Published: July 23, 2026
After four contradictory notices of reassessment for a single taxation year, the Tax Court of Canada was asked to decide whether subsection 152(4.2) of the Income Tax Act could shield a CRA-imposed tax increase from any objection or appeal. Forrest v The King says it cannot, and offers a cautionary postscript on AI-generated case law along the way.
Can the Minister of National Revenue strip a taxpayer of appeal rights by issuing a reassessment under the fairness provisions of subsection 152(4.2) of the Income Tax Act, where that same reassessment also increases the taxpayer’s tax payable? That was the question the Tax Court of Canada confronted in Forrest v The King, 2026 TCC 121, an Informal Procedure decision of Justice Michael U. Ezri released June 26, 2026 under file number 2025-2746(IT)I. The answer, after four contradictory notices of reassessment for a single taxation year, was no.
Background: A Cascade of CRA Reassessments
The appellant, Norman Forrest, filed his 2020 tax return in April 2021, and the CRA assessed the return as filed on April 13, 2021, a date that started the running of the three-year normal reassessment period under subsection 152(3.1) of the Income Tax Act. The tax preparation software Mr. Forrest used contained a glitch that resulted in an improper claim with respect to capital gains on the disposition of shares. The CRA audited the return, and Mr. Forrest responded by filing an amended return seeking a capital gains deduction carry-forward.
The CRA disagreed and, on September 8, 2023, issued a first notice of reassessment adding a capital gain and reducing a capital loss, with the net effect of increasing Mr. Forrest’s taxable capital gain by $12,000.
Mr. Forrest filed a notice of objection on November 10, 2023, along with a T1 adjustment request seeking a capital gains deduction of $29,166.75. The objection then sat without action, and on April 13, 2024, the normal reassessment period expired. The CRA retained the power to reassess in response to the outstanding objection under subsection 165(3), or to reassess under the fairness provisions of subsection 152(4.2), but its ordinary reassessing authority under paragraph 152(4)(a) was now closed off. In August 2024, Mr. Forrest filed a separate and unrelated adjustment request for non-refundable tax credits for an infirm dependant and for attendant care expenses.
On March 7, 2025, the CRA advised Mr. Forrest that his objection was accepted in its entirety, and on March 17, 2025, issued a second notice of reassessment that completely reversed the first, giving him everything he had asked for on the capital gains issue. That notice did not address the non-refundable tax credits. The CRA then decided the second notice had been wrong, and on May 23, 2025, more than a year after the normal reassessment period had expired, issued a third notice of reassessment.
This notice completely reversed the second, reinstated the original $12,000 increase in taxable capital gains, denied the capital gains deduction outright, and allowed the infirm dependant credit. The third notice purported to be issued in response to the November 2023 objection under subsection 165(3), even though that avenue had arguably already been used up when the second notice was issued.
On May 30, 2025, the CRA sent a decision letter partially accepting Mr. Forrest’s objection, denying the capital gains deduction, and inviting him to either file a further objection or appeal to the Tax Court. He chose to do both, in effect: on August 7, 2025, he filed a further notice of objection along with two additional adjustment requests, one restating the capital gains deduction and adding a new allowable business investment loss claim, and the other re-submitting the dependant and attendant care credit claims.
On August 29, 2025, the CRA sent a letter refusing to accept this as a valid new objection, on the basis that Mr. Forrest had already objected once and had already been given a decision, a position difficult to reconcile with the CRA’s own May 30 letter inviting him to object again. The August 29 letter told him to appeal to the Tax Court instead.
Finally, on September 18, 2025, the CRA issued a fourth notice of reassessment. Its only change was to allow the attendant care credit; it did not restore any part of the capital gains deduction. The notice stated that it was issued in response to Mr. Forrest’s adjustment requests and that no objection could be filed against it. Mr. Forrest, representing himself, filed a notice of appeal to the Tax Court on November 13, 2025.
How Subsection 152(4.2) Works: The CRA’s Reassessment Power for Late Relief
Subsection 152(4.2) is one of a handful of provisions in the Income Tax Act that lets the CRA reach back into a taxation year after the normal reassessment period defined in subsection 152(3.1) has already closed, ordinarily three years from the date of the original notice of assessment.
Unlike paragraph 152(4)(a), which lets the CRA reassess beyond the normal period where it can establish a misrepresentation attributable to neglect, carelessness, wilful default, or fraud, and unlike subsection 165(3), which lets the CRA reassess to give effect to a decision on an outstanding objection, subsection 152(4.2) is triggered only by the taxpayer’s own request. On the wording quoted in the decision, it is available to a taxpayer who is an individual, not to corporations, and only within a ten-year window measured from the end of the taxation year in question. Our discussion of errors in reporting income and the normal reassessment period walks through how paragraph 152(4)(a) operates for corporations and individuals alike, in contrast to the individuals-only relief available under subsection 152(4.2).
The provision is commonly described as a fairness or equitable relief mechanism, and the 1991 Department of Finance technical notes confirm that description: it exists so that an individual who realizes, after the normal reassessment period has expired, that a deduction or credit was inadvertently missed can ask the Minister to reassess and correct the omission. The relief it offers is narrow by design. It can be used only to determine a refund to which the taxpayer is entitled or to reduce an amount payable, and the Minister’s exercise of the power is discretionary rather than a matter of right.
That discretionary character has a direct procedural consequence: because the taxpayer, not the CRA, initiates the reassessment, and because the reassessment can only ever help the taxpayer, Parliament paired the provision with the restriction in subsections 165(1.2) and 169(2.2) that no objection or appeal lies from an assessment made under it. If the Minister refuses to exercise the discretion at all, the taxpayer’s recourse is judicial review of that discretionary decision in the Federal Court, not an appeal to the Tax Court on the merits.
That trade-off, appeal rights given up in exchange for an extended reassessment window, only makes logical sense where the resulting reassessment is confined to the relief the taxpayer actually asked for. Subsection 152(4.2) is frequently used alongside, but is legally distinct from, the CRA’s Voluntary Disclosures Program: the VDP is aimed principally at correcting unreported income or other non-compliance in exchange for penalty and interest relief, while subsection 152(4.2) is aimed at correcting a taxpayer’s own missed deductions or credits in a closed year.
A taxpayer with a mixed situation, some unreported income and some missed relief, may need to consider both routes. What Forrest v The King adds to this framework is the confirmation that the fairness rationale behind subsection 152(4.2) has a hard limit: the CRA cannot use a taxpayer’s own request for relief as an occasion to reopen and increase amounts that have nothing to do with that request, and it certainly cannot use the request as a vehicle to reassert an income increase that a previous, non-152(4.2) reassessment had already reversed.
Why Subsection 152(4.2) Came Into Play at All
A later reassessment ordinarily supersedes and nullifies the one before it; that principle does not depend on subsection 152(4.2) and was not seriously in dispute. The real question is why subsection 152(4.2) mattered at all, rather than the third and fourth notices simply reflecting the CRA’s ordinary reassessing authority reasserting itself.
The answer is timing. Under paragraph 152(4)(a), the CRA may generally reassess a taxation year only within the normal reassessment period defined in subsection 152(3.1), ordinarily three years from the original assessment. Once that period lapses, as it did for Mr. Forrest’s 2020 year on April 13, 2024, the CRA loses its ordinary reassessing authority except where a specific statutory exception applies.
Subsection 152(4.2) is one such exception: it lets the Minister reassess a statute-barred year, but only at the taxpayer’s request and only to determine a refund or reduce an amount payable, within a ten-year window. By the time the CRA issued the third notice in May 2025, over a year past the normal period, subsection 152(4.2), triggered by Mr. Forrest’s own outstanding adjustment requests, was one of the only available routes back into the file.
That distinction mattered because a reassessment issued under ordinary paragraph 152(4)(a) authority carries the usual right to object and appeal, while a reassessment issued solely under subsection 152(4.2) is expressly shielded from both under subsections 165(1.2) and 169(2.2). As Justice Ezri framed the issue at the outset of his reasons, the case asked whether the Minister could “abrogate a taxpayer’s appeal rights by purporting to issue an assessment under the fairness provisions of subsection 152(4.2) … where that assessment includes a tax increase, which is then immunized from judicial scrutiny.”
The Minister’s Motion to Quash
The Minister moved to quash Mr. Forrest’s appeal, arguing that the fourth notice of reassessment had been issued under subsection 152(4.2) to give effect to his adjustment requests, that no objection or appeal lies from a subsection 152(4.2) assessment, and that a valid notice of objection is a precondition to a valid appeal. On that view, Mr. Forrest’s appeal was invalid from the outset.
The Court disagreed, but only after working through several layers of the problem: which notice was actually before it, whether a proper notice of appeal had even been filed against that notice, and whether the notice in question was truly, and entirely, a subsection 152(4.2) assessment.
Only the Fourth Notice Survived, and a Notice of Appeal Was Found to Contest It
Relying on subsection 152(8) of the Income Tax Act, which deems each reassessment valid and binding until superseded, and on the line of authority represented by 684761 BC Ltd v R, 2015 TCC 288, the Court confirmed that the fourth notice superseded the third, which had in turn superseded the second and the first. The fourth notice was therefore the only assessment from which an appeal could be maintained; the earlier notices were nullities.
The Court also had to satisfy itself that a notice of appeal against the fourth notice was actually before it. Mr. Forrest’s notice of appeal, filed without the assistance of counsel, was, in the Court’s words, not a model of clarity. It expressly referred to the CRA’s August 29, 2025 decision and the capital gains issue, which the Court found sufficient to constitute an appeal against the third notice, though that notice’s supersession by the fourth meant this alone did not help him.
Attached to the notice of appeal, however, was a document referring specifically to the fourth notice, which the Court accepted as establishing that an appeal against the fourth notice was also properly before it. The Court noted that Mr. Forrest had made significant efforts throughout to preserve his rights, including filing and re-filing T1 adjustment requests and objecting to both the first and third notices.
Why the Fourth Notice Was Only Partly a Subsection 152(4.2) Reassessment
The Court applied the four-part test for identifying a subsection 152(4.2) assessment set out in Reyes v R, 2023 TCC 31, citing Groulx v The Queen, 2008 TCC 445, affirmed 2009 FCA 10: the reassessment must be issued after the normal reassessment period; for the purpose of determining a refund or a reduction in tax payable; on the taxpayer’s own application; made within ten years of the end of the taxation year.
The first and fourth criteria were plainly satisfied. The second criterion was where the analysis turned. On its face, the fourth notice reduced tax payable by allowing the attendant care credit. But the notice also carried forward the $12,000 increase in taxable capital gains from the third notice, and Mr. Forrest had never asked for his income to be increased. The question became whether subsection 152(4.2) can be used to increase tax at all, so long as some other part of the same reassessment reduces it.
Applying the textual, contextual, and purposive framework from Canada Trustco Mortgage Co v Canada, 2005 SCC 54, and Bell ExpressVu Limited Partnership v Canada (AG), 2002 SCC 42, the Court found the word “reassess” in paragraph 152(4.2)(a) ambiguous on its own, since it could describe either an upward or a downward adjustment. Read in context and in light of its purpose, however, the ambiguity resolved against the Crown’s position.
The 1991 Department of Finance technical notes describe the provision as giving the Minister discretion to reassess beyond the normal period only “in order to give the taxpayer a refund, or to reduce taxes payable.” Reading subsection 152(4.2) as permitting tax increases “notwithstanding” the restrictions in subsections 152(4), (4.1), and (5) would, in the Court’s view, create a loophole letting the CRA sidestep those restrictions entirely while also cutting off the taxpayer’s only means of challenging the result: an outcome the Court called an absurd interpretation of a remedial provision meant to help taxpayers, not disadvantage them.
As David J. Rotfleisch, a Certified Specialist in Taxation and the founding Canadian tax lawyer at Rotfleisch & Samulovitch LLP, observes, “Subsection 152(4.2) exists so a taxpayer who missed a deduction or a credit outside the normal reassessment period is not left without a remedy. It was never meant to hand the CRA a one-way ratchet that raises a taxpayer’s tax bill and then places that increase beyond the reach of any court.”
Distinguishing Morton: Why the Crown’s Best Authority Did Not Help
The Crown relied on Morton v R, 2014 TCC 72, where paragraph 17 refers to the Minister’s power under paragraph 152(4.2)(a) to “reassess” tax, interest, and penalties, language that does not, on its face, limit the Minister to reductions. The Court found this reliance misplaced. A closer reading of Morton showed that the gross negligence penalties at issue there were not actually grounded in subsection 152(4.2).
Rather, because the Court in Morton had found that a T1 adjustment request qualifies as a “return” for the purposes of subsection 163(2), a false statement in such a request could support a penalty assessment under the ordinary misrepresentation exception in paragraph 152(4)(a), which permits reassessment beyond the normal period on that separate basis. The Court in Forrest noted that if the Tax Court in Morton had truly considered the penalties to be a subsection 152(4.2) assessment, it would have quashed the appeal outright rather than deciding it on the merits, consistent with Groulx. The comment in paragraph 17 of Morton was, in any event, obiter, and Morton is itself an Informal Procedure decision without precedential weight.
Why No Further Notice of Objection Was Required
Having concluded that the fourth notice conformed to subsection 152(4.2) only with respect to the attendant care credit, and not with respect to the carried-forward capital gains increase, the Court turned to whether Mr. Forrest needed to have filed a fresh, separate objection to the fourth notice before he could appeal the capital gains portion of it. The Court held that he did not, because he had already objected to that exact issue twice: in his November 10, 2023 objection to the first notice, and again in his August 7, 2025 objection, which specifically addressed the capital gains reassessment and the third notice.
The $12,000 increase carried into the fourth notice was not a new position; it was the same disputed figure that had been the subject of live, validly filed objections throughout. Since that issue had never been resolved or abandoned, the objection precondition in subsection 169(1) was already satisfied, and no further objection needed to be filed before the matter could proceed to the Tax Court. The attendant care portion of the fourth notice, being a genuine subsection 152(4.2) adjustment, remained immune from objection and appeal in the ordinary way.
| Practice Point: Object to Every Reassessment, Every Time
Mr. Forrest’s ability to appeal survived only because the Tax Court was willing, after extensive analysis, to treat his earlier objections as carrying forward to the fourth notice. That outcome is not something any taxpayer should plan around. Our firm’s standing advice is to file a fresh notice of objection within 90 days of every reassessment that increases tax payable, regardless of whether the same issue was raised in a prior objection that remains unresolved. Filing costs little; missing the window can cost the entire right of appeal. |
The Court’s Disposition
The Minister’s motion to quash was dismissed. The fourth notice of reassessment was not solely a subsection 152(4.2) reassessment, because it reassessed income and tax above the amounts fixed by the second notice, the last reassessment that clearly did not depend on subsection 152(4.2) for its existence. Mr. Forrest was found to have a limited right to appeal the fourth notice, confined to restoring his gross, net, and taxable income to the amounts reassessed under the second notice, and nothing more.
The Court stopped short of summarily allowing the appeal outright, even though it observed there was no evident basis for the CRA to have increased Mr. Forrest’s income or tax beyond the second notice’s figures once the normal reassessment period had passed, and no misrepresentation had been pleaded to justify doing so. Out of concern for procedural fairness to both sides, the Court gave the parties thirty days from the date of the order to file a consent to judgment or to withdraw the appeal, failing which the matter would proceed to a hearing.
A Cautionary Postscript: Fabricated, AI-Generated Case Citations
Justice Ezri’s reasons close with a postscript of direct relevance to every self-represented litigant, and to the lawyers who oppose them. Mr. Forrest’s written submissions cited two cases that do not exist, apparently the product of an AI hallucination. When the Crown flagged the problem, Mr. Forrest attempted to file a wholesale replacement set of submissions weeks after the filing deadline, which the Crown opposed. The Court placed no weight on either version of the submissions, given their limited responsiveness to the technical issues at hand, but declined to award costs against Mr. Forrest despite the fabricated citations.
The Court’s own words are worth repeating in full for any practitioner or self-represented taxpayer relying on generative AI to prepare submissions: “AI is no substitute for real lawyering,” and while the fabricated cases in this instance did not attract a costs order, the Court was clear that “the cost consequences of filing such nonsense are real.” The lesson generalizes well beyond this case: any citation appearing in a submission to the Tax Court, whether generated by AI or found through conventional research, must be independently verified before it is filed.
What This Means for Taxpayers Facing Serial CRA Reassessments
Forrest v The King illustrates a procedural trap that is likely to recur as the CRA relies increasingly on automated and artificial intelligence-assisted review of adjustment requests, including in higher-volume compliance areas such as cryptocurrency reporting, where a rising number of reassessments and corresponding disputes can be expected. See our discussion of how the CRA is using AI to spearhead crypto tax audits and the role of the Voluntary Disclosures Program for further background.
The decision also underscores the importance of the distinction between capital gains and business income that so often drives a CRA reassessment in the first place. Where the characterization of a disposition is in dispute, taxpayers should consult the framework set out in our review of Stewart v Canada and the capital gains versus business income analysis, as well as our discussion of how the CRA recharacterizes capital gains as business income under the Happy Valley Farms and Stewart framework.
Taxpayers whose original filing error, as in Forrest, arises from defective tax preparation software rather than any intention to misstate their income should also be aware that the CRA and the courts draw a sharp line between an innocent, software-generated error and the wilful blindness or wilful default required to sustain a gross negligence penalty under subsection 163(2) of the Income Tax Act; our discussion of the Federal Court of Appeal decision vacating gross negligence penalties in Khanna v The Queen sets out that framework in more detail.
Where the underlying error might instead be corrected proactively, before the CRA reassesses at all, the CRA’s Voluntary Disclosures Program can in appropriate circumstances offer an alternative route to a corrected filing; our primer on tax evasion and filing a voluntary disclosure application explains the basic eligibility criteria. Businesses navigating parallel, overlapping compliance regimes, such as GST/HST registration requirements, face analogous risks when the CRA issues successive, inconsistent assessments for the same reporting period, and taxpayers with cross-border filing obligations encounter similar layered procedural complexity, discussed in our guide for digital nomads on Canadian tax residence and the sojourner rule.
Finally, taxpayers who are already the subject of a CRA audit that could culminate in a reassessment of this kind should review our guidance on how to survive a CRA tax audit for practical steps to protect their filing position before a dispute reaches this stage.
FAQs: Fairness Reassessments, Objections, and Appeals Under Subsection 152(4.2)
Can I object to a notice of reassessment issued under subsection 152(4.2)?
Generally, no. Subsections 165(1.2) and 169(2.2) of the Income Tax Act bar a taxpayer from objecting to, or appealing, a reassessment issued solely under subsection 152(4.2). As Forrest v The King confirms, that bar applies only to the extent the reassessment does no more than implement the relief the taxpayer actually requested.
Can subsection 152(4.2) be used to increase my tax payable?
No. The Tax Court in Forrest held that subsection 152(4.2) is a remedial, taxpayer-favourable provision that can only be used to determine a refund or reduce an amount payable, never to increase it, even where the same reassessment also grants the taxpayer some relief.
What happens if the CRA issues several contradictory reassessments for the same year?
Only the most recent reassessment remains in effect, since each new reassessment supersedes and nullifies the one before it under subsection 152(8) of the Income Tax Act. A taxpayer should nonetheless object to every reassessment that increases tax payable as it is issued, since earlier reassessments, and any decisions on the objections filed against them, can become moot once superseded.
Do I need to file a new objection every time the CRA reissues a reassessment on the same issue?
As a strict legal matter, not necessarily. Where a later reassessment simply restates or carries forward an amount that was already the subject of a live, validly filed objection, as in Forrest, a fresh objection to that same issue is not required before appealing. Our strong advice, however, is to file a new notice of objection within the 90-day deadline after every single reassessment that increases tax payable, without exception, and without relying on an earlier objection to carry the issue forward.
The outcome in Forrest was reached only after the Tax Court worked through a genuinely convoluted and contradictory sequence of CRA correspondence, including a CRA letter that flatly told the taxpayer he could not file a further objection, followed by an earlier letter that had invited him to do exactly that. No taxpayer should assume in advance that a court will sort out that kind of confusion in their favour. Objecting to every reassessment as it is issued, whether or not the issue was raised before, costs little and closes off the entire argument the Minister raised in this case.
Can the CRA rely on a taxpayer’s own adjustment request to justify increasing that taxpayer’s tax?
No. The Tax Court in Forrest made clear that a reassessment issued to implement a taxpayer’s adjustment request under subsection 152(4.2) cannot also be used as an opportunity to increase that taxpayer’s income or tax payable beyond what was already fixed by the last reassessment issued under ordinary assessing authority.
Is it safe to rely on AI-generated legal research when preparing Tax Court submissions?
No, not without independent verification. The postscript in Forrest involved submissions that cited two fabricated, non-existent cases, apparently generated by AI. While the Court did not award costs against the self-represented taxpayer in that instance, it expressly warned that filing fabricated case law carries real cost consequences and that AI is no substitute for genuine legal analysis.
Pro Tax Tips
Taxpayers who receive multiple, contradictory notices of reassessment for the same taxation year should not assume that only the most recent notice matters, nor should they assume that a reassessment invoking subsection 152(4.2) automatically forecloses an appeal. As Forrest v The King demonstrates, the correct approach is to object to every substantive reassessment that increases tax payable, within the ninety-day period that follows each one, without exception and regardless of whether the same issue was already the subject of an earlier objection.
A notice of appeal to the Tax Court should also clearly identify the specific notice of reassessment under dispute, ideally by attaching or referencing the notice itself, since the Tax Court in Forrest was prepared to look at the taxpayer’s supporting materials to confirm that the correct reassessment was properly before it, but only after scrutinizing a notice of appeal the Court itself described as lacking clarity.
Perhaps most importantly, a reassessment issued under subsection 152(4.2) is only immune from objection and appeal to the extent it does no more than implement the taxpayer’s own adjustment request; where the CRA uses the occasion of a subsection 152(4.2) reassessment to also increase the taxpayer’s income or tax payable, that additional increase remains open to challenge, but a taxpayer should never assume that an earlier, unresolved objection will be found to carry forward and excuse a fresh filing, since that argument succeeded in Forrest only after extensive judicial analysis of a confusing and contradictory CRA record.
As David J. Rotfleisch, a Certified Specialist in Taxation and the founding Canadian tax lawyer at Rotfleisch & Samulovitch LLP, observes, “When the CRA reverses itself multiple times on the same taxation year, taxpayers should not assume their appeal rights disappeared along with the earlier reassessments. The question that matters is not the label the CRA attaches to a reassessment, but what that reassessment actually changes in the taxpayer’s income and tax payable.” Any taxpayer facing a comparable sequence of reassessments should retain an experienced Canadian tax lawyer promptly, file a fresh notice of objection to every reassessment that increases tax payable as it arrives, and independently verify any legal research relied upon, whether prepared by counsel or generated by AI, before it is ever filed with the Court.
| Speak With a Canadian Tax Lawyer
If the CRA has issued multiple, contradictory notices of reassessment for the same taxation year, or if you are unsure whether a reassessment issued under subsection 152(4.2) of the Income Tax Act can be objected to or appealed, contact our office for a FREE 10-minute telephone consultation with a student-at-law (Canada only). |
Disclaimer
This article provides broad information. It is only accurate as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on as tax advice. Every tax scenario is unique to its circumstances and will differ from the instances described in this article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.
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