http://decisions.fct-cf.gc.ca/fc-cf/decisions/en/item/109672/index.do 
Karam v. Canada (Attorney General) (May 7, 2015 – 2015 FC 600, O’Keefe J.).
Précis: Mr. Karam was assessed in 2009 for his share of the proceeds of sale of property owned by a partnership of which he was a member. CRA assessed the transaction as being on income account, not a capital gain. Mr. Karam’s share of the profit was assessed to be $1,898,828.00. He was allowed a reserve of $919,978.00 and his share of partnership income after taking into account the reserve was $978,850.00. He filed a notice of objection claiming that the proceeds should have been treated as a capital gain. In 2010 CRA confirmed the original assessment on the basis that his “profit” of $978,850.00 was on income account. Mr. Karam then unsuccessfully appealed to the Tax Court. After his appeal was dismissed he wrote to CRA on December 5, 2013 “requesting that CRA use the 2007 profit in the amount of $978,850.00 determined on the 2010 notice” [para. [7]] to determine his tax payable. Presumably his argument was that the “profit” of $978,850.00 less the reserve of $919,978.00 gave rise to income of $58,872.00. CRA declined to change his tax payable and Mr. Karam sought to review that decision in the Federal Court.
Both parties acknowledged that the use of the term “profit” in the 2010 notice was a mistake. The Court concluded that it had jurisdiction to review the decision since it was a collection matter, not a decision on an assessment. However the Court dismissed the application with costs since the use of the term “profit” rather than “income” was acknowledged by both parties to be a mistake and did not deprive the notice of meaning or lead to severe misinterpretation.
Decision: The Crown relied successfully on the curative provisions of subsection 152(8):
[28] Subsection 152(8) of the Act provides:
152. (8) An assessment shall, subject to being varied or vacated on an objection or appeal under this Part and subject to a reassessment, be deemed to be valid and binding notwithstanding any error, defect or omission in the assessment or in any proceeding under this Act relating thereto.
[29] I agree with Mr. Justice Bud Cullen’s interpretation in Riendeau that the purpose of this section is “designed to relieve the Minister from detrimental consequences of errors in his department.” To interpret otherwise, is to allow an act of injustice by providing taxpayers with a potential windfall resulting from CRA’s unintentional errors.
Ultimately it boiled down to the fact that Mr. Karam had suffered no harm by virtue of the 2010 notice:
[33] It is clear to me that the 2010 notice is to confirm the findings from the 2009 reassessment. When reviewing all the correspondence together, the error of using the term “profit” as opposed to the proper term of “income” is not substantial as to deprive the meaning of the letter or to invite severe misinterpretation.
[34] Therefore, the CRA did not err in law in informing the applicant that his share of KLP’s income was as assessed in the notice of reassessment dated September 24, 2009.
[35] For the reasons above, I would deny this application.
The parties agreed upon costs in the amount of $1,800.00 (taxes inclusive) which the Court accepted.
TAGS: Judicial Review, Collection Act, Subsection 152(8) of the Income Tax Act