INCOME TAX
Income Calculation
Income or Capital Gain
Judicial review of decision of Canada Revenue Agency (CRA) under Income Tax Act (ITA), s. 152(4.2) lump-sum disability amount of $80,000 correctly included in deceased’s taxpayer’s income in 1991—CRA declined to exercise discretion to reassess outside normal reassessment period on basis of IC75-7R3 (no reassessment where request based solely on successful appeal to courts by another taxpayer); also based on view lump-sum settlement of disability claim should be included in income under ITA, s. 6(1)(a) (taxing value of any benefits of any kind received by virtue of employment) where ITA, s. 6(1)(f) (taxing employment insurance benefits received on periodic basis in respect of loss of income from employment) not applicable—CRA also of view portion of lump-sum payment would be in lieu of periodic payments and should be included in income under ITA, s. 6(1)(f)—In 1991, deceased taxpayer received lump-sum payment of $80,000 from Confederation Life pursuant to negotiated settlement of benefits due under private disability insurance plan—First applied for fairness relief in February 2002 to re-characterize payment as not being “income” taxable under ITA, s. 6(1)(a) or s. 6(1)(f)—Applicant arguing amount was lump-sum payment received on account of disability, not aggregate of periodic payments would have received from Confederation Life up to age 65, therefore not taxable—Application allowed —Standard of review herein patent unreasonableness; however, interpretation of ITA, s. 6(1)(a) question of law to be decided on basis of correctness—CRA erred in invoking IC75-7R3 (reassessment will not be made if request based solely upon successful appeal to courts by another taxpayer), as applicant relied on Peel v. Minister of National Revenue (1987), 87 DTC 268 (T.C.C.) wherein lump-sum payments deemed not taxable—Subsequent cases cited by applicant merely reinforced initial decision—CRA erred in applying portion of IC75-7R3 without any indication existing case law taken into account in decision-making process—Tsiaprailis v. Canada (2001), 2002 DTC 1563 (T.C.C.), relied on by respondent, not dealing with right to receive benefits in future, but deeming taxable portion of lump-sum payment representing taxpayer’s entitlement to past benefits (i.e. arrears) as in respect of amounts payable in past on periodic basis—Based on materials, no basis for concluding any portion of settlement or lump-sum payment would be in lieu of periodic payments, therefore taxable under ITA, s. 6(1)(f)— Landry v. Canada, [1998] 2 C.T.C. 2712 (T.C.C.) relied on to find ITA, s. 6(1)(a) not applicable—In Landry, Bowman T.C.J. stating ITA, s. 6(1)(a) general provision not intended to fill gaps left by ITA, s. 6(1)(f): expressio unius est exclusio alterius—Income Tax Act, R.S.C., 1985 (1st Supp.), c. 1, ss. 6(1)(a) (as am. by S.C. 1994, c. 7, Sch. II, s. 3; c. 21, s. 2), (f), 152(4.2) (as enacted by S.C. 1994, c. 7, Sch. II, s. 125; 2000, c. 19, s. 44).
Chisholm v. Canada (Customs and Revenue Agency) (T-1086-04, 2005 FC 303, O’Keefe J., order dated 25/2/05, 16 pp.)