A CRA Delay Nearly Cost This Couple Their Sale Proceeds

The situation

Piotr worked as an administrative assistant during the week and drove for a rideshare app most evenings and weekends. Kasia was a hairdresser who had built a small mobile styling side business, doing house calls on her days off. Years earlier, the two had used their combined savings to buy a modest rental property in Kenora, renting it out for extra income while they held full-time jobs. Now in their fifties, they had decided to sell the property and put the proceeds toward paying down their mortgage and topping up their retirement savings.

The sale itself looked straightforward. The property had a reliable long-term tenant, no major repairs pending, and a real estate agent already lined up to list it once the tenant's lease term ended. Before signing anything, though, Piotr and Kasia came to Treadstone Law for a pre-sale review — a check of their tax standing and the paperwork the sale would require, the kind of housekeeping step many sellers skip because nothing about the sale itself seems to call for it. Neither of them expected the review to turn up anything beyond routine filing confirmations — Piotr filed his own returns most years, and both of them believed they were current with CRA and had nothing left to sort out before the sale. It turned out to be the most important call they made in the whole process.

What the review found

A search of Piotr and Kasia's account with the Canada Revenue Agency (CRA) turned up an outstanding balance of about $28,000 — money neither of them had budgeted for and had mostly forgotten was still open. The story behind it went back several years. CRA had reassessed Piotr's returns after cross-checking the earnings slips his rideshare platform was required to issue against what he had actually reported, and found a few years of driving income that had gone unreported. Gig income of this kind is fully taxable business income in Canada, and platforms increasingly report driver and courier earnings directly to CRA, so a mismatch tends to surface eventually. The reassessment added roughly $19,000 in tax and penalties.

Piotr had disagreed with part of the reassessment and filed a notice of objection — the formal step that pauses collection on the disputed amount while CRA reviews the file — well within the required time. That should have led to a resolution within a reasonable stretch. Instead, the file sat with CRA for close to 27 months before an appeals officer confirmed most of the original assessment. During those 27 months, interest kept compounding daily on the outstanding balance, the way it does on any unpaid tax debt, whether the delay is the taxpayer's fault or not. By the time the objection was finally resolved, interest alone had added roughly $9,000 on top of the $19,000 in tax and penalties, bringing the total to about $28,000.

The review also flagged a second, more urgent problem. When a tax debt goes unresolved long enough, CRA has the power to register a certificate in Federal Court, which has the same effect as a court judgment and can attach to real property the debtor owns — functioning much like a lien. Nothing in Piotr and Kasia's file showed a certificate had been registered yet, but nothing ruled it out either, and a debt of this size sitting untouched for years was exactly the kind of file CRA could act on with little warning. If that happened before closing, it could hold up or derail the sale entirely, since a buyer's lender would not close over an unresolved encumbrance on title. Piotr and Kasia had no idea the debt, or that risk, still existed.

What we did

1. Pulled a full account transcript from CRA. This gave a line-by-line history of every assessment, objection milestone, and interest charge on the file, rather than relying on the single summary balance shown on Piotr and Kasia's online account. That level of detail mattered because a taxpayer relief request lives or dies on dates, not impressions — CRA needs to see precisely when each dollar of interest accrued. The transcript became the raw material for separating ordinary interest, which nobody disputes, from the extra interest attributable to CRA's own delay in working the objection.
2. Built a chronology of the objection, tying every date to a document. We recorded when Piotr filed his objection, when CRA acknowledged receipt, when an appeals officer was finally assigned, and how long the file then sat with no further contact. That stretch — months where nothing moved and no one at CRA appeared to be working the file — was the key fact for the relief request, since delay-based relief depends on pointing to a specific, undisputed gap rather than a general sense that things took too long.
3. Filed a request for taxpayer relief. The Income Tax Act gives CRA discretion to cancel or waive interest in circumstances substantially caused by CRA's own delay in processing a matter, rather than by the taxpayer. We prepared a written request isolating the interest that accrued specifically during the unexplained stretch of the objection's life, supported by the transcript and chronology, and asked CRA to cancel that portion rather than the debt as a whole.
4. Coordinated the closing timeline to avoid a certificate. Rather than wait for the relief decision before doing anything else, we contacted Sarah, the real estate lawyer acting on the sale, and arranged for a holdback from closing proceeds sufficient to cover the outstanding balance. This meant the sale could proceed on schedule while the relief request was still pending, without risking a certificate being registered against the property in the meantime.
5. Directed payment from closing proceeds once the relief decision came back. Rather than have Piotr and Kasia wire funds separately after closing, or leave a smaller balance for them to chase down later, we arranged for the lawyer holding the holdback to pay CRA directly from the sale proceeds the moment the reduced amount was confirmed. That kept the entire matter inside the transaction itself, so the couple left closing with the debt fully resolved rather than carrying a lingering obligation into the next tax year.

The outcome

CRA agreed with the relief request. It cancelled roughly $8,000 of the interest that had accrued during the period the objection sat unaddressed, bringing the total balance down from about $28,000 to about $20,000. The remaining amount — the original tax and penalty plus the interest that had accrued before and after the delay period — was still owed, since taxpayer relief addresses delay-driven interest, not the underlying tax debt itself.

Because the review had caught the problem during pre-sale planning rather than after an accepted offer, there was time to arrange the holdback calmly instead of scrambling days before closing. The sale went ahead on the date Piotr and Kasia had planned. At closing, the lawyer handling the sale paid the reduced $20,000 balance directly to CRA from the holdback, clearing the debt in full. No certificate was ever registered against the property, and Piotr and Kasia walked away with the rest of their equity intact — several thousand dollars more than they would have kept had the interest gone uncontested.

What made the difference was timing. Had the debt surfaced mid-transaction, after an agreement of purchase and sale was already signed, there would have been far less room to negotiate a holdback or to pursue relief without risking the closing date — a buyer's lender or lawyer discovering a $28,000 CRA balance days before closing tends to produce delay, renegotiation, or a lost deal, not a calm holdback arrangement. Catching it during the planning stage, before the property was even listed, turned a potential emergency into a manageable step in the file, and meant the couple never had to explain an unexpected CRA debt to a buyer's lawyer under time pressure.

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