http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/143107/index.do
Menzies v. The Queen (March 22, 2016 – 2016 TCC 73, Lafleur J.).
Précis: The taxpayer originally claimed a partnership loss of roughly $88,000 in her 2001 taxation year. The Minister reduced that loss by roughly $20,000 under the terms of a settlement agreement with the partnership. The taxpayer claimed that the reassessment was ineffective because she did not authorize the settlement and did not receive a copy of the Minister’s Notice of Determination and Notice of Redetermination of Loss (the “Determination”). She also claimed interest relief because of the alleged delay of the Minister in reassessing her 2001 taxation year:
The Appellant argued that since she did not receive the Letter and the Minister cannot prove that it sent the Notice of Determination and Notice of Redetermination to her as required under subsection 152(1.5) of the Act, the reassessment of the Appellant by Notice of Reassessment dated November 13, 2012 is invalid. Furthermore, the Appellant stated that she did not give the general partner of Grosvenor the authority to negotiate with the Minister and enter into the Minutes of Settlement dated November 15, 2011 on her behalf and that gives rise to a conflict of interest. In addition, the Appellant is asking for a reduction of interest charges because, in her view, the Minister did not act in a timely fashion and that resulted in interest being charged for 7 years (the Minister having exercised its discretion to reduce interest for 3 years only).
The Tax Court held that it did not have jurisdiction to award interest relief. It rejected Mrs. Menzies’ argument that she was not bound by the settlement. Moreover it did not accept Ms. Menzies’ evidence that she did not receive the Determination. As a result the appeal was dismissed. There was no order as to costs as this was an informal procedure appeal.
Decision: The Tax Court first dealt with the allegation that the settlement reached with the partnership did not bind her:
Before examining the tax liability of the Appellant, I wish to address the argument raised by the Appellant to the effect that she did not give the general partner of Grosvenor the authority to negotiate with the Minister and enter into the Minutes of Settlement dated November 15, 2011 on her behalf. In my opinion, that argument is not sound. As indicated in Schedule “A” to the Confidential Offering Memorandum filed as Exhibit R‑1 which was executed by the Appellant, the Appellant had irrevocably constituted and appointed the general partner of Grosvenor (namely, 1444932 Ontario) “with full power of substitution, as his or her true and lawful attorney and agent, with full power and authority in his or her name, place and stead and for his or her benefit to:”
. . .
3.01(iii) execute, deliver and file all elections, determinations, or designations under the Tax Act or any other taxation or other legislation or laws of Canada or any other jurisdiction in respect of the affairs of the Limited Partnership or a limited partner’s interest in the Limited Partnership or the dissolution of the Limited Partnership, including any appropriate tax election forms which are, in the opinion of the General Partner, appropriate in the circumstances;
Given the power of attorney executed by the Appellant, the Appellant cannot argue that the general partner did not have authority to negotiate with the tax authorities on her behalf. It is the usual practice when investments are made as a limited partner that the general partner be given vast powers to deal with the tax authorities on behalf of the limited partners.
Turning to the argument that Ms. Menzies did not receive the Determination the Court simply did not accept her evidence:
I am not persuaded by the allegation of the Appellant to the effect that she did not receive the Letter. She admitted that she had received the Notice of Reassessment dated November 13, 2012; the address indicated in the Notice of Reassessment is the same as the one indicated in the Letter. Furthermore, the Notice of Reassessment referred to the Letter. In my view the Appellant is not credible when she declared that she did not receive the Letter.
[As Justice Valerie Miller held in Nicholls v The Queen, 2011 TCC 39, 2011 DTC 1063, in a case where an applicant had filed an application for an extension of time to appeal, the Crown “only has the onus to prove the assessments were sent if the Applicant alleges that he has not received the assessments and that allegation is credible.” (para 15). I am of the view that these principles should apply in this case.
Since I do not find the allegation of the Appellant to be credible, the Respondent does not have to prove that the Letter (together with the Notice of Determination dated March 30, 2005 and the Notice of Redetermination dated April 2, 2012) were sent to the Appellant.
Furthermore, the language of subsection 152(1.6) of the Act is clear – whether one or more limited partners have received the notice of determination or not is not relevant for the validity of a notice of determination issued in accordance with subsection 152(1.4) of the Act.
The interest relief she sought was not with the jurisdiction of the Tax Court:
Finally, all the assumption of facts relied upon by the Minister to reassess the Appellant were admitted by the Appellant and her agent. The real issue in this appeal is the time it took the Minister to reassess the Appellant – fairness is an issue which is not within the jurisdiction of this Court.
As a result the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.