Taxpayer awarded substantial indemnity costs after settlement offer

Tax court of Canada | Tax | Income tax | Administration and enforcement

Taxpayer treated cash settlement payments as being on income account under s. 9(1) of Income Tax Act and claimed business losses. Minister of National Revenue reassessed taxpayer on basis that payments were made on account of capital and resulted in capital losses. Taxpayer’s appeal was allowed. Taxpayer brought motion for increased costs. Motion granted. Taxpayer was awarded costs of $300,712 on substantial indemnity basis after settlement offer, $50,000 for time before settlement offer, and disbursements totalling $350,712. Thirty-day limit to request increased costs in s. 147(7) of Tax Court of Canada Rules (General Procedure) applied and was not followed by taxpayer. Taxpayer’s request for extension of time to provide submissions on enhanced costs was granted, as taxpayer demonstrated continuing intention to seek enhanced costs, short delay did not prejudice Minister, and taxpayer had arguable case as party who obtained judgment as favourable as settlement offer. Taxpayer was awarded substantial indemnity costs for period of time after settlement offer because offer met requirements of s. 147(3.3) of Rules. Taxpayer was awarded costs above Tariff for time before settlement offer equivalent to 30 per cent of actual costs incurred because amount in issue was significant and matter involved high volume of work and was fairly complex. Parties were to bear their own costs for this motion for costs. 

MacDonald v. The Queen (2018), 2018 CarswellNat 1076, 2018 TCC 55, Dominique Lafleur J. (T.C.C. [General Procedure]); additional reasons (2017), 2017 CarswellNat 3934, 2017 TCC 157, Dominique Lafleur J. (T.C.C. [General Procedure]).

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