Tax Court Of Canada rejects CRA’s attempt to apply gross-negligence penalties in statute-barred years

Still, the CRA bears the burden of proving that the taxpayer committed fraud or made such a misrepresentation. Yet its tax auditors will often reassess otherwise statute-barred taxation years without sufficient evidence that the taxpayer committed fraud or made a misrepresentation attributable to neglect, carelessness, or wilful default. Fuhr v The King provides yet another example of this practice. Faced with the CRA’s lack of evidence, the Tax Court of Canada allowed the taxpayers’ appeal outright — thereby cancelling tax reassessments that imposed over $2 million in additional taxable income and about $500,000 in gross-negligence penalties.