In my post for June 17, I discussed a case allowing interest relief for court-related delay for a taxpayer whose objection was held in abeyance pending the outcome of the court case. In the June 5 Tax Topics, John Yuan points out a potential trap for a taxpayer whose objection is being held in abeyance.
Subsection 225.1(5) of the Income Tax Act (Canada) provides as follows:
(5) Notwithstanding any other provision in this section, where a taxpayer has served a notice of objection under this Act to an assessment or has appealed to the Tax Court of Canada from an assessment and agrees in writing with the Minister to delay proceedings on the objection or appeal, as the case may be, until judgment has been given in another action before the Tax Court of Canada, the Federal Court of Appeal or the Supreme Court of Canada in which the issue is the same or substantially the same as that raised in the objection or appeal of the taxpayer, the Minister may take any of the actions described in paragraphs 225.1(1)(a) to 225.1(1)(g) for the purpose of collecting the amount assessed, or a part thereof, determined in a manner consistent with the decision or judgment of the Court in the other action at any time after the Minister notifies the taxpayer in writing that
(a) the decision of the Tax Court of Canada in that action has been mailed to the Minister,
(b) judgment has been pronounced by the Federal Court of Appeal in that action, or
(c) judgment has been delivered by the Supreme Court of Canada in that action,
as the case may be.
The upshot? If taxpayer 1 appeals to the Tax Court and taxpayer 2’s objection is held in abeyance pending the outcome of that appeal, taxpayer 2’s tax debt will become collectible if taxpayer 1 loses the appeal at the time the appeal is lost even if taxpayer 1 appeals the decision to the Federal Court of Appeal or, arguably, taxpayer 2 might be entitled to file his own appeal because taxpayer 1’s appeal is not determinative.
