A taxpayer cannot object to or appeal from a nil assessment. The courts have held that a piece of paper that says you don’t owe any tax is not an assessment for the purposes of the Income Tax Act even though it might have that word printed at the top of it.
Dray v. The Queen, 2005 TCC 797, does a pretty good job of explaining a bizarre rule. As the Tax Court judge says “This is a concept which taxpayers may have difficulty understanding.” That’s an understatement.
The Justice continued:
[4] When the Minister assesses no tax then there is no appeal from it. In Liampat Holdings Limited v. The Queen, (1995) 96 D.T.C. 6020 (F.C.T.D.) at page 6021, the Court said: “There is a long line of jurisprudence that no appeal lies from a nil assessment. In Okalta Oils Ltd. v. M.N.R. (1955), 55 DTC 1176 (S.C.C.), one of the earliest cases dealing with nil assessments, where Fauteux, J., writing for the Court, observed that “assessment” meant the actual amount of tax which a taxpayer was called upon to pay. If no amount was claimed, there was no assessment therefore, no right of appeal. …”
[5] Further the Court said, “The case law is clear and, in my view, this Court has no jurisdiction to consider the plaintiff’s 1982 nil tax assessment, even if the loss would have an effect on a subsequent loss determination. However, the taxpayer is not left without alternatives. Subsection 152(1.1) provides that a taxpayer may request that the Minister determine the amount of the taxpayer’s loss.” It reads as follows:
152(1.1) Where the Minister ascertains the amount is a taxpayer’s non-capital loss, net capital loss, restricted farm loss or limited partnership loss for a taxation year and the taxpayer has not reported that amount as such a loss in his return of income for that year, the Minister shall, at the request of the taxpayer, determine, with all due dispatch, the amount of such loss and shall send a notice of determination to the person by whom the return was filed.
[6] Further the Court said, “According to Interpretation Bulletin IT-512: Determination and Redetermination of Losses, this provision was put in place specifically to deal with situations where a taxpayer has no right of appeal because of a nil assessment. I have not found any time limitations for seeking a loss determination and counsel for the plaintiff, in his written submissions did not direct me to such a provision. Accordingly, the plaintiff will not be unfairly prejudiced by the conclusion that I am without jurisdiction to consider the appeal from the 1982 assessment on its merits.”
