Taxpayer’s request for cancellation of interest refused

Federal court | Tax | Income tax | Administration and enforcement

Taxpayer entered into complicated departure trade transaction with bank before move to Malta in 1998, borrowing money and incurring interest before departure to be deductible while reinvesting such money with bank and earning interest after move to be non-taxable. Taxpayer claimed deduction of $47,499,149 as interest and carrying charges, offsetting income he realized from three of his companies. Minister reassessed taxpayer and his companies for 1998 and 1999 taxation years, taking various positions in multiple reassessments that included denying corporate deductions for payments to taxpayer while including such payments in taxpayer’s income and premise that taxpayer had not terminated his Canadian residency. Litigation ensued, with taxpayer’s appeal held in abeyance pending outcome of similar case. Parties entered into settlement and taxpayer paid total balance of tax liabilities owing of $38,067,818, twelve years after reassessment. Taxpayer’s request for cancellation of interest in relation to 1998 taxation year was refused. Taxpayer applied for judicial review. Application dismissed. Taxpayer presented no evidence that he was without any other realistic options other than waiting for outcome of similar case before courts, simply relying on amount of aggregate of liabilities to support such assumption. Amounts, while significant, did not in themselves establish that he could not have paid assessed tax debts at time of reassessment. CRA’s aggressive reassessments were response to lack of information from taxpayer, who could have provided information for realistic assessment, could have provided waiver so that CRA did not need to take defensive positions or could have made settlement offer. Taxpayer chose, no doubt with advice of counsel, to deal with issues by waiting for court to pronounce upon validity of his complex and aggressive departure trade scheme. Taxpayer knowingly failed to pay tax debt pending decision in related case, knowing that interest would continue to accrue on tax debt. Complexities of situation were of taxpayer’s making and could not be used to absolve him from having to pay interest. There was nothing unreasonable in Minister’s decision.

Walsh v. Canada (Attorney General) (2017), 2017 CarswellNat 1809, 2017 FC 411, James Russell J. (F.C.).


Free newsletter

Our newsletter is FREE and keeps you up to date on all the developments in the Ontario legal community. Please enter your email address below to subscribe.

Recent articles & video

Court overturns robbery and firearm convictions because Charter breach undermined trial fairness

Employers should focus on proactive steps on mental health, not just legal requirements: lawyer

Ontario Superior Court dismisses insurance claim over water damage incident in a restaurant

Ontario Superior Court approves settlement for victim of fatal traumatic brain injury

Amid animal-related family law reform push, TMU launching pet law legal clinic

Legal Aid Ontario appoints Fallon Melander as AVP of the new Indigenous Services Department

Most Read Articles

Amid animal-related family law reform push, TMU launching pet law legal clinic

Ontario Superior Court orders insurer to disclose documents in fatal motor vehicle collision case

Waivers in Ontario: Are they legally binding?

Ontario Superior Court grants bankruptcy order over unsettled million-dollar debt