From Justice Bocock, in Robertson v R, 2015 TCC 246, we read the following regarding whether a mistake of law amounts to a negligent misrepresentation:
[a] wise and prudent person is, generally by definition, not unknowledgeable of the law. However, a wise and prudent person is also not all-knowing. He or she may be ignorant of specific legislative provisions—section 7 of the Act, for example. The question to be asked is this: was it reasonable for a wise and prudent person to remain ignorant, in the circumstances, at the time the misrepresentation was made? In the present case, the answer to this question is no. A wise and prudent person in Mr. Robertson’s situation should have at least raised the issue of the taxation of the Options in his own mind or with his accountant or another professional advisor.
When can a taxpayer rely on an accountant’s error to avoid a reassessment outside the normal reassessment period? Justice Bocock summarized Aridi v R, 2013 TCC 74, as follows:
(1) the taxpayer submits all materials to the professional advisor; (2) a discussion is had between the advisor and the taxpayer touching upon the inclusion or exclusion from income of the item; (3) that discussion gives rise to a review of the facts related to the inclusion or exclusion; and (4) a clear, factual confirmation made by the professional advisor leads to the misrepresentation.
Discussed in Philip Friedlan and Adam Friedlan, “Reassessing a Statute-Barred Year and the ‘Wise and Prudent Person’ Test” Tax for the Owner-Manager 16:1 (January 2016).
