Tax Court of Canada


Income tax

Administration and enforcement

Enquiries were extensive enough to negate finding of wilful blindness

Brother of taxpayer’s then boyfriend received tax refund of approximately $50,000. Taxpayer and boyfriend viewed refund cheque and were told that brother had confirmed that cheque could be cashed. Taxpayer and boyfriend engaged same tax preparer and signed blank documents for tax preparer. Taxpayer was denied business loss for 2008 taxation year and was assessed gross negligence penalty of $24,760 per s. 163(2) of Income Tax Act. Taxpayer appealed. Appeal allowed. Denial of claimed business loss of $178,172 was not contested. Two elements of s. 163(2) to be established were false statement in return and knowledge or gross negligence in making of, assenting to or acquiescing in making of that false return. Taxpayer had not contested that false statements were made in her 2008 T1 adjustment return. Evidence did not support that taxpayer had any actual knowledge of false statements being made on her behalf in her 2008 revised filing. Viewing cheque was significant and reasonable step taken by person unsophisticated in tax matters to assure herself as to legality of work done by tax return preparers boyfriend’s brother had utilized. Enquiries were extensive enough to suffice for purposes of negating finding of wilful blindness in context of her decision that she could trust new tax return preparers. 

Kajtor v. The Queen (2018), 2018 CarswellNat 24, 2018 TCC 6, B. Russell J. (T.C.C. [General Procedure]).

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