Can the Tax Court Hear a Dispute Over a Capital Gains Reassessment in Canada?

If the CRA has reassessed you on the sale of a property, or has denied your principal residence claim, you may disagree with the result. The Tax Court of Canada is the court that hears these disputes, but a Tax Court judgment is not always the end of the road, because it can be appealed to the Federal Court of Appeal, and informal procedure judgments can be appealed only on limited grounds such as lack of jurisdiction, breach of procedural fairness or an error of law.

This article walks through the path from objection to court, the choices you face about procedure, and the kind of preparation that tends to help. It explains how things generally work; your facts decide the outcome.

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

Start with a notice of objection

A notice of objection must be in writing and set out the reasons and all relevant facts. For individuals (other than trusts) and graduated rate estates, the deadline is the later of one year after the filing-due date or 90 days after the notice of assessment was sent. For others, it is 90 days.

Once the CRA receives it, the Minister must reconsider the assessment and vacate, confirm or vary it, or reassess, and then notify you in writing.

There are exceptions. If the Minister reassessed only to reflect certain matters already determined, the objection must be made within 90 days and is limited to reasons that cannot reasonably be regarded as already dealt with. You also cannot appeal an issue on which you waived in writing the right to object or appeal.

Taking the issue to the Tax Court

After you have served a notice of objection, you may appeal to the Tax Court of Canada to have the assessment vacated or varied once the Minister has confirmed or reassessed. The deadline is 90 days from the day the notice of confirmation or reassessment was sent. The CRA says the Court must receive your notice of appeal within that 90 days.

If the Minister has not notified you of a decision, you may appeal once 90 days have passed after the notice of objection was served.

If you miss the deadline, you can ask the Court for an extension, but the application must be made within one year after the 90-day period expires. You need to show, among other things, that you applied as soon as circumstances permitted and that there are reasonable grounds for the appeal.

Informal or general procedure

The informal procedure applies where the aggregate of all amounts in issue is $25,000 or less, or the loss in issue is $50,000 or less, and you elect it. Many property disputes involve more tax than that. If the amounts exceed $25,000 or the loss exceeds $50,000, the Court orders the general procedure, unless you elect to limit the appeal to those amounts.

If you limit your appeal to stay in the informal procedure, the judgment is deemed to state that the amounts will not be reduced by more than $25,000 or the loss increased by more than $50,000. Weigh that limit carefully.

What proof helps

In the general procedure, allegations of fact in your notice of appeal that the Crown does not deny in its reply are deemed admitted. The reply sets out facts admitted and denied and the issues to be decided, so it shows you what the CRA is relying on. Each party also files a list of documents within thirty days following the closing of the pleadings.

• Purchase and sale documents, lawyer's statements of adjustments and closing records.
• Records of improvements and other costs you claim.
• Evidence of how you used the property and when you lived in it, if you claim the principal residence exemption.
• Bills, tax notices and correspondence showing the dates and amounts you rely on.
• The CRA's notices, including the reasons it gave for reassessing.

Under the informal procedure, the Court is not bound by legal or technical rules of evidence. Even so, clear paperwork makes your account easier to believe.

What to do next

• Note the date on your reassessment or confirmation and the matching deadline.
• File your objection on time, with your reasons and all relevant facts.
• Collect and organize your property records now, before memories fade.
• Add up the amounts in issue to see whether the informal procedure is open to you.
• If you are filing documents with the Court, redact SINs, business numbers and full birth dates.
• Talk to a lawyer or accountant, especially where the sums are large.

A filed appeal can still settle. With your written consent, the Minister may reassess at any time to dispose of an appeal.

Frequently asked questions