Redeemer Foundation v. M.N.R., 2005 FC 1361, represents an interesting coda to my article on CRA demands for third-party information. In this decision, the Federal Court quashed reassessments that were based on information obtained pursuant to an improper demand for third-party information.
A rogue convinces you to “invest” in a “business” and you lose the money you invest because the business really consists of stealing your money. Will you be entitled to a deduction in respect of the money you have lost? The Federal Court of Appeal, in Hammill v. The Queen, 2005 FCA 252, said no.
On July 18, 2005, the Department of Finance released over 300 pages of draft legislation amending the Income Tax Act (Canada) (the “Act”). For the most part, the legislation merely reintroduces previously-announced proposals, but Finance slipped in a new measure that imposes new burdens on charities. If the proposal is enacted, a charity that issues a receipt with an eligible amount in excess of $5,000 will be required first to make “reasonable inquiry” about whether the amount should be reduced under any one of a number of complex provisions of the Act relating to gifts.
You file an income tax return for your client, and later the CRA issues an assessment or a reassessment that does not agree with the return as filed. Your natural instinct is to try to solve the problem by discussing it with the auditor or the person who issued the assessment. The communication is quicker and more direct. The person is already familiar with the issue in dispute. Remember, however, that while you are dealing with this person the clock is ticking away and your time for filing an objection is running out.