http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/144161/index.do
Samson v. The Queen (May 10, 2016 – 2016 TCC 115, Boyle J.).
Précis: Mr. Samson and his wife, Ms. Hilliard, owned property in the United States worth more than $100,000 which they did not report in their 2008 to 2011 income tax returns.
They were each assessed $2,500 penalties under subsection 162(7) for each of the years 2008 through 2011 for failing to file forms T1135 in respect of their foreign property by the end of April of the following year as required by section 233.3 of the Income Tax Act (Canada) (the “Act”). [para. [1]]
Mr. Samson had a long history of non-compliance and both he and Ms. Hilliard filed voluntary disclosure applications in 2007 for the 10 preceding taxation years. The Court simply did not accept their explanations about their failure to disclose the foreign property in question (income producing real property in North Carolina). The Tax Court did not except their excuses; the appeals were dismissed.
Decision: The issue before the court was quite simple:
[2] The Appellants do not dispute that they each owned foreign property in excess of the $100,000 threshold throughout the period. Nor do they dispute that they did not file their form T1135 information returns for any of these years within the time required. They were not required to file income tax returns for each of these years as a result of losses claimed from their foreign and Canadian rental properties which have not been challenged. It is their position that they are entitled to maintaining a so-called due diligence defence to the subsection 162(7) administrative penalties, and that they were reasonable in their belief at the time that they did not have to report their foreign property and file T1135 forms for the years in question because they did not have any income tax payable for the year and hence did not have to file T1 income tax returns.
[3] The Appellants now accept that the definition of filing‑due date for purposes of their T1135s is expressly not affected by subparagraph 150(1.1)(b)(i) dealing with income tax returns for years in which no tax is payable, as the definition of filing‑due date in section 248 says that the filing‑due date for a taxation year is the day on or before which the taxpayer’s Part I tax return for the year is required to be filed or would be required to be filed if tax under Part I were payable by the taxpayer for the year.
[4] The issue to be decided in these appeals is whether the taxpayers were diligent in their compliance efforts and acted reasonably.
At the end of the day the Court just did not accept the excuses proffered by Mr. Samson and Ms. Hilliard:
[28] Ms. Hilliard maintains that she behaved reasonably in relying on her husband to take care of their tax compliance obligations. On the facts of this case, there is again no reasonable basis for her to rely on him as she was well aware that he was regularly delinquent with his tax filings and, since this lead her to also make her first voluntary disclosure, this extended beyond optional tax filings or tax filings which were not required if there was no tax payable. It is not enough that she was not aware he ever “evaded” tax. (While this came out in evidence in chief, there was no suggestion in any of the evidence that Mr. Samson had in fact ever attempted to evade tax). Ms. Hilliard was aware her husband was a serial non‑complier.
[29] Other facts were put in to evidence in support of their due diligence/reasonableness defence regarding Mr. Samson’s mother being ill and then passing away, their son’s very severe illness during the period and some of Mr. Samson’s personal medical issues. None of these were present when the current round of T1135 non‑compliance started with respect to the 2007 year due in April of 2008.
[30] According to his doctor’s letter, Mr. Samson’s thyroid condition developed in early 2009 and it took the better part of six months for the disorder to be controlled. Mr. Samson added he had gone to the hospital emergency department six months earlier to see an endocrinologist. His mother’s dementia, her resulting move into a care home, and her later death began in 2011. Their son Robert’s severe bacterial infection also commenced in 2011.
[31] It is hard to see that these have much relevance to overlooking filing T1135s, nor is there any evidence these impaired the Appellants’ functioning to being beyond their ability to recall such things as their T1135 obligations. Some of the other medical conditions mentioned by Mr. Samson sounded like those typical of many Canadian men his age. Similarly, his caring for his elderly mother sounded rather similar to the situation that many Canadians of the Appellants’ ages regularly find themselves in. There was no evidence that the Appellants could or did not work through these periods or that they hired anyone else to do the maintenance that they had always carried on with respect to their properties. The evidence is that they did cancel certain trips away while their son was ill and while Mr. Samson’s mother was dying; they did not go south that winter.
[32] Again, these were well after the spate of non‑compliance began. Indeed, the conditions of his mother and their son were after Mr. Samson retained Mr. Grant to deal with their not having filed their T1135s since 2006.
[33] Subsequent to the hearing of these appeals, Mr. Samson wrote to the Court asking to be permitted to file further written submissions. This was written by him personally, not his counsel who remained both Appellants’ counsel of record. Mr. Samson does not appear to have copied his counsel. The Respondent wrote that it did not oppose the request “as long as the submissions are restricted to submissions on the evidence already adduced at the hearing and no further evidence is presented by the Appellant”. In the circumstances of this case, after considering Mr. Samson’s request, I decided that additional submissions would not be appropriate, necessary or helpful in this case.
[34] The Appeals are dismissed.