Peck v. R. – TCC: Gross negligence penalties upheld in another Fiscal Arbitrators case

Peck v. R. – TCC:  Gross negligence penalties upheld in another Fiscal Arbitrators case

https://decisia.lexum.com/tcc-cci/decisions/en/item/307386/index.do

Peck v. The Queen (March 12, 2018 – 2018 TCC 52, Owen J.).

Précis:   Mr. Peck claimed a business loss of $342,682.13 in 2009 which he used to reduce his 2009 income to nil and carried the balance back to 2008, 2007 and 2006.  CRA denied the losses and imposed a gross negligence penalty of $52,852.98.  This was a Fiscal Arbitrators case.  Mr. Peck sought to vacate the penalty.  The Court dismissed the appeal with costs holding that Mr. Peck met the standard of gross negligence.

Decision:   Justice Owen reviewed the case law on gross negligence extensively and then reached a very pithy conclusion:

[78]  The Appellant signed and filed the Return and the Request notwithstanding the clear deficiencies in the cover letter, the request in the cover letter to carefully review the Return, the expected refund of all income taxes paid for 2009, 2008, 2007 and 2006 described on the second page of the package, the large fee payable to FA that was based on the amount of the tax refunded to the Appellant, the fictitious business income and very significant business loss shown on the Summary in addition to the gross and net rental income, the error in the amount of gross and net rental income reported on the Summary, the nonsensical Statement of Agent Activities included in the package, the fictitious service described on the T2125 that purportedly generated the business loss, the fictitious business income and expense reported on the T2125 and the nonsensical descriptions of those amounts, the erroneous rent and absence of expenses reported for the rental property on the T776, the per added to the signature lines of the Return and the Request, and the failure of FA to identify the tax preparer on the signature page of the Return.

[79]  In my view, the conduct of the Appellant in signing and filing the Return and the Request in these circumstances represented a marked and substantial departure from the conduct one would expect of a reasonable person in the same circumstances. The Appellant cannot simply throw up his hands and say “I blindly relied on my tax preparer” when the materials provided by that tax preparer are so obviously wrong, deficient and nonsensical, and when the tax result purportedly obtained is so extraordinary and suspicious.

[80]  To use the words quoted by the Supreme Court in Guindon, the conduct of the Appellant in the circumstances in issue demonstrated “such an indifference to appropriate and reasonable diligence in a self-assessing system as belies or offends common sense”. Such conduct amounts to gross negligence.

As a result the appeal was dismissed with costs.