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FEDERAL INCOME TAX - Assessment - Limitation period

Tuesday, April 16, 2019 @ 9:10 AM  


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Appeal by the taxpayer from the dismissal of his appeal from reassessment for the 2009 taxation year after the normal reassessment period had expired. The appellant retired in 2009 and was a member of the Ontario municipal employees pension plan (OMERS). In his year of retirement, he established a new pension plan in which he was the sole member. The commuted value of $640,080 was transferred to the new plan. In 2013, the Minister revoked the registration of the new pension plan effective January 2009 and issued a notice of reassessment for the 2009 taxation year which included the amount transferred to the new plan in the appellant’s income. The notice was sent on the last day before the expiry of the time period that the Minister was able to assess this amount. In 2017, the Minister concluded that the revocation notice was ineffective because it was sent two days earlier than was permitted by the Act. The Minister sent a second revocation notice in 2017 which stated that it superseded the earlier one and was being issued to correct a timing error. It also stated to be effective on a retroactive basis to January 2009. The Tax Court concluded the reassessment should not be vacated because the factual basis of the reassessment had not changed and always was that the commuted value of the appellant’s OMERS pension was transferred to a non-registered plan.

HELD: Appeal allowed. The appellant was entitled to rely on the expiry of the normal reassessment period to finalize his tax payable for the 2009 taxation year. In issuing the second revocation notice and relying on it for purposes of the reassessment, the Minister was in effect seeking to do away with the limitation period. The Tax Court erred in its conclusion that the factual basis of the reassessment had not changed. The 2013 reassessment was based on the 2013 revocation notice. This basis was abandoned in 2017 because the notice was of no effect and the Minister then relied on a new notice of revocation. This change in position was reflected in the amended reply filed by the Minister in 2017 acknowledging that the Minister’s factual assumptions did not support the reassessment and were no longer being relied on. The revocation notice was a factual element that was necessary to support the legal basis of the income inclusion. The applicable revocation notice was sent in 2017 which was long after the limitation period had expired. This was not a factual basis on which the reassessment was based when it was issued or when the limitation period expired. The Tax Court failed to take this into account. The Minister’s reliance on the 2017 revocation notice was a new factual basis underlying the reassessment raised long after the limitation period had expired. This was also a new fact that did not materialize until after the limitation period had expired when the Minister issued the second notice.

Mammone v. Canada, [2019] F.C.J. No. 310, Federal Court of Appeal, D.J. Rennie, J.M. Woods A.C.J. and J.B. Laskin JJ.A., March 6, 2019. Digest No. TLD-April152019006