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Proposed guarantor was not required to comply with rebate conditions

Purchaser entered into agreement of purchase and sale with builder to purchase home to be built. HZ was proposed guarantor of mortgage to finance purchase of house, and signed purchase of agreement and sale for that reason, but backed out before closing. FR became guarantor, but his replacement of HZ was not reflected in agreement of purchase and sale. Minister of National Revenue denied purchaser’s claim for new housing rebate under Excise Tax Act (Can.), on ground that purchaser and HZ did not satisfy condition of having intention that property be their primary place of residence. Purchaser appealed. Appeal allowed. HZ was not “particular individual” for purposes of s. 254(2)(a) of Act and was not required to comply with rebate conditions. HZ was only acting in capacity as agent in signing agreement of purchase and sale. Agent was not “recipient” as defined in s. 123(1) of Act. At commencement of hearing, Crown raised issue of whether purchaser intended property to be used as his primary place of residence. It was not fair for Crown to raise issue at such late stage and it was not considered.
Javaid v. R. (Apr. 17, 2015, T.C.C. [Informal Procedure], Judith M. Woods J., File No. 2014-1802(GST)I) 251 A.C.W.S. (3d) 525.

Constitutional Law


Human rights did not include right not to pay tax

Corporation wholly owned by taxpayer paid taxpayer certain amounts in 2007 through 2010 taxation years. Taxpayer reported some amounts as employment income, and other amounts were reported by corporation and taxpayer as subcontract payments. Canada Revenue Agency treated difference between what was reported by taxpayer and what was paid to him by corporation as income for 2007 through 2010. Taxpayer appealed. Appeal dismissed. Human rights as advanced in Canadian Constitution, Canadian Charter of Rights and Freedoms and international human rights treaties did not extend to not paying tax and did not include right not to pay tax. Taxpayer acknowledged that if his arguments did not succeed, amounts reassessed and penalties imposed would be properly payable.
R. v. Davis (Mar. 17, 2015, T.C.C. [Informal Procedure], Patrick Boyle J., File No. 2014-3081(IT)I) 251 A.C.W.S. (3d) 170.



Amount of assessments reduced to amount of relevant Federal Court certificates

Director was controlling mind of three companies who did engineering work for developer. Developer did not pay its bills on timely basis, resulting in three companies taking collection actions, and eventually executing lien. Minister of National Revenue assessed director under s. 323 of Excise Tax Act (Can.), for Goods and Services Tax (GST) that company TE Inc. failed to remit and $86,222.48 in GST that company 306 Canada Inc. (TM) failed to remit. Director appealed. Appeals allowed in part. Amount of assessments reduced to amount of relevant Federal Court certificates. Certificate that Minister registered with Federal Court of Canada for TM’s unremitted net GST was $11,896.19 less than amount assessed. Section 323(2)(a) of Act provided that Minister may not assess amount in excess of amount of Federal Court certificate. Director knew that three companies were facing significant cash flow issues due to developer failing to pay invoices and chose not to make remittances, believing that developer would eventually pay and remittances could be made in future. Director took no steps to prevent failure by three companies to make remittances. Failure to make remittances in belief that failure could be corrected in future did not constitute defence under s. 323(3) of Act. While director may not have been able to foresee events that occurred with respect to developer’s contract, he was person who made decision not to pay certain of three companies’ accounts payable, including remittances. Director was not entitled to rely upon due diligence defence in s. 323(3) of Act.
Maxwell v. R. (Mar. 25, 2015, T.C.C. [General Procedure], Steven K. D’Arcy J., File No. 2011-2668(IT)G, 2011-2669(GST)G, 2011-2687(IT)G, 2011-2688(GST)G) 250 A.C.W.S. (3d) 711



Written separation agreement was required to permit principal residence designation

Taxpayer passed away in 2005. Taxpayer purchased property in Whistler in 1976. Taxpayer transferred property to husband in 1991 for one dollar, but did not report disposition. Husband sold property in 2003 for $350,000. Gain of property was attributed to taxpayer. For 2003 tax return, taxpayer had not claimed property as her principal residence. Husband passed away in 2011, and had other property designated as principal residence from 1992 until his death. Assessment for 2003 was completed in 2013 and Minister refused to designate Whistler property as taxpayer’s principal residence for reason that another family member had made principal residence designation in respect of another property for same time period. Minister calculated capital gain of $243,009 was made in disposition and was attributed to taxpayer pursuant to s. 74.1(1) of Income Tax Act (Can.). Trustee testified that taxpayer and her husband separated in 1983, and son stated that taxpayer did not live at property and that property was family vacation property. No written separation agreement was found. Estate appealed. Appeal dismissed. Written separation agreement was required by Act and was requirement in circumstance. If taxpayer was still married only one of taxpayer and spouse could designate property as principal residence except if taxpayer and spouse were separated under written separation agreement pursuant to s. 54(c) of Act.
Balanko Estate v. R. (Mar. 19, 2015, T.C.C. [Informal Procedure], Gerald J. Rip J., File No. 2014-3116(IT)I) 250 A.C.W.S. (3d) 526.



Taxpayers purchased from accountants false donation receipts use to claim tax credits

Taxpayers were husband and wife who made charitable donations. CRA believed that receipts for donations were forged by tax preparers. Minister of National Revenue assessed taxpayers under Income Tax Act for 2005-2009 taxation years. Taxpayers appealed. Appeal dismissed. Taxpayers were not in position to make alleged donations given financial circumstances. Taxpayers’ explanations for donations were not plausible. Husband participated in scheme for five years and matter could not be said to be one of momentary lapse of judgment. Wife could not be absolved of responsibility even if she relied on judgment of others. Taxpayers purchased from their accountants false donation receipts that were used to claim tax credits to which they were not entitled. Taxpayers were not instigators of schemes but could not escape tax liability. Assessment for years outside of regular limitation period was justified as taxpayers knowingly made false representations in respect of donations disallowed by Minister.
Vekkal v. R. (Nov. 18, 2014, T.C.C. [Informal Procedure], Robert J. Hogan J., File No. 2013-882(IT)I, 2013-883(IT)I) 246 A.C.W.S. (3d) 723.



Investor was shareholder only and not de facto director

Investor was shareholder of taxpayer company that operated pub. Investor signed some documents that indicated he was director of company. Investor signed disclaimer letter to Canada Revenue to unfreeze company’s bank account, after minister issued requirement to pay in respect of unremitted source and GST deductions. Company ceased operations. Minister assessed investor as director for company’s unremitted deductions. Investor appealed. Appeal allowed. Investor did not know he could be considered director and did not execute proper documentation to become director. Proper steps were not taken by company to appoint investor and so under Business Corporations Act (N.B.), investor was not de jure director. Facts established that investor was shareholder only and not de facto director. All major decisions relating to business were made by other persons. Investor was co-signer for business cheques only because two signatures were required and obtained loan to keep company afloat because he was told that otherwise shareholders would lose their investments. Investor signed letter to CRA as owner without even reviewing it. Investor did not even know where account books were located or how to turn lights on when he sought new management. Investor was naive individual whose conduct only demonstrated that he was trying to protect his investment. Investor relied entirely upon preparers of documents that he signed who did not explain nature of documents or financial situation of company.
MacDonald v. R. (Oct. 20, 2014, T.C.C. [Informal Procedure], Eugene P. Rossiter A.C.J., File No. 2013-2568(IT)I, 2013-2569(GST)I) 245 A.C.W.S. (3d) 332.



Taxpayer could have advanced grounds of appeal without use of extreme statements

Trial judge rendered judgment on merits of taxpayer’s appeal, which was appealed. Judge remained seized with issue of costs and with deciding appropriateness of parties’ proposal for dealing with identification of confidential information. Taxpayer made statements in its appellate factum alleging that judge was untruthful in reasons, containing untruths about judge, and alleging impartiality on judge’s part. On judge’s own motion, judge considered whether he should recuse himself from remaining issues. Motion granted; judge recused himself. Reasonable, fair-minded, fully informed Canadian would entertain doubt that judge could remain able to reach impartial decisions, and would be left with apprehension of bias. Taxpayer could have advanced grounds of appeal without use of unqualified extreme statements which attacked judge’s integrity. Taxpayer wrongly accused judge of being untruthful in order to advance argument that judge was doing something different in his reasons than he said he was doing. While taxpayer had right to challenge evidentiary foundation of judge’s conclusions, taxpayer told clear untruths about judge when taxpayer stated that certain issues were not put to taxpayer during trial and were raised for first time in reasons, and that judge reframed case after trial. Taxpayer, in factum, wrote about judge’s “palpable antipathy” towards taxpayer, and referred to his analysis as being “infected by his pejorative and unfair comments”. Reasonable person reading only these phrases would believe that such complaints might give rise to serious doubt about judge’s impartiality. One error in reasons, appropriately identified in factum, was acknowledged.
McKesson Canada Corp. v. R. (Sep. 4, 2014, T.C.C. [General Procedure], Patrick Boyle J., File No. 2008-2949(IT)G, 2008-3471(IT)G) 244 A.C.W.S. (3d) 234.
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