The CRA's Reply in a Tax Court of Canada Appeal: Assumptions Explained

Some weeks after you file your notice of appeal, a document arrives from the Crown. It is called the reply, and it is the CRA's side of the story. It often includes a list of assumptions the CRA made when it assessed you.

This article explains what the reply is, why the assumptions matter, and what you can do in response. It is general information, and it is wise to have a lawyer or accountant review the reply with you.

This article covers Canadian federal tax law, which applies in every province.

What the reply is

The reply is the Crown's formal response to your notice of appeal. In the general procedure the Crown must file it within 60 days after service of the notice of appeal. In the informal procedure the Minister files a reply within sixty days after the notice of appeal is transmitted.

A general procedure reply must set out, among other things, the facts admitted and denied and the issues to be decided. The Crown's assumptions are also set out in the reply.

Why the assumptions matter

When the CRA assesses you, it relies on certain facts it has taken to be true, such as what an expense was for or what a property was worth. The reply lists these. Reading them closely tells you what the CRA thinks the case is about and where your evidence needs to be strongest.

Who must prove what on each assumption is a legal question that depends on the facts of your case, and it is worth discussing with a lawyer before you decide how to respond. One rule is clear: in the general procedure, allegations of fact in your notice of appeal that are not denied in the reply are deemed admitted.

How to respond

In the general procedure you may file an answer to the reply under Rule 45, within thirty days after service of the reply. The Court may extend or abridge any time in the Rules on just terms, but do not count on that.

• Go through each assumption and mark it as correct, wrong or unknown.
• For each one you dispute, note which document or witness shows it is wrong.
• Check whether the reply raises issues or grounds you had not expected.
• Compare the reply's facts with the facts in your notice of appeal.
• Decide whether an answer is needed to put your position on record.

What happens after the reply

In the general procedure, each party files and serves a list of documents within thirty days following the closing of the pleadings. A party may apply for an order requiring a full list of relevant documents.

There is also examination for discovery. A person examined must answer proper questions relevant to a matter in issue, must notify the other parties if an earlier answer was wrong or incomplete, and a party may read the adverse party's discovery evidence into its own case at the hearing.

In the informal procedure, the Court fixes the hearing date and is not bound by legal or technical rules of evidence. Judgment must be rendered not later than ninety days after the hearing concludes, except in exceptional circumstances. A written settlement offer can also affect costs in either procedure.

What to do next

• Note the date you received or were served with the reply, and count thirty days for any answer in the general procedure.
• List every assumption and your evidence for or against it.
• Start collecting the documents you will need to list.
• Consider whether a written settlement offer makes sense; in the general procedure it must be served at least 30 days after pleadings close and at least 90 days before the hearing to carry the enhanced costs effect.
• Get advice from a lawyer or accountant if the amounts or issues are significant.

Frequently asked questions