Précis: Mr. Thompson and his late wife set up a corporation to manage his mortgage brokerage business. Neither was particularly sophisticated in either accounting or tax and they relied heavily on their accountant, Mr. Halford. Mr. Halford set up a simple split year deferral method allowing them to defer taxation of their business income (the “Deferred Income”). By late 2009 and early 2010 the Thompsons became concerned about the quality of Mr. Halford’s work. They moved to a new accountant who had considerable difficulty getting information from Mr. Halford. Mr. Halford eventually went out of business. The new accountant, Mr. Jeffery, found that Mr. Thompson had under-reported income for 2005 and 2006 and Mrs. Thompson had under-reported for 2005, 2006 and 2007. Mr. Jeffery proposed to report the unreported income in the 2009 taxation years of the Thompsons. CRA rejected the proposal and reassessed the Thompsons for the 2005-2007 taxation years (which were otherwise statute-barred). The only question before the Tax Court was whether the circumstances permitted CRA to open statute-barred years.
Thompson v. R. - TCC: Court permits statute-barred years to be opened because of unreported incomeREAD MORE »