In Glenogle Energy Inc. v Canada (Attorney General), 2022 FC 198, the taxpayer filed a 97(2) election with a nominal agreed amount. Three months later, the taxpayer applied to amend the election to insert an agreed amount of $32 million. The CRA denied the request, in part because (the CRA alleged) the request amounted to “retroactive tax planning. The taxpayer applied for judicial review. The Court upheld the CRA decision because it was “justified, transparent, and intelligible, and fell well within the range of possible and acceptable outcomes”.
The authors make some suggestions for avoiding a similar outcome.
- It is better to late-file an election (where it can be done as of right) and pay a penalty, rather than request an amendment that requires the Minister to concur.
- The transfer agreement, in addition to specifying the agreed amount in dollars, should state the intention of the parties regarding its tax consequences. For example, a section 85 rollover agreement might state that the parties intend to trigger a gain equal to the transferor’s unused capital gain exemption. The authors suggest that this statement of intention could anticipate an allegation that an amendment represented an attempt at retroactive tax planning.
- In Glenogle, the court noted that a judicial review should generally only assess a CRA decision in light of the information provided by the taxpayer to the CRA. Taxpayers, then, should consider engaging counsel to assist with a request to amend an election so that the best possible record will be before the court if a judicial review application becomes necessary.