The Federal Court case of Re 9183-4507 Québec Inc. involved motions related to jeopardy collection orders related to CRA tax assessments. CRA had successfully obtained an ex-parte jeopardy collection order and the Canadian income tax lawyer acting for the taxpayer brought a motion to the Federal Court of Canada to have the jeopardy collection order set aside. The CRA income tax assessment results from the application, by the Canada Revenue Agency, of the General Anti-Avoidance Rule [GAAR] under section 245 of the ITA. CRA effectively cancelled transactions whereby the corporation 4507 transferred a sum of approximately $46M to its sister corporation 4564, thereby incurring a capital loss. At the time the minister issued the income tax garnishments, only $7.5M in liquid assets out of the $46M transferred remained. There were several issues including whether (i) the minister had fulfilled his duty of frank and full disclosure of the material facts at the time the ex parte income tax jeopardy collection application was filed, (ii) there were reasonable grounds to believe that granting 4507 an extension of time to pay the amounts assessed would jeopardize the collection of all or any part of the income tax debt. The court found against the Canadian income tax lawyer for the taxpayer on all issues and allowed CRA to proceed with the income tax garnishment to collect the CRA income tax assessment.
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