Tax Court of Canada


Income tax

Administration and enforcement

Proposed amendments would facilitate consideration of true substance of litigation

Taxpayer and taxpayer corporation established general partnership. Partnership opened trading account with securities company and realized certain losses, which were allocated to both taxpayers in accordance with their capital interests in partnership. Minister reassessed taxpayers and found that no losses were actually realized and income losses allocated were unreasonable. Taxpayers filed notices of appeal and Minister filed replies to notices of appeal, litigation deadlines were established, and examination for discovery held. Minister sent taxpayers draft amended reply on last date of deadline, to advance additional arguments that partnership’s units were tax shelter within meaning of s. 237.1 of Income Tax Act for two taxation years, but taxpayers would not consent to proposed amendments. Minister brought motions for leave to file amended replies to notices of appeal. Motions granted. It was found satisfactory that amended reply in each of appeals passed test set out in section 54 of Tax Court of Canada Rules and s. 152 (9) of Income Tax Act. Motions to amend could not have come earlier, considering court’s previous order compelling Minister to serve taxpayers with draft of amended replies within short period of time. Motions to amend were made at early stage of litigation and amendments arose, in part, from evidence given by one of taxpayers’ nominees during examination for discovery. Proposed amendments would undoubtedly assist in ensuring that all applicable provisions of Act were considered and would facilitate consideration of true substance of litigation, based on its merits.

Thompson v. The Queen (2018), 2018 CarswellNat 5002, 2018 TCC 167, Réal Favreau J. (T.C.C. [General Procedure]).

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