http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/110701/index.do
Deschesnes v. The Queen (July 9, 2015 – 2015 TCC 177, Lafleur J.).
Précis: Mr. Deschesnes received disability benefits from Great West Life Insurance Company (“Great West”) in 2012 as well as from the Régie des rentes du Québec (RRQ). During 2012 RRQ reimbursed Great West $12,947.58 for an overpayment it had made to Mr. Deschesnes. Part of the dispute turned on whether that amount was taxable in the hands of Mr. Deschesnes. The second amount in dispute was $5,352.60 representing cheques that Mr. Deschesnes received from RRQ in 2012 but did not cash in that year. Finally there were late filing penalties of $73.35 at issue.
The Tax Court dismissed the first two issues on appeal but set aside the late filing penalties under the confused circumstances of the matter.
Decision: The amount paid to Great West by RRQ was held to be taxable to Mr. Deschesnes:
[32] The evidence has shown that the RRQ paid that amount to Great West. In a letter to the appellant dated August 22, 2012, Great West confirmed that it had received that amount as reimbursement of the amount it had overpaid to the appellant (page 28 of Exhibit I‑1).
[33] For clause 56(1)(a)(i)(B) of the Act to apply, the appellant must have received some amounts as disability benefits.
[34] In this case, the appellant has benefited from the $12,947.58, which the RRQ had reimbursed to Great West in the 2012 taxation year. If the RRQ had not made that reimbursement, the appellant would have had to reimburse that amount to Great West. The appellant had therefore received that amount during the 2012 taxation year.
[35] In light of the foregoing, I am of the view that the $12,947.58 that the RRQ repaid to Great West must be included in the appellant’s income in accordance with clause 56(1)(a)(i)(B) of the Act.
Similarly, the uncashed cheques received from RRQ in 2012 were taxable in the year of receipt:
[39] Judge Garon applied the same principles in Piché v. The Queen, [1992] T.C.J. No. 655 (QL), affirmed by [1993] F.C.J. No. 510 (QL) (F.C.A.), quoting the following excerpt from Moody, supra:
In the absence of some special circumstance indicating a contrary conclusion such as, for example, post-dating or an arrangement that the cheque is not to be used for a specified time, a payment made by cheque, although conditional in some respects, is nevertheless presumably made when the cheque is delivered and, in the absence of such special circumstance, there is, in my opinion, no ground for treating such a payment other than as a payment of cash made at the time the cheque was received by the payee.
[40] In this case, no special condition or circumstance surrounded the five cheques from the RRQ for August to December 2012. In addition, the appellant agreed that he had received these five cheques during the 2012 taxation year. Thus, the appellant could have cashed the cheques at any point during that taxation year. I am therefore of the opinion that the appellant received the $5,352.60 during the 2012 taxation year as disability benefits paid by the RRQ from August to December 2012. Accordingly, he must include that amount in his income for the 2012 taxation year even though he did not cash the cheques until 2013.
The Court did however relieve against the late filing penalties:
[43] Thus, the appellant had to file his income tax return for the 2012 taxation year no later than April 30, 2013. The appellant agrees that he filed his return for the 2012 taxation year in February 2014. In his testimony, the appellant agreed that he had crossed out his signature on the tax return because he believed it contained incorrect information, even though his tax preparers had confirmed to him that the return was in compliance. Indeed, he incorrectly believed that, because he had not cashed the RRQ cheques in 2012, he should not have included them in his 2012 income. He also believed that he did not need to pay taxes on the amounts that the RRQ had reimbursed to Great West because, according to him, it would have been double taxation. The appellant testified that he had tried to talk to RRQ representatives several times but to no avail. He also testified that he had tried to obtain information from Great West representatives.
…
[46] Given the particular circumstances of the appeal and of the appellant’s efforts to find out the correct way to prepare his tax return for the 2012 taxation year, I am of the view that the late filing penalties should be cancelled.
Thus the appeal was allowed, without costs, only for the purposes of deleting the late filing penalties.