Federal Appeal


Income tax

Employment income

Income allocated to taxpayer was not self-employed earnings as it did not arise from business

Taxpayer retired as partner from professional financial services firm in 2007 and following year was allocated income from partnership. Taxpayer included income in 2008 tax return but did not include any amount for Canada Pension Plan (CPP) contribution payable in relation to income and was assessed on basis that income allocated to him resulted in CPP contribution payable by him of $4,098.60. Almost 4 years later, taxpayer submitted adjustment request form and was reassessed in 2014 with net result of reassessment that taxpayer had balance payable of $2,210.03. Taxpayer filed notice of objection and was reassessed, with reassessment reflecting original 2009 assessment. Taxpayer appealed to Tax Court of Canada and judge concluded that since that amount was included in his income as business income, it should also be treated as self-employed earnings for purposes of CPP. Taxpayer appealed. Appeal allowed. Since taxpayer had ceased to be member of partnership in 2007, he ceased to carry on business in common with other members of partnership at that time and as result was not carrying on business in common with other partners at any time in 2008 for purposes of CPP. Neither ss. 96(1.1) or 96(1.6) of Income Tax Act deemed taxpayer to be member of partnership or to be carrying on business for purposes of CPP. Since there was no other provision that would deem him so, he would not be member of partnership in 2008 for purposes of CPP and would not be carrying on business in 2008 for purposes of s. 14 of CPP. Income allocated to taxpayer for 2008 was not self-employed earnings for purposes of s. 14 of CPP as this income did not arise from business that he was carrying on in 2008.

Freitas v. Canada (2018), 2018 CarswellNat 2686, 2018 FCA 110, Wyman W. Webb J.A., Mary J.L. Gleason J.A., and J.B. Laskin J.A. (F.C.A.); reversed (2017), 2017 CarswellNat 878, 2017 CarswellNat 9179, 2017 TCC 46, 2017 CCI 46, Diane Campbell J. (T.C.C. [Informal Procedure]).

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