Expectation permitted court to grant procedural remedies rather than substantive rights

Tax - Income tax - Administration and enforcement

Taxpayer participated in employee stock option plan offered by his employer . As result of purchasing shares at less than their fair market value, taxpayer was assessed taxable employment benefit pursuant to s. 7 of Income Tax Act for 2007 taxation year at $12.75 per share. By mutual consent, employment benefit was reduced by 30 per cent for tax purposes. Taxpayer suffered capital loss on sale of shares, and due to operation of employee stock option rules and Income Tax Act, taxpayer was unable to claim loss to offset stock option employment benefit, with result that he was liable to pay federal and provincial income taxes on stock option. Canada Revenue Agency did not recommend to Governor in Council remission of 2007 tax liability under s. 23(2) of Financial Administration Act. Taxpayer’s application for judicial review of refusal to provide remission was dismissed. Trial judge found stock option plan of taxpayer was different from stock purchase plan of other employees and identical tax treatment of plans was not warranted. Trial judge found being unable to offset capital loss against stock option employment benefit does not provide automatic entitlement to remission. Trial judge found CRA properly considered mandatory conditions for determining whether individuals qualified for remission, and discretion was not improperly fettered Trial judge found CRA reviewed facts, addressed grounds for relief and clearly identified why taxpayer was not in same circumstances as others and why there were no extenuating circumstances. Trial judge found procedural fairness was observed. Taxpayer appealed. Appeal dismissed . Trial judge properly applied standard of reasonableness. Finding that taxpayer was not similarly situated to other employees who obtained shares through stock purchase plan, as opposed to stock option plan, was reasonable. Doctrine of legitimate expectation in relation to other employees was not applicable as expectation permitted court to grant procedural remedies rather than substantive rights. Taxpayer suffered financial setback but there were no extenuating circumstances.

Fink v. Canada (Attorney General) (2019), 2019 CarswellNat 6078, 2019 FCA 276, Eleanor R. Dawson J.A., David Stratas J.A., and Anne L. Mactavish J.A. (F.C.A.); affirmed (2018), 2018 CarswellNat 6208, 2018 CarswellNat 6772, 2018 FC 936, 2018 CF 936, Sylvie E. Roussel J. (F.C.).

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