SLIDE 70 Fall 2019 Tax Update – What’s New?
Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP Page 46 Video News Inc. October 26/27, 2019
For those interested, or suffering from insomnia, the timeline here, over sixteen years, was as follows: · The contributions were made in 2003 and 2004. · His returns for 1997 – 2004 were filed in early 2005. The Notices of Assessment mentioned the tax on excess contributions in theory, but no further CRA action was taken. · His 2005 through 2008 returns were filed later (the exact timing was not stated in the case). · CRA’s first letter regarding T1-OVPs was sent on February 9, 2007. His accountant filed T1-OVPs and a T3012 form on February 12, 2008. CRA had no record of receiving these. · On October 20, 2008, CRA again sent correspondence requesting the forms within 30 days, this time noting they would consider making arbitrary assessments. · Arbitrary assessments were issued on January 5, 2009. · On January 21, 2009 the accountant filed T1-OVPs for 2003 through 2007, and T3012 forms for 2003 and 2004. · The funds were withdrawn on February 26, 2010, and included on the taxpayer’s 2010 return, with an offsetting deduction claimed. The deduction was denied. · The taxpayer objected, eventually finding his way to Tax Court. The decision, unreported (2012- 3282(IT)I), was that he was too late for 2003 but, as his 2004 return had been reassessed in 2008, he was within the period allowed for that year. That decision was rendered on April 5, 2013, and suggested he consider a taxpayer relief request. · That request was filed on December 19, 2013. · T1-OVPs for 2008, 2009 and 2010 were requested by correspondence dated September 29,
- 2014. CRA issued arbitrary assessments on June 19, 2015. The taxpayer filed T1-OVPs in
August, and the 2010 assessment was adjusted pursuant to an Objection. · The CRA denied relief on November 30, 2016, leading to a Judicial Review in the Federal Court (decision released November 7, 2017), and to this appeal, on which the decision was released
RRSP – Fraud Losses CRA has been reviewing RRSP stripping transactions, typically involving an RRSP investment which goes bad, with funds circling back to the annuitant. Unfortunately, in the Tax Court case of Stewart (2010- 3525(IT)G), a taxpayer defrauded by an investment promoter looked a lot like a participant in an RRSP strip, and CRA assessed him for the full value of the lost RRSP funds. Originally, a 10-acre parcel of land was acquired by the promoters for $5,000. A mortgage was registered against it in the amount of $1.8 million, followed by two other mortgages which brought the total to $6.9 million, sold as RRSP investments. The Court accepted the taxpayers’ assertion that the funds were stolen and that they had lost access to them, finding that no money was received by the taxpayers outside of the RRSP and that the taxpayers were acting at arm’s length from the promoter and the corporations involved in the sale of the investment in mortgage interests. The taxpayers had simply chosen to participate for investment
- purposes. Although the investments disappeared, the Court found that, at the time of investment,
consideration with an equivalent FMV was received in return. They had essentially made a loan to a company that was still holding their cash. It was only at a later point that the funds disappeared.
