Craig Burley has written a brief summary of Canada (Atty-General) v Brogan Family Trust, 2014 ONSC 6354, a recent case on rectification. I’m skeptical of the idea that the CRA has no interest in a rectification application if it is “not yet a creditor”, and Brogan illustrates the point well. The judge in Brogan wrote:
[13] I am not persuaded that as contemplated by the rules, the CCRA [sic] was affected by the order of McLean, J. The respondents were not obliged to file a return until the end of the year — well after the order was obtained. When the return was filed at the end of the year, then tax liability if any, could be ascertained. I don’t accept the CCRA’s contention that tax liability was established at the moment of the sale with the amount of the tax to be determined after the return was filed by the respondents. To accept the CCRA’s argument would in principle implicate the CCRA as tax collector in virtually every proceeding in the courts involving damages for termination of employment, personal injury income loss claims, family matters, or for the purchase and sale of a business.
Ignore for the moment the questionable use of the “slippery slope” device. A long line of tax cases has established that one’s liability for tax under the Income Tax Act (Canada) does not depend on the issuance of an assessment. Indeed, the Act itself says as much (see subsection 152(3)). For more on this point, see my post entitled “More ‘Fun’ With Section 160”.
