot take collection action before
the earlier of (a) the day of mailing of a copy of the decision of the Court to the taxpayer, or (b) the
day in which the taxpayer discontinues the appeal.
With respect to large corporations, subsections 225.1(7) and (8) specify that subsection 225.1(1) to
(4) do not apply to a large corporation which files a Notice of Objection to an Assessment under
the ITA. Such corporations will be required to pay 50 percent of the disputed amount if it, or a
related corporation, was liable for the large corporation's tax in respect of the year in dispute. The
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full amount of tax that is not in dispute must also be paid.
CCRA is not restricted from collecting once it is successful at trial in the Tax Court,
notwithstanding that the taxpayer is appealing the decision to the Federal Court of Appeal. Section
225.1 must be read subject to subsection 225.2 (2) which pennits the Minister to make an ex parte
application to a judge of a superior Court of a province or to a judge of the Federal Court of
Canada for authorization to take immediate collection action. In granting the application, the judge
must be satisfied that there are reasonable grounds to believe that the collection of all or any part of
the assessed amount would be jeopardized by delay. The judge is specifically empowered to
impose such tenns as he or she considers r.easonable in the circumstances.
B.
NOTICE OF OBJECTION UNDER THE EXCISE TAX ACT
The process of filing a Notice of Objection to an assessment made under the ETA is very similar
to filing a Notice of Objection under the Income Tax Act. There are, however, some distinctions
that a practitioner should be aware of when consulted by a client with respect to a Notice of
Assessment issued under the ETA.
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First of all, as previously mentioned, a Notice of Assessment is not typically issued by the
Minister automatically when a GST return is filed. Therefore, a Notice of Assessment under the
ETA act will only result after an audit or compliance review has been conducted by CeRA. It is
quite common for auditors when conducting a income tax audit to concurrently conduct a GST
- 23 -
audit as well.
The practitioner should be aware that there will be separate Notices of
Assessment/Reassessment issued with respect to the income tax adjustments and the GST
adjustments. The proposed GST adjustments will typically be set out in a separate 30 day
proposal letter forwarded to the taxpayer by the auditor. A practitioner should therefore request
a copy of the GST proposal letter.
The second important point to note is that the time limit for the Minister to assess a GST return is
the later of the date the GST return was required to be filed and the date it was actually filed. In
many situations, the client may not have filed GST returns at the appropriate time and therefore
the limitation period may extend beyond four years from the date the GST return was required to
be filed. A practitioner should obtain copies of the GST returns filed by the client and attempt to
determine the date when they were filed in order to determine whether the reassessment is
outside the limitation period.
Thirdly, an assessment under the ETA may be made with respect to more than one reporting
period. Typically, an auditor will conduct a GST audit for the same years that the income tax
.
audit is being conducted. For example, if the auditor is conducting an audit of the 2000 and 2001
income tax returns of the client, the GST audit will likely cover this time period as well, even
)
)
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)
though the taxpayer may have filed GST returns on a monthly basis. There will likely, however,
only be one Notice of Assessment issued under the ETA for the entire audit period under review.
In this case, only one Notice of Objection needs to be filed with respect to the Notice of
Assessment that is issued for the entire audit period.
Once a Notice of Assessment under the ETA has been issued, the taxpayer has 90 days after the
date the Notice of Assessment was sent to file a Notice of Objection. The date the Notice of
Assessment was sent will be the mailing date indicated on the Notice of Assessment.
In contrast to filing a Notice of Objection under the ITA, a Notice of Objection filed under the
ETA requires that a prescribed form be used. The form to be used is GST 159, Notice of
Objection (attached as Schedule 4). The Notice of Objection must set out the reasons for the
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objection and all relevant facts. In addition, all of the other information set out in GST Form 159
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must be completed. A copy of the disputed Notice of Assessment should accompany the Notice
)
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of Objection. The form should be signed by the taxpayer and filed with the Appeals Division of
)
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the nearest District Taxation Office of the CCRA. If a person is objecting to more than one
assessment, a separate Notice of Objection must be filed for each disputed assessment.
"Specified Persons"
The ETA also imposes additional obligations and requirements in filing a Notice of Objection on
behalf of a "specified person". A "specified person" is a listed financial institution described in
any of subparagraphs 149(1)(a)(i) to (x) during the reporting period or a person (other than a
charity) whose threshold amounts (as determined under subsection 249(1)) for the person's fiscal
year that includes the reporting period and the immediately previous fiscal year each exceed $6
million. A person's threshold amount for any fiscal year is calculated by reference to the total
value of the consideration for taxable supplies (other than supplies of financial services, sales of
capital property and zero-rated exports) made by that person (and any associates) in the
immediately preceding fiscal year.
Therefore, the determination of whether a person is a
"specified person" in a given year is based on the annual taxable supplies made in the two
)
)
immediately preceding fiscal years.
)
The special rules require that "specified persons" provide detailed information in a Notice of
)
Objection. In particular, the Notice of Objection must:
•
Provide a reasonable description of each issue requiring a decision;
•
Specify the relief that is being sought in respect of each issue, expressed as the change in
any amount relevant for the purpose of the assessment (i.e. an increase in the amount of
allowable input tax credits); and
•
List the facts and reasons relied on for each issue.
Where a specified person has not provided the required information with respect to the amount
of relief sought or the facts and reasons in support of each issue in the objection, the Minister
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may pursuant to subsection 301(1.3) of the ETA request in writing that the person provide the
required information. If the person submits the information in writing to the Minister within 60
days after the request, it will be treated as having been provided in the Notice of Objection. It is
noted that there is no requirement on the Minister to request that the required information be
d
)
provided and such issues may not be raised until the matter is before the Tax Court of Canada in
which case the Notice of Objection and Notice of Appeal may be held to be invalid.
- 25-
Application for Extension of Time to File a Notice of Objection
If a person has not filed a Notice of Objection within 90 days after the date the Notice of
Assessment is sent to the person, the person may apply to the Minister for an extension of the
time to object under section 303 of the ETA. The application for an extension of the time limit
should set out the reasons why the notice ofobjection was not filed within the time otherwise
limited to do so and should be delivered to the Chief of Appeals at the nearest District Taxation
Office and should be accompanied by a copy of the Notice of Objection. Subsection 303(7) of
the ETA sets out the requirements that must be met before an application for an extension will be
granted. These requirements are identical to those for an extension under subsection 166.1 of the
ITA.
There is no particular form required to be completed in order to apply for an extension to file a
Notice for Objection under the ETA, other than the requirement that the Notice of Objection
accompanying the application be in the prescribed form.. The common practice is to send a letter
to CCRA with the Notice of Objection setting out the relevant facts and addressing each of the
requirements in subsection 303(7).
Once a Notice of Objection under the ETA is filed with CCRA, the process of dealing with the
objection proceeds in a manner similar to objections filed under the ITA. However, as the ITA
and ETA are administered by separate divisions of CCRA, a different Appeals Officer will be
assigned to deal with the objection filed under the ETA. Prior to the Appeals Officer being
assigned to the file, documents may be requested from the auditor upon providing an
authorization appointing the lawyer as the representative of the taxpayer. As well, requests can
be made under the PA or AlA for disclosure, a meeting can be requested with the Appeals
Officer assigned to the file and further representations and documents can be presented to the
Appeals Officer. The result of the objection will be that the assessment will either be vacated,
varied or confirmed.
Prior to reaching a decision with respect to the Notice of Objection, the Appeals Officer will
typically send a proposal letter to the taxpayer or his representative advising of the proposed
adjustments, if any, and requesting further representations within a certain time period (usually
30 days). If the assessment is varied, a Notice of Decision will be sent to the taxpayer or his
- 26-
representative together with a Notice of Reassessment. If no adjustments are proposed to the
original assessment, a Notice of Decision will be forwarded to the taxpayer and his
representative confirming the assessment. The date set out in the Notice of Decision is important
as it determines the time limit for filing a Notice of Appeal to the Tax Court of Canada.
One other distinction between a Notice of Objection filed under the ITA and a Notice of
Objection filed under the ETA is that once a Notice of Assessment is issued under the ETA the
amount set out as owing is immediately payable and the filing a Notice of Objection will not stay
enforcement action by CCRA. CCRA may attempt to collect the total amount outstanding even
though the person files a Notice of Objection or a Notice of Appeal. In practice, the Minister
may agree to postpone collection action against the person pursuant to subsection 315(3) or
314(2) of the ETA in respect of all or any part of the amount assessed, subject to certain terms or
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conditions or upon security being provided.
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C.
NOTICE OF APPEAL TO THE MINISTER UNDER THE CPP ACT AND EI
ACT
)
)
There are two situations where it might be necessary to file an appeal with CCRA pursuant to the
)
Cpp Act and/or EI Act. As mentioned above, the first situation concerns where a ruling has been
)
made by CCRA at the request of HRDC, an employer or an employee for a determination as to
whether a particular employee was engaged in pensionable or insurable employment.
The
second situation is where CCRA has conducted a formal payroll audit of the payroll records of a
client and has issued a Notice of Assessment to the client for the employee's and employer's
portion of the CPP contributions and EI premiums payable with respect to one or more
individual.
When CCRA receives a request for a ruling or conducts a payroll audit under the CPP Act or EI
Act, a single ruling or notice of assessment is typically issued for the relevant ruling period or
audit period. Once the ruling or assessment is issued, the provisions the EI Act and CPP Act
provide that an appeal to the Minister may be made within 90 days after the person is notified of
the ruling or assessment.
The 90 day time limit for filing an appeal to the Minister will
commence from the date specified in the ruling letter or Notice of Assessment.
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Although there is no requirement that a particular form be used to file an appeal with Minister
from a ruling or assessment, Form CPTlOO, Appeal Under the Canada Pension Plan and/or
Employment Insurance Act is recommended by CCRA (see Schedule 5). Form CPTlOO states
that a separate sheet should be attached providing the relevant facts and reasons why the appeal
should be allowed and the assessment varied or vacated. In the event that the Form CPTlOO is
not used, a full statement of the relevant facts and reasons why the appeal should be allowed
should be included as part of the appeal. In addition, a copy of the ruling letter or Notice of
Assessment should be attached to the appeal filed with the Minister. If Form CPTlOO is used,
the appropriate box specifying whether the appeal relates to CPP, EI or both should be properly
marked.
The Notice of Appeal should the addressed to the Assistant Director of Appeals at the local
District Taxation Office of CCRA. It is extremely important that the person or representative
filing the appeal be able to establish through documentary evidence that the appeal was filed
within the 90 day time period.
It should be specifically noted that, unlike the ITA and ETA, there are no provisions in the CPP
Act or EI Act which provide for an application to extend the time for filing an appeal with the
Minister.
An Appeals Officer of CCRA will be assigned to review the appeal and will contact the .
individual or authorized representative to discuss the issues and the facts involved in the dispute.
Information that the Rulings Officer or the Payroll Auditor relied upon in making the ruling or
issuing the Notice of Assessment can be requested directly from the auditor, the Appeals Officer
or through the provisions of the AlA or PA. The Appeals Officers who handle appeals under the
CPP Act and EI Act work in a separate division of CCRA and will be different from the Appeals
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Officer handling an objection filed by the taxpayer under the ITA or ETA. A meeting can be
requested with the Appeals Officer to review the facts and assumptions that they have relied on
in reaching the ruling and/or assessment. The Appeals Officer will also consider further written
representations and documentation provided by the individual or his authorized representative.
It should be noted that when CCRA receives a request for a ruling, questionnaires are typically
sent to the alleged employer and employee to fill out. These questionnaires are extremely
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important as it is the responses to these questions that will form the basis for the ruling of the
Rulings Officer. It is common for the questions contained in a questionnaire to be specially
designed to elicit facts which according to the jurisprudence are used to determine whether a
particular person is an employee engaged under a contract of service or an independent
contractor working under a contract for services. Therefore, particular care and attention should
be used in completing these questionnaires and it is advisable for a person to seek legal advice in
preparing their responses.
In certain situations, an Appeals Officer may request that a further more detailed questionnaire
be completed by the alleged employer and employee. The legal representative should assist the
client in preparing these responses. In addition, in the event that the hirer and the worker have
entered into a formal written contract for service for the purpose of establishing an independent
contractor relationship, a copy of this contract should be provided to the Appeals Officer.
In certain situations, a directive may be issued by the Head Office of CCRA to target certain
types of corporations, industries or job classifications to determine the true nature ofthe working
relationship. For example, in recent years CCRA has targeted trucking companies and truck
drivers to determine the nature of their working relationship. It may be that the Appeals Officer
will not have authority to decide the appeal without referring the matter to CCRA Head Office.
In these situations, our experience has been that it is unlikely that CCRA Head Office will
reverse the ruling made by the original Rulings Officer that a particular individual was an
employee working under a contract of service.
A legal representative may want to ask the Appeals Officer whether they have authority to
,
resolve the matter or whether it will be necessary for them to refer any decision reached to the
CCRA Head Office for approval. If the Appeals Officer advises that it will be necessary to refer
the matter to Head Office, a legal representative may consider whether it is cost effective to
make any further representations to the Appeals Officer, but rather may request that the Appeals
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Officer simply confirm the ruling or assessment so that the matter can be appealed to the Tax
Court of Canada.
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It should also be noted that once a ruling or assessment is made under the CPP Act or El Act,
CCRA make commence collection action immediately against an employer whether or not an
- 29-
appeal has been filed. However, in some situations, CCRA may be willing to consider refraining
for pursuing collection action with respect to a ruling or assessment while the matter is pending
before the Tax Court. In other situations, CCRA will require that the employer commence
withholding CPP and EI on a "go forward" basis with respect to the particular employee or
employees, but will not pursue collection with respect to the amounts in dispute for prior periods
until the appeal has been finally determined. In each case, the decision by CCRA whether or not
to pursue collection action after a ruling or assessment has been issued is purely discretionary.
VI.
NOTICE OF APPEAL STAGE
A.
APPEALS TO THE TAX COURT OF CANADA UNDER THE ITA
Where a taxpayer fails to resolve an income tax dispute at the Notice of Objection Stage, the
taxpayer may launch an appeal to the Tax Court of Canada pursuant to subsection 169(1) of the
ITA. The right to appeal to the Tax Court of Canada under Section 169(1) arises once the
Minister has confirmed the assessment or reassessment under objection, or where 90 days have
elapsed from the date of service of the Notice of Objection. The Notice of Appeal must be filed
with the Tax Court within 90 days of the date the Notice of Confirmation or Notice of
Reassessment was mailed to the taxpayer with respect to the Notice of Objection.
Informal Procedure
The Tax Court of Canada has exclusive jurisdiction to initially hear all appeals under the ITA.
There are two different streams of procedures for hearing income tax appeals: the Informal
Procedure and the General Procedure.
A separate set of rules has been enacted for each
procedure and these rules apply to all proceedings instituted after January 1, 1991.
A taxpayer can use the Informal Procedure for appeals in three circumstances:
1.
The aggregate of all federal tax and penalties in dispute for one taxation year is equal
to or less than $12,000;
2.
The amount ofloss in issue does not exceed $24,000; or
3.
The only amount in issue is the amount of interest assessed under the ITA.
When the amount in dispute exceeds the threshold limits, an taxpayer can elect to restrict the
amount under appeal to the limits and forego any claim for the excess.
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A taxpayer must specifically elect in the Notice of Appeal filed with Tax Court to have the
Informal Procedure apply to the appeal. There is no specific form that is required to be filed
with the Tax Court to commence an appeal under the Informal Procedure, although a form is
provided in Schedule 4 of the Informal Procedure Rules. A Notice of Appeal under the Informal
Procedure is required to be made in writing and set out the relevant facts and the reasons relied
upon for appealing the assessment.
It has been our practice to follow a more formalized
approach in preparing a Notice of Appeal under the Informal Procedure which specifically
identifies the parties involved, the Notice(s) of Assessment appealed from, statement of facts,
issues to be decided, statutory provisions upon which the appellant relies and the grounds which
he intends to submit, the relief sought, the address of the appellant, the place of trial and the
name and address of the solicitors for the. appellant and an election for the appeal to be heard
under the Informal Procedure. An example of a Notice of Appeal filed under the Informal
Procedure is attached as Schedule 6.
It should also be noted that, unlike the Notice of Objection stage, a single Notice of Appeal may
be filed with respect to more than one Notice of Reassessment.
However, each Notice of
Reassessment and the corresponding taxation year should be identified in the Notice of Appeal.
An appeal under the Informal Procedure may be filed with the Tax Court by delivering or
mailing the Notice of Appeal to the Registry of the Tax Court of Canada office together with a
$100 filing fee. A Notice of Appeal can also be sent by fax or by using the Tax Court of
Canada's online document-filing system accessible through its website. If a Notice of Appeal is
sent by fax or online, the original of the Notice of Appeal, together with the filing fee, must be
sent to the Tax Court immediately thereafter.
Once a Notice of Appeal is filed with the Tax Court, a copy of the Notice will be sent by the
registry to the office of the Commissioner of Customs and Revenue. Within 60 days after the
. registry transmits a copy of the Notice of Appeal, the Minister is required to file and serve a
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Reply to the Notice of Appeal containing statements setting out: the facts that are admitted; the
facts that are denied; the facts of which the Respondent has no knowledge and puts in issue; the
findings or assumptions of fact made by the Minister when making the assessment; any other
- 31 -
material facts, the issues to be decided, the statutory provisions relied on, the reasons the
Respondent intends to rely on and the relief sought.
Within five days after the Reply is filed, the Minister is required to serve a copy of the Reply by
registered mail addressed to the Appellant's address for service of documents.
The Tax Court is required to fix a date for a hearing of an appeal under the Informal Procedure
not later than 180 days after the Reply is filed, or where the Court is of the view that it would be
impractical in the circumstances to fix the hearing date within that time period, 365 days after the
last day on which the Minister of National Revenue must file a Reply to the Notice of Appeal.
When the Tax Court has fixed the date for a hearing, the registrar of the Court is required to send
to all parties a Notice of Hearing by registered mail not later than 30 days before the date set for
the hearing.
There is no formal disclosure process or examinations for discovery under the Informal
Procedure. A party who intends to call an expert witness at the hearing is required, not less than
10 days before the commencement of the hearing, to file at theTax Court registry and serve on
the other parties, a report signed by the expert setting out the expert's name, address and
qualifications and the substance ofthe expert's testimony.
An application may be brought by the Attorney General of Canada to remove the appeal from the
Informal Procedure to the General Procedure. Typically, a motion to have the General Procedure
rules apply should be made within 45 days of service of the Notice of Appeal.
If the taxpayer is more than 50 percent successful in their appeal, the Tax Court judge can order
the Minister to pay costs to the taxpayer in accordance with the Informal Procedure Rules or in a
fixed sum. In the event that the taxpayer is not successful in their appeal under the Informal
Procedure, the rules do not allow the judge to order costs against the taxpayer.
)
Once the hearing date is set, the hearing of the appeal will proceed under the Informal Procedure
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before a Tax Court judge. As mentioned, there is no formal disclosure requirements under the
Informal Procedure. However, counsel for the taxpayer and the lawyer from the Department of
Justice will typically agree to provide at least partial disclosure prior to the hearing date. It is
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under the Infonnal Procedure rules that a significant benefit can be realized by requesting
disclosure under the AlA or PA prior to the hearing date.
The hearing before the Tax Court judge proceeds on a similar basis as a trial before the Court of
Queen's Bench in tenns of calling viva voce evidence, entering documents as exhibits and oral
argument. As the onus is on the taxpayer to disprove the assumptions of fact relied upon by the
Minister, the taxpayer is required to present its case first, subject to some exceptions. In many
instances, the Minister will not call any evidence or will simply call the auditor to testify.
A decision is required to be made by the Tax Court not later than 90 days after the hearing has
been concluded, except in exceptional circumstances. The judgement of the Tax Court will
either be to dismiss the appeal or allow the appeal and either vacate the assessment, vary the
assessment or refer the assessment back to the Minister for reconsideration and reassessment. It
should be noted that judgements under the Infonnal Procedure do not have any precedential
value. A judgement of the Tax Court under the Infonnal Procedure is not subject to appeal but
in accordance with the Federal Court Act an application for judicial review can be brought
before the Federal Court of Appeal within 30 days of the decision of Tax Court being
communicated.
It should also be noted that where a taxpayer has failed to file a Notice of Appeal with the Tax
Court of Canada within the 90 day time limit, the taxpayer may make an application to the Tax
Court for an order extending the time to file an appeal pursuant to the subsection 167(1). The
application may be made in Fonn 18.1 set out in the Infonnal Procedure Rules. The application
is required to set out the reasons why the appeal was not instituted within the time limited for
doing so and is made by filing with the Tax Court three copies of the application accompanied
by three copies of the Notice of Appeal. A hearing date will be set for the application before the
Tax Court. The Tax Court will not make an order to extend the time to file an appeal unless:
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The application is made within one year after the expiry of the time limited for filing a
Notice of Appeal
•
The taxpayer demonstrates that within the time otherwise limited for filing a Notice
Appeal, the taxpayer:
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o Was unable to act or instruct another to act in the taxpayer's name or
- 33 -
o Had a bona fide intention to appeal;
•
It would just and equitable to grant the application based on the reasons set out in the
application and the circumstances of the case;
•
The application was made as circumstances permitted; and
•
There are reasonable grounds for appeal.
General Procedure
All appeals which are instituted in the Tax Court of Canada, other than those under the Informal
Procedure, are governed by the General Procedure Rules. Every Notice of Appeal filed under
the General Procedure must be in Form 21(1) (a).
The General Procedure is a much more formalized process which is more comparable to a Court
of Queen's Bench action in that it provides for partial or full document disclosure, examinations
for discovery, and, in some cases, a pre-hearing conference prior to the hearing of the appeal.
General proceedings are instituted by filing the original and two copies of the Notice of Appeal
using Form 21(l)(a) with the Registry of the Tax Court to Canada. There is a prescribed filing
fee which must be paid which varies from $250 - $550 based on the amount of the total federal
tax and penalty in dispute or the loss contested. Filing may also be done by forwarding the
required documents and fee by registered mail or by transmitting the required documents by
facsimile.
Where a taxpayer chooses to file by facsimile, the original of the documents
transmitted by fax must be sent forthwith by registered mail to the same Registry office, together
with the filing fee.
Generally, the Minister must file a Reply to a Notice of Appeal under the General Procedure
must within 60 days after service of the Notice of Appeal. Within this time, the Minister is
entitled to apply to the Court for an extension of time. Alternatively, the Appellant may consent
to an extension of time for filing the Reply to 90 days. If the Minister does not file and serve a
Reply within these time periods, Rule 63 of the General Procedure Rules permits the Appellant
to apply for default judgement. However, on a motion for default judgement, the Court may
exercise its discretion to permit the Reply to be filed and served late in order for the Appeal to be
- 34-
heard, although a condition may be imposed that the facts alleged by the Appellant are assumed
to be true thereby placing the onus on the Minister.
The Tax Court of Canada may dispose of an appeal by dismissing it or allowing it. If the appeal
is allowed, the Court may vacate or vary the assessment or it may refer the assessment back to
the Minister for reconsideration and reassessment. Reasons, if issued, must be in writing. There
is no time limit for the rendering of a judgement under the General Procedure. A judgement
rendered· in an appeal to the Tax Court of Canada under the General Procedure may be appealed
to the Federal Court of Appeal. The Appellant must file an appeal within 30 days.
Costs may be awarded to either party in a General proceeding. The Court has full discretionary
power in deciding when to award such costs. The Crown may be awarded costs notwithstanding
counsel for the Crown is a salaried office of Her Majesty.
A practitioner should be aware that there are restrictions imposed on a large corporation in filing
a Notice of Appeal pursuant to subsection 169(2) and (2.1) of the ITA. Subsection 169(2.1) will
restrict the right of a large corporation to appeal to the Tax Court with respect to issues or relief
that were not set out in a valid Notice of Objection.
B.
APPEALS TO THE TAX COURT OF CANADA UNDER THE EXCISE TAX
ACT
The Tax Court of Canada has exclusive original jurisdiction to hear and determine appeals
concerning matters arising under Part IX of the ETA. A person who has filed a Notice of
Objection may appeal to the Tax Court to have the assessment vacated or a reassessment made
if:
•
The person does not agree with the decision issued by the Appeals Division, in which
case the appeal must be filed within 90 days from the date the Notice of Decision was
sent; or
•
The Minister has not issued a Notice of Decision regarding the objection within 180 days
.
from the day the person filed the Notice of Objection.
A person may also request consent from the Minister to appeal directly to the Tax Court of
J
Canada and waive the right to a reconsideration of the assessment (the objection process). A
request for direct appeal to the Tax Court of Canada may be made in the Notice of Objection or
- 35-
in a separate document filed at the same time. The Minister may consent to the direct appeal and
confirm the assessment without reconsideration. The person then is required to file a Notice of
Appeal with the Registry of the Tax Court of Canada. Similar to appeals filed under the ITA, a
Notice of Appeal filed with the Tax Court raising issues under the ETA may be heard under two
different procedures: the Informal Procedure and the General Procedure.
Unlike appeals filed pursuant to the ITA, no monetary limits are prescribed for an election to the
Informal Procedure in a GST appeal. However, in order to bring a person under the Informal
Procedure for a GST appeal, an election must specifically be made in the Notice of Appeal filed
with the Tax Court.
Where an election has not been made in the Notice of Appeal, subsection 15(1) of the ETA
Informal Procedure Rules provides that the election may be made within 90 days from the date
on which the Reply is served or, on a motion, within such additional time as the Court may
. allow. Subsection 18.15(1) of the Tax Court of Canada Act requires that the appeal under the
Informal Procedure be in writing and that it set out in general terms the reasons for the appeal
and the relevant facts. The Notice of Appal may be brought in the form set out in Schedule 4 of
the Informal Procedure Rules regarding GST Appeals. The original Notice of Appeal must be
filed by depositing it or mailing it, to the Registry of the Tax Court. The Notice of Appeal must
set out an address for service.
Although an appeal under the ETA may be commenced under the Informal Procedure regardless
of the amount in issue, pursuant to section 18.3002 of the Tax Court of Canada Act, where the
Attorney General of Canada requests, the Tax Court shall order that the General Procedure Rules
apply with respect to an appeal commenced under the Informal Procedure.
The request is
required to be made within 60 days after the day the Registry of the Court transmits the Notice of
Appeal to the Minister unless the Court is satisfied that is reasonable in the circumstances to
allow the transfer after that time or the person who brought the appeal consents to the request. In
the event that the amount in dispute in the appeal is less than $7,000 and the aggregate of taxable
supplies for the prior fiscal year of that person is equal to or less than $1 million, the Court is
required to order that all reasonable and proper costs of the person who brought the appeal be
paid by Her Majesty in right of Canada.
- 36-
The filing fee that must accompany the Notice of Appeal when filed with the registry of the Tax
Court under the Informal Procedure is $100. Once the Notice of Appeal is filed, the Court is
required by subsection 308(1) of the ETA to serve a copy of the Notice of Appeal on the
Commissioner of Customs and Revenue. The Minister is required to file a Reply to the Notice of
Appeal within 60 days after the day the Registry of the Court transmits the Notice of Appeal to
the Commissioner, unless the person who brought the appeal consents to the filing after those 60
days.
General Procedure
Unless the Appellant specifically elects for the matter to be heard under the Informal Procedure,
the appeal will be processed under the General Procedure, regardless of the amount contested.
The General Procedure Rules of the Tax Court are followed during the appeal and the Notice of
Appeal must be flied in the prescribed Form 21(1)(a). The filing fee for filing a Notice of
Appeal under the General Procedure is as follows:
Amount in Dispute
Filin2 Fee
$250
Less than $50,000
$400
$50,000 or more, but less than $150,000
$550
$150,000 or more
The practitioner should also be aware that there are special rules in filing a Notice of Appeal
which apply to "specified persons" under the ETA.
Specified persons are precluded from
appealing an assessment to the Tax Court of Canada if they have not complied with provisions
for filing a Notice of Objection. Specified persons are also precluded from revising the relief
sought with respect an issue that was specified in the Notice of Objection (subsection 306.1).
Similar to subsection 167 of the ITA, pursuant to subsection 305 of the ETA, a person who has
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not appealed within the 90 day time period may apply to the Tax Court of Canada for an
extension of the time to appeal. The application must give the reasons why the appeal was not
made within the required time limit.
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When applying for an extension of the time limit to appeal, three copies of the application
accompanied by three copies of the Notice of Appeal must be filed with the Registrar of the Tax
Court of Canada or sent by registered mail. The test that is applied to determine whether an
extension of time will be granted is set out in subsection 305(5) of the ETA and is generally the
same as test imposed under subsection 167(1) of the ITA.
C.
APPEALS TO THE TAX COURT OF CANADA UNDER THE CPP ACT AND EI
ACT
Under the CPP Act and the EI Act, a person who has been affected by a decision on an appeal to
the Minister may, within 90 days after the decision is communicated to the person, appeal from
the decision to the Tax Court of Canada. Where the person has missed the 90 day deadline for
filing a Notice of Appeal, the person may apply to the Tax Court of Canada for an extension of
time to appeal provided the application is made to the Tax Court within 90 days after the
expiration of the 90 days allowed to file the appeal.
A Notice of Appeal must be in writing and must state the relevant facts and the reasons for the
appeal and provide an address for service. Pursuant to section 18.29 of the Tax Court ofCanada
Act, the Informal Procedure applies to all appeals heard under the CPP Act or the EI Act with
some exceptions. The form for the Notice of Appeal that may be used is set out in Schedule 5 of
the Tax Court of Canada Rules of Procedure regarding EI appeals and Schedule 5 of the CPP
Rules. There is no filing fee for filing a Notice of App~al under the CPP Act or EI Act.
Once a Notice of Appeal has been filed at the Tax Court of Canada, the Registrar will serve a
copy on the Commissioner of Customs· and Revenue. The Minister is then required to file and
serve and Reply within sixty days from the day on which the Notice of Appeal was served on the
Minister.
Pursuant to the Tax Court of Canada rules regarding CPP and EI appeals, an
application for discovery of documents or oral examination for discovery may be made after the
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Reply has been filed by the Minister. A Notice of Hearing is required to be sent no less than 30
days before the date of the hearing and expert reports are required to be served and filed not less
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than 20 days before the date of the hearing.
On an appeal, the Tax Court may vacate, confirm or vary the assessment or refer the matter back
to the Minister for reconsideration and reassessment.
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It should also be noted that other parties who may be affected by the Appeal will be given notice
of the appeal.
For example, where an employer has filed an appeal with respect to the
insurability and pensionability of a particular worker, the employee affected will be given notice
of the appeal. The employee then may file a Notice of Intervention with the Tax Court of
Canada within 45 days of the date they were informed of the appeal. Once a judgement is
issued, any party may apply for judicial review to the Federal Court of Appeal within 30 days of
the decision first being communicated. 5
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5 Throughout this paper the writer is indebted to the paper by Edwin Kroft, Tax Dispute Resolution I: Assessments,
Appeals and Enforcement, 2001 National Tax Law CLE Conference and the paper presented by Alain J. Gaucher to
the Institute of Chartered Accountants of Saskatchewan, Disputing The Tax Assessment.
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SCHEDULE 1
OBJECTION
•
•
•
•
•
•
You can use this form to file an objection to a Notice of Assessment or a Notice of Determination issued under the
Income Tax Act.
Please deliver or mail your completed form to the Chief of Appeals at your tax services office or tax centre.
Filing deadlines - You may be filing an objection as an individual or a testamentary trust. If so, you have to file
your objection within one year of the date you had to file your income tax return or 90 days from the date on your
notice of assessment or determination, whichever date is later. All others have to file their objections within 90 days
of the date on their notices.
Large corporations - In addition to providing facts and reasons for objecting, you have to describe each issue and
specify the relief you want for each one.
Collection action - We usually postpone collection action on amounts in dispute until 90 days after we mail the
Minister's decision. In some situations we will not postpone collection action on disputed amounts such as taxes you
had to withhold and remit. In all cases, interest will continue to accrue on any amount payable.
For more information, you can contact the Appeals Division at your tax services office or tax centre.
From:
Name:
To:
Chief of Appeals
Address (as shown on your notice)
340 • 3rd Avenue North
Saskatoon, Saskatchewan
S7KOA8
Telephone (Including area code)
Home
Business
()
()
Name and address of any authorized representative
MacPherson Leslie & Tyerman, Attention: Kurt G. Wintermute
Telephone (including area code)
1500,410· 22nd Street East, Saskatoon, Saskatchewan, S7K 5T6
(306) 975·7121
Please provide the following information or preferably enclose a copy of your notice.
Date of notice
Number of notice
(if printed on notice)
Taxation year
(for T2's show fiscal period end)
Social Insurance Number or
Business Number
1998
January15, 2001
Please state the facts and reasons for your objection (if you need more room, attach a separate sheet).
)
See attached "Statement of Facts and Reasons".
.--J Your signature (or of an authorized person, if a corporation or trust is filing the objection)
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Privacy Act - Personal Information Bank Number RCT/P-PU-005
) T400A (96)
::ODMA\PCDOCS\SASKATOON\1333321\1
Date
1998 Taxation Year
Taxpayer:
STATEMENT OF FACTS
1.
The Appellant was at all material times, resident on a farm located near the Town of
Mayfair, in the Province of Saskatchewan. The Appellant has a farm background, having
been raised on a farm in Saskatchewan. The Appellant's father and grandfather were
both farmers. The Appellant has been farming continuously on his own since 1987.
2.
In 1987, the Appellant rented two quarter sections of farmland near
,
Saskatchewan and purchased a tractor, cultivator, grain truck and grain auger for the
purpose of establishing a farming business.
3.
By 1989, the Appellant was renting a total of four quarters of land and had acquired
additional farm equipment, including: tools, stone picker, press drills, swather, four wheel
drive tractor and a second swather.
4.
In 1990, the Appellant dropped three of the quarters of land he had been renting and
purchased three quarters of land in the Mayfair area and rented an additional quarter of
land. The Appellant purchased the three quarters of land with the intention of eventually
moving his family out to the farm so that his four children could be raised on the farm. In
1991, the Appellant also started investing heavily in farm machinery and equipment and
purchased 5 or 6 cows for the purpose of establishing a cattle operation.
5.
By 1992, the Appellant owned three quarters of land and rented a total of four quarters of
land for his farming operation. In 1993, the Appellant moved his family out to one of the
quarter sections of land which he owned and this quarter became his home quarter. The
home quarter had a house, barn, shop and granaries located on the land.
6.
In 1995, the Appellant built a quonset, corral system and loading facilities on his home
quarter for his cattle operation. In 1996, the Appellant built an addition to the existing
house on his home quarter. In 1997 and 1998, the Appellant built two calving sheds for
his calving operation. As well, in or about 1998, the Appellant purchased one of the
quarter sections of land he had been renting and rented an additional quarter section of
land.
7.
Since 1998, the Appellant has owned four quarters of land and has rented an additional
four quarters of land which he has actively farmed. The Appellant currently actively
farms a total of eight quarters of farmland and rents an additional quarter of pasture land
for his cattle operation. By December of 1999, the Appellant owned 60 cows and two
bulls. The Appellant purchased an additional eight cows in 2000.
8.
Over the past 14 years, the Appellant has committed a major portion of his time and
energies to the business of farming. Until recently, the Appellant has not had the
financial resources to allow him to cease working off his farm in order to become solely
engaged in the business of farming. Low commodity prices, high input costs, and the
effects of weather forced the Appellant to work off the farm. In August, 2000, the
::ODMA\PCDOCS\SASKATOON\1333321 \1
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Appellant accepted a severance package from his employer which allowed him to cease
his off-fann employment effective December 28,2000 and pursue his fanning and cattle
operations on a full-time basis. However, prior to ceasing his off-fann employment, all
of the Appellant's resources from his off-fann income were directed back into the fann
business.
9.
The Appellant has been actively involved in the maintenance and operation of the fann.
The nature of the Appellant's off-fann employment allowed him to take the necessary
time for labour intensive aspects of his fanning business such as seeding and harvesting.
The Appellant has used very little hired labour in his fanning business.
10.
Over the years the Appellant has invested extensively in capital improvements to land and
equipment in order to maintain an active fann business. These investments have
consumed the largest portion of the Appellant's resources. The major portion of the
Appellant's energy, resources, and dedication have been to his fann business over the
past 14 years.
11.
In the Appellant's opinion, his extensive investment of time and money in his fann
business will create a profitable operation in the near future. The Appellant states that the
foregoing is consistent only with the Appellant being engaged as a fanner in the bus.iness
of farming whereby the Appellant's chief source of income for the years 1998 and 1999
constitutes fanning or a combination of fanning and some other source of income within
the meaning of and use of these words in section 31(1) of the Income Tax Act (Canada)
(the "Act").
STATEMENT OF REASONS
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w
12.
The provisions of section 31 (1) of the Act contemplates that a taxpayer may carry on a
combination of activities which will constitute the principal source of income. The
Appellant acquired farmland, equipment and buildings in an orderly fashion in order to
fonn the necessary base for a long-tenn profitable fanning business. The Appellant
contends that he is entitled to deduct all of his fanning losses from his employment
income regardless of the fact that he continued his off-fann employment while devoting
the majority of his time and resources to his fanning business. The Appellant contends
that his major pre-occupation is fanning.
13.
The Appellant further contends that a taxpayer can have employment in two full-time
occupations at the same time without the existence of one of those full-time occupations
leading to the conclusion that he falls within the restrictions imposed by section 31 (1) of
the Act. For the foregoing reasons and such other reasons as may be presented by
counsel, the Appellant respectfully submits that the Respondents reassessments are
incorrect, and that the Appellant should be allowed to deduct from income the full
amount of the fanning losses incurred in the years in question, and respectfully submits
that the reassessments should be varied in this regard.
::ODMA\PCDOCS\SASKATOON\1333321 \1
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SCHEDULE 2
Kurt G. Wintermute
Direct Line: (306) 975-7121
E-mail: [email protected]
July 24, 2002
)
)
Access to Infonnation & Privacy Coordinator
Canada Customs and Revenue Agency
11 th Floor, Albione Tower
25 Nicholas Street
Ottawa, ON
KIA OL5
Attention:
Suzanne LaFrance
Dear Madam:
Re:
Our File:
Privacy Act Request - Mr.
28030.1
We act as solicitors for
Privacy Act Request Fonn, duly executed by
2.
Authorization designating our office as authorized party to receive infonnation pursuant to
the Request enclosed herewith.
Yours truly,
MacPherson Leslie & Tyennan LLP
Per:
Kurt G. Wintennute
\
_J
t;=j
. We enclose herewith the following:
1.
We trust the foregoing is satisfactory.
--J
_
KGW/jep
Enc!.
::ODMA\PCDOCS\SASKATOON\1333326\1
_
Info
Source
TBC 350-58 (Rev. 1997/11)
Personal
Information
Request
Form
Privacy Act
Step 1
Step 2
Step 3
Step 4
Determine which federal government institution is
most likely to hold personal information about you.
Decide whether you wish to submit an informal
request for the information or a formal request
under the Privacy Act. If you wish to make an
informal request, contact the appropriate
institution. The address can likely be found in Info
Source publications which are available across
Canada, generally in major public and academic
libraries, constituency offices of federal Members
of Parliament and most federal government public
enquiry and service offices.
To apply for personal information
about you under the Privacy Act,
complete this form. Describe the
information being sought and
provide any relevant details
necessary to help the institution
find it. If you require assistance,
refer to Info Source (Sources of
Forward the personal
information request
form to the Privacy
Coordinator of the
institution holding the
information. The
address is listed in the
"Introduction" to Info
Federal Government
Information) for a description of
Source.
When you receive an answer to
your request, review the
information to determine
whether you wish to make a
further request under the Act.
You also have the right to
complain to the Privacy
Commissioner should you
believe that you have been
denied any of your rights under
the Act.
personal information banks held
by the institution or contact its
Privacy Coordinator.
Federal Government Institution
CANADA CUSTOMS AND REVENUE AGENCY
I wish to examine the information
DAsitis
~ All in English
D All in French
Provide details regarding the Information being sought
Any and all information with respect to the 1998 and 1999 taxation years of
, including, without
limitation, a copy of auditor's reports, auditor's working papers, information or documents supplied by third
parties, appeals officer's reports, notes of meetings and conversations with Canada Customs and Revenue
Agency personnel, technical interpretations, internal memoranda, special investigations reports and
documents, Department of Justice opinions, Department of Finance back-up materials and memoranda and any
records of notes or conversations relating to these documents.
Method of access preferred
1'\71 Receive copies
~ of originals
D
Examine originals in
government offices
Name of applicant
City or town
Street, address, apartment
SWIFT CURRENT
Postal Code
Province
Telephone number
(306)
SASKATCHEWAN
I request access to personal information about myself under the Privacy Act as I am a Canadian citizen,
permanent resident or another individual, including an inmate, present in Canada
Signature
1+1
Government Gouvernement
of Canada
du Canada
Date
Canada
AUTHORIZATION
To:
Access to Information and Privacy Coordinator
Canada Customs and Revenue Agency
Dear Madam:
Re:
You are hereby authorized to provide my solicitors, MacPherson Leslie & Tyennan, 1500, 41022 nd Street East, Saskatoon, Saskatchewan, S7K 5T6, with all infonnation requested under the
Privacy Act.
DATED the 8th day of June, A.D. 2001.
WITNESS
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::ODMA\PCDOCS\SASKATOON\1333361\1
SCHEDULE 3
Kurt G. Wintermute
Direct Line: (306) 975-7121
E-mail: [email protected]
March 19,2003
Access to Infonnation and Privacy Coordinator
Canada Customs and Revenue Agency
Albione Tower
25 Nicholas Street
11 th Floor
Ottawa, ON KIA OL5
Attention:
Suzanne LaFrance
Dear Madam:
Re:
Our File:
Access to Information Act Request -
We act as solicitors for
,Inc.
Inc. We enclose herewith the following:
1.
Access to Infonnation request fonn, duly executed by
2.
Authorization of
Inc. designating our office as authorized party to
receiveinfonnation pursuant to the Request enclosed herewith;
3.
Authorization of
infonnation in the Request; and
4.
Our finn cheque in the amount of $5.00 representing the application fee required to
accompany a Request pursuant to the Access to Information Act.
We trust the foregoing is satisfactory.
Yours truly,
MacPherson Leslie & Tyennan LLP
Per:
Kurt G. Wintennute
KGW/amk
Encl.
::ODMA\PCDOCS\SASKATOON\1333325\1
to include infonnation related to
Inc.;
with the
TBC 350-57 (Rev. 1997111)
Access to
Information
Request
Form
Info
Source
Access to
Information Act
Step 1
Step 2
Step 3
Step 4
Determine which federal government institution
is most likely to have the information you are
seeking. Decide whether you wish to submit an
informal request for the information or a formal
request under the Access to Information Act. If
you wish to make an informal request, contact
the appropriate institution. The address can
likely be found in Info Source publications
which are available across Canada. generally in
major public and academic libraries,
constituency offices of federal Members of
Parliament and most federal government public
enquiry and service offices.
To apply for information under the
Access to Information Act. complete
this form or a written request
mentioning the Act. Describe the
information being sought and
provide any relevant details
necessary to help the institution find
it. If you require assistance. refer to
Forward the access request
to the Coordinator of the
institution holding the
information. The address is
listed in the "Introduction" to
Info Source. Enclose a
$5.00 money-order or
cheque payable to the
Receiver General of
Canada. Depending upon
the type or amount of
information being sought,
you may be asked to
authorize further charges.
When you receive an
answer to your request.
review the information to
determine whether you
wish to make a further
request under the Act. You
also have the right to
complain to the Access to
Information Commissioner
should you believe that you
have been denied any of
your rights under the Act.
Info Source (Sources of Federal
Government Information) for a
description of program records held
by the institution or contact its
Access to Information Coordinator.
Federal Government Institution
CANADA CUSTOMS AND REVENUE AGENCY
Provide details regarding the Information being sought
Any and all infonnation with respect to the 1999 taxation year of
Company Limited, including,
without limitation, a copy of the T2 corporate income tax return, a copy of auditor's reports, auditor's working
papers, infonnation or documents supplied by third parties, infonnation or documents supplied by
_ _ _ _ _Company Limited, appeals officers' reports, notes of meetings and conversations with Canada
Customs and Revenue Agency personnel, technical interpretations, internal memoranda, special investigation
reports and documents, Department of Justice opinions, Department of Finance backup materials and
memoranda, and any records of notes or conversations relating to these documents.
Method of access preferred
1"71
Receive copies
~ of originals
D
Examine originals in
government offices
Name of applicant
City or town
Street, address, apartment
SASKATOON
)
Tell9phone number
Postal Code
Province
--)
SASKATCHEWAN
This request for access to information under the
Access to Information Act is being made by
)
D
a Canadian citizen, permanent resident or
another individual present in Canada, or
rzJ
a corporation present in Canada
----'>
,~
)
Signature
.+.
Government Gouvernement
of Canada
du Canada
Date
Canada
AUTHORIZATION
To:
Access to Information and Privacy Coordinator
Canada Customs and Revenue Agency
Dear Sir/Madam:
Re:
You are hereby authorized to include in the Access to Information Act Request made on behalf of
_ _ _ _ _ _ _ Inc., any and all information related to myself,
, and to
provide such information to my solicitors, MacPherson Leslie & Tyerman LLP, 1500 - 410 22 nd Street East, Saskatchewan, S7K 5T6.
DATED the __ day of July, A.D. 2002.
WITNESS
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::ODMA\PCDOCS\SASKATOON\1333330\1
)
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AUTHORIZATION
To:
Access to Information and Privacy Coordinator
Canada Customs and Revenue Agency
Dear Sir/Madam:
.1
I
I
Re:
_ _ _ _ _ _ _.Inc.
You are hereby authorized to provide my solicitors, MacPherson Leslie & Tyerman LLP, 1500410 - 22 nd Street East, Saskatchewan, S7K 5T6, with all information requested under the Access
to Information Act.
DATED the _ _ day of July, A.D. 2002.
_ _ _ _ _ _ _ _INC.
Per:
::ODMA\PCDOCS\SASKATOON\1333330\1
---------------
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Revenue
Canada
SCHEDULE 4
Revenu
Canada
Protected (when completed) - Protege (une fols rempll)
Notice of Objection (GST/HST)
Avis d'opposition (TPSITVH)
FOR OFFICE USE ONL Y - RESERVE A L'USAGE DU BUREAU
IMPORTANT: See information on reverse
ATTENTION : Voir les renseignements au verso
Account/Business Number· N° de compte au d'enlreprise
IDENTIFICATION
Full Legal Name - Nom (au complat)
D
Language of Preference
Langue priMrie
D
English
Anglals
French
Frenl'8ls
Tredlng Name (n different from the legal name) • Raison soclale (si elle diffire du nom cklessus)
Mailing Address· Adresse postale
City· Ville
!province
Country - Pays
Poslal Code· Code poslal Contact Person .. Personne-ressource
Tille· Titre
Business Telephone No, • N • de tilephone au travail
(
)
rax Number· Numero detilicopleur
(
)
OBJECTION· OPPOSITION
Notice of Objeclion Is hereby given from the ASSESSMENT detailed below,
La prisente est un Avis d'oppositlon i I'igard deta COTISATION decrlte cI-dessous.
DETAILS OF ASSESSMENT AGAINST WHICH OBJECTION IS TAKEN· DETAILS DE LA COTISATION FAISANT L'OBJET DE L'OPPOSITION
Notice of Assessment No.
N" de I'avis de cotisallon
Date Notice of Assessment Sent
Date d'envol del'avls de colisation
Amount of Tax in Dispute
Monlant de taxe en Ill1ge
Tax Servlces 0fIice
Bureau des services flsceux
AccounVBuslness No. (n applicable)
N" de compte ou d'enlrepnse (s'li y a lieu)
STATEMENT OF FACTS AND REASONS· EXPOSE DES FAITS ET DES MOTIFS
Provide a complete slatement of the relevant facts upon which the objec1ion is based,
Including a detailed summary of the reasons for the objection, Nole: lf space Is Insufficlenl,
attach separete sheet(s).
Foumir un expose delalllb de tous les faits perl1nents sur lesquels repose
I'opposltion, y compJ1s un risume delalllb des motifs. Nota: SII'espece est
Insuffilsant. jolndre une ou plusleurs feuDles dlstlnctes.
D
Check nedditlonal pages are attached
Cacher sl des feuilles supplimentalres sont jolntes
CERTIFICATION· ATTESTATION
I certify that the infonnation given on this foon Is, to the best of my knowledge, true,
correct and complete In every respect and that I am the person assessed (in the
case of 8 corporation, a duly authorized officer) or the person authorized to sign on
behalf of the person essessed.
I
J'atteste que les renseignements donnes dans ce formulaire sont, III me
connaissance, exacts at complets sous tous les rapports at que je suis 18 personna
vlsie par la collsation (dans Ie ces d'une soclitb, un cedre dOment autonsi) au la
persone autori. au nam de la personna visee par 'a cotisation.
Signature of person assessed (in the cese of a corporation, a duly authorized officer) or authonzed agent
Date
Signature de Is personne vls8e par la caUsation (dans Ie cas d'une societe, un cadre dOmant sutarise) au du representant autorlslt
NAME AND ADDRESS OF AUTHORIZED AGENT (If applicable)· NOM ET ADRESSE DU REPRESENTANT AUTORISE (s'li y a lieu)
Name of Agent (pnnt) • Nom du reprisenlant (en lettres maulies)
Telephone No.• N' de tilbphone
Address· Adresse
(
)
City. Ville
!
Province
Icountry. Pays
Contact Person· Personne-ressource
Poslal Code • Code poslal
Fax Number· Numiro detilicopleur
(
)
The above-named agent is authorized to act on behalf of the person named In the notice of assessment referred to abc1ie.
Le reprisentant nomme cI-dessus est eutonsi
a agtr au nom de la personne disignee dans ravls de collsatlon susmentionne.
Date
Signature of person assessed (in the case of a corporation, a duly authorized officer)
Signature de la personne vlsee par la collsation (dans Ie cas d'une soclbte, un cedre dOment autonse)
Personallnfoonatlon provided on this foon Is protected under the provisions of the Privacy Act and Is mainlalned In Personallnfonnation Bank RCC/P·PU-OS5.
Las renselgnements personnels foumis sur la presente sont protegBs en vertu de la Loi sur Is protection des renselgnements personnels at sont conserves dans Je Repertoire des
renselgnements personnels RCC/p·PU-oS5.
GST1S9(97)
A070
Canada
Notice of Objection (GSTlHST)
Avis d'opposition (TPSITVH)
For use by persons who wish to file an objection to an
assessment under section 301 of the Excise Tax Act.
AI'intention des personnes qUi desirent presenter un avis
d'oppositlon a une cotlsation, en vertu de I'article 301 de la Loi
sur /a taxe d'ace/se.
A separate notice of Objection must be filed In respect of each
Notice of Assessment against which an objection Is taken. If
the facts and reasons set out are Identical for more than one
Notice of Assessment, this may be Indicated and one
statement of facts and reasons will be sufficient.
Un Avis d'opposition distinct doit etre presente a I'egard de
chaque Avis de cotlsatlon falsantl'objet d'une opposition. Slles
faits etles motifs enonces sont communs a plusieurs Avis de
cotlsation, iI suffit de Ie preclser et d'inclure un seul expoSe des
faits et motifs.
This notice is to be filed with the Minister by sending or
delivering It to the Appeals Divison of your local Revenue
Canada tax services office.
II faut soumettre Ie present avis au Minlstre en I'envoyant
ou en Ie remettant a la Division des appels de votre bureau
des services fiscaux de Revenu Canada.
The notice must be filed with the Minister within 90 days after
the day the Notice of Assessment is sent.
L'avis doit etre soumis au Minlstre dans les 90 jours sulvant Ie
jour de j'envol de l'Avis de colisatlon.
Though not a requirement, It would be helpful If a copy of the
Notice of Assessment, against which the objection is taken,
was filed along with the Notice of Objection.
Bien que ce ne soit pas obllgatoire, iI convlendralt d'annexer a
l'Avls d'opposltlon un exemplalre de l'Avis de cotlsatlon
correspondant.
Where a disagreement with an assessment exists, the tax
services office Issuing the assessment should be contacted In
an altemptto resolve any disagreement before a Notice of
Objection is filed. Please note that In the event the
disagreement cannot be resolved, you must ensure a Notice of
Objection Is properly filed within the 90-day period required by
law.
51 vous vous opposez a une cotlsatlon etablle a votre egard,
vous devriez communiquer avec Ie bureau des services
fiscaux emelteur pour essayer de regler Ie IItige avant de
presenter un Avis d'opposllion. Veuillez noter que s'li est
impossible de regter Ie IItige, vous devez produlre un Avis
d'opposiUon dans Ie delai de 90 jours prevu par la loi.
An acknowledgement of your objection wiillnform you where to
make enquiries or send additional information.
Vous recevrez un accuse de reception de votre opposition qui
vous indiquera a quel endroit vous renselgner ou envoyer des
renselgnements supplementaires.
You should Inform the Department of any subsequent change
of address.
Priere d'informer Ie ministere de tout changement d'adresse.
Printed in Canada
Imprime au canada
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SCHEDULE 5
Agence des douanes
et du revenu du Canada
Canada Customs
and Revenue Agency
APPEAL UNDER THE CANADA PENSION PLAN AND/OR EMPLOYMENT INSURANCE ACT
To indicate the subject of your appeal, tick one or both boxes.
D CANADA PENSION PLAN
D EMPLOYMENT INSURANCE ACT
Please print when you complete this form.
PART I • APPEAL OF A RULING
To appeal a ruling(s), attach a separate sheet(s) providing a full statement of all relevant facts and reasons for your appeal. Also, attach a copy of the ruling letter(s) that you are
appealing.
D
Indicate whether you are
D
Employer/
Payor
Worker
o
Human Resources Development Canada
iSoclallnsurance Numoef \::iINJ or
Employer BUrneSS Number
I
I
I
I
I
J
IPnone number for daytime contact
(i1clUdinr area code)
Applicant's name
Address (in full)
Other party's name and address
If you are the employer/payor, list the name, address and SIN of the worker(s) to which the ruling applies (attach a separate sheet if necessary):
Ruling
I
)
d~te(s)
I
M
I
0
IEmPloyment period(s) under appeal from
IRuling reference number(s):
I
I
I
I
I
I
Address of Worker's Human Resource Centre of Canada
;
I
y
I ~ I ~ I To I
I
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M
I
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Applicant's signature (for individuals, proprietors, and partners)
)
Authorized officar's signature (for corporations)
Date
PART II • APPEAL OF AN ASSESSMENT OR REASSESSMENT
To appeal a Notice of Assessment or a Notice of Reassessment, provide, from the notice, the infonmation asked for below. Attach a separate sheet(s) giving the relevant facts and
reasons why your appeal should be allowed, and the assessment vacated or varied.
• Attach a copy of the Notice of Assessmlmt or Notice of Reassessment, and include a list with the name, address, and SIN of all workers involved in each assessment.
Name shown on the Notice of Assessment or Reassessment
I~ame
and phone numoer Tor aaytlme
contact (including area code)
Address (in full)
(
)
Details of assessment (As shown on the Notice of Assessment or Reassessment)
If you wish to appeal the amounts shown as tax, please submit Form T400A-Notice of Objection, or a letter outlining your request.
Year
rssessm,nt date
I
I
I
I
M
I
I
0
I
employer number
I
I
c;nada Pension Plan E;PIOyment insurance
Applicant's signature (for Individuals, proprietors, and partners)
Authorized officar's signature (for corporations)
Authorization - Please complete this section if you want us to contact your representative about this appeal.
Representative's name
IAddress
Date
I~.hone number for daytime contact
I(ilcludinr area code)
Date
Signature
CPT100 E (00)
Printed in Canada
II;erest
IP;nally
I
(Ce formulaire existe aussi en franyais.)
(For infonmation and instructions, see over)
1845
Canada
APPEAL UNDER THE CANADA PENSION PLAN AND/OR EMPLOYMENT INSURANCE ACT
You can use this form if you are:
• an employer/payor or worker who wants to appeal a ruling under the provisions of section 27 of the Canada Pension Plan
and/or section 91 of the Employment Insurance Act, or
• an employer/payor who wants to appeal a Notice of Assessment or Notice of Reassessment under the provisions of
subsection 27.1 of the Canada Pension Plan and/or section 92 of the Employment Insurance Act.
Mail or deliver one completed copy of this form or a letter detailing your request (signed by the appellant if an individual, or by an
authorized officer for a corporation) to the Chief of Appeals of your nearest Canada Customs and Revenue Agency office. If you
send a letter, include the information related to your appeal as requested in either Part I or Part II on the reverse of this form.
Give telephone numbers (including area codes) where persons may be contacted during the day. If you would like to have a
representative handle your appeal, please complete the information required under the AUTHORIZATION section on the back of
this form.
The mailing deadlines are as follows:
• The appeal of a ruling must be postmarked within 90 days after you are notified of the rUling decision.
• The appeal of a Notice of Assessment or Notice of Reassessment must be postmarked within 90 days after the date shown
on the Notice of Assessment or Notice of Reassessment from which the appeal is being made.
File a separate form or letter of appeal for:
• each ruling letter (complete PART I - APPEAL OF A RULING, on reverse). If more than one rulings decision was issued on
the same worker or employer/payor and involves more than one period of employment, you may use one form;
• each assessment being appealed (complete PART II - APPEAL OF AN ASSESSMENT OR REASSESSMENT, on reverse).
You may change your address after filing an appeal. If so, send a letter to the Chief of Appeals of the tax services office where
you mailed or delivered your appeal, stating both your old and new address plus your new telephone number and area code
where you can be reached during the day.
Information on your appeal rights under the Employment Insurance Act and Canada Pension Plan can be found in our brochure
called Your Appeal Rights: Employment Insurance and Canada Pension Plan Coverage, which is available from your tax
services office.
(To complete form, see over)
SCHEDULE 6
TAX COURT OF CANADA
IN RE THE INCOME TAX ACT
R.S.C. 1985, c. 1 (5 th Supp.) as amended
BETWEEN:
APPELLANT
AND:
HER MAJESTY THE QUEEN,
RESPONDENT
NOTICE OF APPEAL
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TAKE NOTICE THAT THE APPELLANT does hereby appeal to the Tax Court of
Canada from Notices of Reassessment dated October 15,2002 in respect of the Appellant's 1997
AND 1998 taxation years, in accordance with paragraph 169(a) of the Income Tax Act, R.S.C.
1985, c. 1 (5 th Suppl.) as amended (the "Act").
A.
STATEMENT OF FACTS
1.1
The Appellant was, at all material times, resident on a farm located near
Saskatchewan.
1.2
The Appellant has a farm background, having been raised on a farm in Saskatchewan.
The Appellant's father and grandfather were both farmers. The Appellant has been
farming continuously in partnership with her husband since 1976.
1.3
In 1976, the Appellant and her husband purchased 80 acres of farm land and a mobile
home near
, Saskatchewan and commenced a cow-calf operation.
1.4
In 1980, the Appellant and her husband purchased an adjacent quarter-section of farm
land for their cow-calf operation.
1.5
The Appellant and her husband subsequently purchased another quarter-section of farm
land near
, Saskatchewan which was used for purposes forage and leased
an additional three quarters of pasture land near
,Saskatchewan. Over the
years, the Appellant and her husband have also leased and entered into crop-share
arrangements for certain other parcels of land located near their home quarter and have
also utilized community pasture land for their herd.
::ODMA\PCDOCS\SASKATOON\1333334\1
_
1.6
During the relevant taxation years, the Appellant carried on the business of farming. The
Appellant's farming operations consisted primarily of a cow-calf and forage operation.
During the relevant taxation years, the Appellant and her husband owned approximately
400 acres of farm land and leased additional farm land in excess of 480 acres. Since
commencing farming in 1976, the Appellant has committed the majority of her energies
to the business of farming. The Appellant has been actively involved in the maintenance
and operation of the farm and the cow-calf operation. The Appellant has invested
extensively in capital improvements to the farm and equipment in order to maintain an
active farm business.
1.7
Over the years, the Appellant and her husband have suffered significant setbacks in their
farming operation. In 1980, 1981, 1984 and 1988, the Appellant's farm operation
experienced severe drought conditions and insect infestation resulting in high input costs
for their cow-calf operation and the loss of numerous head of cattle. In addition,
beginning in 1988 and continuing for two years thereafter, a significant number of the
Appellant's cows which were sent to the community pasture returned open (not
pregnant). The problem was eventually determined to be a venereal parasite spread by
bulls in the community pasture for which there was no compensation. By the time the
problem was determined and cleared up, the prices in the calf market had fallen
drastically and remained low in subsequent years.
1.8
Due to these setbacks, the Appellant and her husband were forced to increase their debt
load in order to maintain their farm operation which resulted in significantly high interest
costs.
1.9
In 1995 the Appellant and her husband made significant capital expenditures on new
equipment. The Appellant and her husband were also attempted to expand their herd by
holding back heifers. In 1996, the Appellant and her husband bred 164 cows. However
the herd experienced a BVD outbreak (a viral disease) which, combined with cold winter
weather, resulted in cattle losses totalling in excess of 80 pregnant cows.
1.10
As a result of these setbacks, the Appellant obtained an additional loan from her father to
support the farming operation and underwent a further debt restructuring program with
the Saskatoon Credit Union. Pursuant to the debt restructuring program, the Saskatoon
Credit Union required that the Appellant maintain off-farm income to support the farm
debt.
1.11
Low cattle prices, high input costs, high interest rates, insect infestation and disease and
the effects of weather have forced the Appellant to continue to work off the farm. The
Appellant has not had the financial resources to permit her to cease working off the farm
in order to become solely engaged in the business of farming. The nature of the
Appellant's employment allows her to take the necessary time for labour intensive aspects
of the farming business, in particular, during haying season and calving season.
1.12
During the relevant taxation years, the Appellant earned off-farm employment income as
a teacher with the
. In the 1997 and 1998 taxation years, the Appellant
reported employment income in the amount of
and
:
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respectively. In 1997, the Appellant took a leave from her work for approximately 5
months which allowed her to dedicate more time to support her farming operation.
.1.13
During the 1997 and 1998 taxation years, the Appellant and her husband recorded gross
farming income from their farming partnership of
and
respectively, and net losses from the farming business of
and
,
respectively. The Appellant's proportionate share of the partnership farm losses in 1997
and 1998 which were reported in her income tax returns for those years were
_
and
, respectively.
1.14
The Appellant claimed the full amount of such losses against income from other sources
in the 1997 and 1998 taxation years. The Respondent in its Notices of Reassessment,
reassessed the Appellant's 1997 and 1998 taxation years on the following basis:
1997 Taxation Year
(a)
That the Appellant's chief source of income in the 1997 taxation year was not
farming nor a combination of farming and some other source of income and,
accordingly, restricted the Appellant's farm loss for the 1997 taxation year to
$8,750.00 on the basis that the Appellant's chief source of income in the 1997
taxation year was neither farming nor a combination of farming and some other
source of income.
1998 Taxation Year
(b)
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1.15
The Respondent initially reassessed the Appellant for the 1997 and 1998 taxation years
by Notices of Reassessment dated March 12,2001.
1.16
The Appellant filed a Notice of Objection to the Notices of Reassessment dated March
12,2001 in a timely manner.
1.17
The Respondent issued further Notices of Reassessment dated October 15, 2001, with
respect to Appellant's Notice of Objection for the 1997 and 1998 taxation years.
B.
ISSUES TO BE DECIDED
2.1
The Appellant submits that the issues to be determined include, inter alia, the following:
I
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That the Appellant's chief source of income in the 1998 taxation year was neither
farming nor a combination of farming and some other source of income and,
accordingly, restricted the Appellant's farm loss for the 1998 taxation year to
$8,750.00 on the basis that the Appellant's chief source of income in the 1998
taxation year was neither farming nor a combination of farming and some other
source of income.
::ODMA\PCDOCS\SASKATOON\1333334\1
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1997 Taxation Year
(a)
Whether the Appellant's 1997 loss from the Appellant's farming business is
restricted by virtue of subsection 31 (1) of the Act on the basis that the Appellant's
chief source of income in the 1997 taxation year was neither farming nor a
combination of farming and some other source of income.
1998 Taxation year
(b)
Whether the Appellant's 1998 loss from the Appellant's farming business is
restricted by virtue of subsection 31 (l) of the Act on the basis that the Appellant's
chief source of income in the 1998 taxation year was neither farming nor a
combination of farming and some other source of income.
C.
STATUTORY PROVISIONS UPON WHICH THE APPELLANT RELIES AND
THE GROUNDS WHICH SHE INTENDS TO SUBMIT
3.1
The Appellant states that the relevant statutory provisions include, inter alia, sections 3,
18(1)(a), 18(1)(h), 31 and 111 oftheAct.
D.
DISTRICT TAXATION OFFICE
4.1
The District Taxation Office referred to in the Notice of Reassessment is the Saskatoon
District Taxation Office.
E.
RELIEF SOUGHT
5.1
That the Respondent's reassessments against the Appellant's 1997 taxation year, be
vacated or, alternatively, and referred back to the Respondent for reconsideration and
reassessment on the following basis:
1997 Taxation Year
(a)
That the Appellant's losses from the 1997 taxation year from the Appellant's
farming business are not restricted by virtue of subsection 31 (l) of the Act and are
fully deductible from the Appellant's income from other sources in the 1997
taxation year.
1998 Taxation Year
(c)
That the Appellant's losses from the 1998 taxation year from the Appellant's
farming business are not restricted by virtue of subsection 31 (l) of the Act and are
fully deductible from the Appellant's income from other sources in the 1998
taxation year.
5.2
That the costs of the appeal be awarded in favour of the Appellant.
5.3
Such further and other relief as this honourable Court may deem fit and allow.
::ODMA\PCDOCS\SASKATOON\1333334\1
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F.
NAME AND ADDRESS OF SOLICITORS FOR THE APPELLANT
6.1
The Appellant's address is as follows:
G.
PLACE OF TRIAL
7.1
The Appellant proposes that this matter be heard at the City of Saskatoon, in the Province
of Saskatchewan.
H.
NAME AND ADDRESS OF SOLICITORS FOR THE APPELLANT
8.1
The Appellant's address for service is in care of her solicitors:
MacPherson Leslie & Tyerman LLP
Lawyers
1500, 41 0_22 nd Street East
Saskatoon, SK
S7K5T6
THE APPELLANT ELECTS to have the informal procedure by sections 18.1 to 18.28 of the
Tax Court ofCanada Act applied to this appeal.
DATED at the City of Saskatoon, in the Province of Saskatchewan, this
January, 2003.
day of
MacPHERSON LESLIE & TYERMAN LLP
Per:
Solicitors for the Appellant
This Notice of Appeal was delivered by:
\
MacPHERSON LESLIE & TYERMAN LLP
Lawyers
1500 - 410 22 nd Street
Saskatoon, Saskatchewan
S7K 5T6
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whose address for service is
Lawyer in charge of file:
Telephone Number:
Fax Number:
same as above.
KURT G. WINTERMUTE
(306) 975-7121
(306) 975-7145
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TO:
REGISTRAR OF THE TAX COURT OF CANADA
Kent Professional Building
200 Kent Street
Ottawa, Ontario
KIAOMI
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TAX COURT OF CANADA
IN RE THE INCOME TAX ACT
R.S.C. 1985, c. 1 (5 th Supp.) as amended
BETWEEN:
APPELLANT
AND:
HER MAJESTY THE QUEEN,
RESPONDENT
NOTICE OF APPEAL
MacPherson Leslie & Tyerman LLP
Lawyers
1500, 410 - 22nd Street East
Saskatoon, Saskatchewan
S7K5T6
Kurt G. Wintermute
Counsel for the Appellant
Telephone:
Facsimile:
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(306) 975-7121
(306) 975-7145
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