Tax court of Canada | Tax | Income tax | Administration and enforcement
Corporate taxpayer was non-profit organization which operated golf course and it realized gain on disposition of parcel of land in 2006. Taxpayer reported gain on T1044 Non-Profit Organization Information Return, but not on T3 Trust Income Tax, and Minister reassessed taxpayer in 2015 for not reporting disposition and gain on its T3. Taxpayer filed notice of objection on basis that taxpayer believed that gain on disposition of land was exempt from taxation. Minister’s reassessment was made after normal reassessment period set out in subsection 152(3) of Income Tax Act and would be statute barred unless Minister could satisfy s. 152(4) of Act, which had to show that taxpayer made misrepresentation. In reply to taxpayer’s notice of objection, Minister sent reply and subsequently amended reply and taxpayer successfully challenged Minister’s amended reply motion to strike it for not setting out facts to allow Tax Court of Canada to conclude that taxpayer made misrepresentation. Months later, Minister sent further amended reply to taxpayer to solve deficiencies in past reply. Taxpayer brought motion to strike Minister’s further amended reply. Motion dismissed. It was found that some paragraphs of Minister’s statements in further amended reply suggested potential basis for proving taxpayer misrepresentation was due to wilful default or neglect and that taxpayer failed to exercise reasonable care as required to disprove s. 152(4) of Act. In particular, Minister’s pleading of facts related to business experience of taxpayer’s directors and their failure to seek professional opinions on tax consequences of disposition of land, and these were facts on basis on which court could conclude that misrepresentation was attributable to neglect. This countered taxpayer’s submission that Minister’s further amended reply should be struck for not pleading facts which would allow court conclude that taxpayer made misrepresentation.
Mont-Bruno C.C. Inc. v. R. (2018), 2018 CarswellNat 2724, 2018 TCC 105, Réal Favreau J. (T.C.C. [General Procedure]).
