In-kind incentives and rebates were required to be included in corporation's income

Taxpayers, which included husband and wife shareholders and their corporation, carried on business as pharmacy. Taxpayers received certain incentives and rebates from drug manufacturers and suppliers, which included traveller’s cheques, reloadable credit cards and gift cards, but they did not include them in their individual or corporate income. Minister reassessed taxpayer shareholders in context of targeted audit program and as result, taxpayer husband and wife filed amendments to their tax returns from 2010 to 2013 and those amendments were filed on basis that certain rebates received by corporation would be included in their personal income. Minister accepted adjustments to returns but subsequently also reassessed taxpayer corporation and added to its income from 2010 to 2013. Taxpayers appealed. Appeals allowed in part. Corporation should have known that in-kind incentives and rebates were required to be included in its income, particularly as they were “near” cash items. Corporation should have taken steps to ensure that any amounts received as incentives or rebates, regardless of form, were properly accounted for and reflected in its books and records. Accordingly, this was misrepresentation of corporate income, which was attributable to neglect, and reassessments of corporation were not statute-barred. Appeal pertaining to reassessment of corporate income from 2010 to 2013 was dismissed.

Mikhail v. The Queen (2019), 2019 CarswellNat 605, 2019 CarswellNat 668, 2019 TCC 49, 2019 CCI 49, K.A. Siobhan Monaghan J. (T.C.C. [Informal Procedure]).

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