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Published: November 12, 2021

Last Updated: November 12, 2021



In 4431472 Canada Inc v Canada (Attorney General), 2021 FC 812, the Federal Court reviewed the Canada Revenue Agency’s decision to not process the amended tax returns filed by the corporate applicant for its 2008 to 2011 taxation years. The Court was asked to determine whether the Agency’s decision was reasonable and whether to set aside the Agency’s decision.




Although there are several parties involved in this case, we shall distill the facts of the case to their bare bones.


4431472 Canada Inc. (“443 Inc.”) is a holding company with one shareholder, Mr. Ludmer, and no operating business. 443 Inc. is one of the beneficiaries of a trust called Thames Trust. The Trust receives payments from a Bermuda-based corporation called GAM Ltd. Based on the payments received from the Bermuda-based GAM Ltd, Thames Trust would then make distributions of the trust property to the beneficiaries, including 443 Inc. From 2008 to 2011, and in 2014 and 2015, Thames Trust made distributions totaling nearly $17.63 million to its beneficiaries, including 443 Inc.


For the 2008 to 2011 taxation years, 443 Inc. filed its T2 tax returns and reported the distributions it received from the Trust as taxable income. The Canada Revenue Agency (CRA) then assessed the corporation based on its submitted filing position and the corporation never objected to the assessments that were issued for the years in question. This all changed in November 2010 when 443 Inc. discovered that it had mischaracterized the distribution. Rather than reporting the distribution as taxable income, it realized that it should have reported the distribution as non-taxable voluntary payments. Consequently, 443 Inc. proceeded to file requests for refunds and submitted amended T2 tax returns for the 2008 to 2010 taxation years, holding that the distribution it received from the Trust was not considered income from a source under the Canadian Income Tax Act. Because 443 Inc. never heard back from the CRA regarding its amended returns for the 2008 to 2010 taxation years, it decided to report the income it received from the Trust as taxable income for the 2011 taxation year as a cautionary measure. In June 2012, the corporation submitted a request for a refund and an amended return. Through the amended returns, the sum of the refunds claimed by 443 Inc. for the 2008 to 2011 taxation years totalled nearly $2.8 million.

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From 2012 to 2014, 443 Inc. regularly followed up with the CRA to see if the Agency has granted or denied its request for refunds for the 2008 to 2011 taxation years. However, the CRA did not respond to the corporation’s requests in a timely manner nor did the Agency issue new notices of assessment for the applicable years in question.


Finally, on May 26th, 2014, the CRA sent Mr. Ludmer a proposal letter notifying him that the Agency considered the payments received by Thames Trust from the Bermuda-based corporation, GAM Ltd, as income from property or business for the purposes the Income Tax Act. Thereafter, a series of exchanges occurred between 443 Inc. and the CRA. This ultimately led to the CRA to issue a proposal letter on July 6th, 2017, where the tax agency held that the distributions received by the corporation were taxable receipts and therefore, the CRA was disallowing the deductions claimed by the Trust for the 2011 taxation and subsequent years. This in turn affected the amended returns filed by 443 Inc. The proposal letter also provided that the CRA would not decide whether to grant 443 Inc.’s requests for refunds and processing of its amended returns until a “final and appealable” determination has been made (presumably by the Tax Court) regarding the payments Thames Trust received in 2011 and onwards.


On February 20th, 2019, 443 Inc. filed an application seeking an order of mandamus to push the CRA to determine the corporation’s tax liability for the 2008 to 2011 taxation years. This then led to the CRA to issue a decision letter on May 7th, 2019 where the CRA stated that corporation’s initial filing position of treating the payments from the Trust as income was the correct position at law, that the CRA was not obliged to process the amended returns, and that the CRA was to “postpone its final decision” on the amended returns until a final resolution of all related tax matters has been reached, but that the Agency decided to render a “final decision on the [a]mended returns, that is, not to reassess 443 Inc.” As can be seen, the CRA’s letter is unclear as to whether the Agency was rendering a final decision.

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As the Federal Court was asked to review the CRA’s May 7th, 2019 decision, the standard of review that the Court adopted was reasonableness as there was no particular reason to warrant departure from this standard. The Court held that the way the CRA drafted its decision letter was unclear and subject to two different interpretations. As such, the Court ruled that the CRA’s decision was unreasonable and must be set aside. The Court explained that the letter was unclear as to whether the CRA was definitively refusing to reassess 443 Inc. or whether the Agency was simply cementing its earlier proposal to postpone rendering a decision on whether to process 443 Inc.’s amended returns until the Tax Court addressed the payment issue.



This case highlights that if a taxpayer receives a decision from the CRA that is ambiguous and open to different interpretations, the CRA’s decision may be found unreasonable and may be set aside. In this case, because the CRA did not convincingly render a final decision, the corporate taxpayer was unable to receive a notice of reassessment. Receiving such a notice is important because taxpayers who disagree with the CRA’s notice of assessment or reassessment have 90 days from the date of issue of the notice to appeal the decision by filing a notice of objection. Speak to one of our experienced Canadian tax lawyers to better understand the avenues that are available to you should you find yourself in any dispute with CRA.


"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."


Judicial review refers to the process whereby courts review the decisions rendered by an administrative tribunal or decision maker, such as the Canada Revenue Agency, to ensure that the decisions made by the administrative body are fair, reasonable, and lawful.  A judicial review, however, is not an appeal. Therefore, a judicial review is not an opportunity to re-argue a case. The aim of a judicial review is to see whether the administrative decision-maker, CRA in this case, has properly exercised its decision-making powers.

When a taxpayer submits a tax return, one of the duties of the CRA is to examine the return and determine the tax and interest and penalty, if any, payable. Once the CRA completes this examination, a notice of assessment is issued to the taxpayer.  If the CRA requires more information from the taxpayer, the CRA then undertakes another review or a tax audit, and issues a notice of reassessment upon completion. The notice of reassessment then replaces the notice of assessment.

If taxpayers disagree with the tax liability set out in their notice of tax assessment or tax reassessment, taxpayers have 90 days to file an appeal called a notice of objection from the date of issue of the tax assessment or tax reassessment.

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