by Marc Weisman & Alison Ronson of Torkin Manes LLP

Viewers of detective dramas know that accused persons refuse to speak without their lawyer present. A visit from a Canada Revenue Agency (“CRA”) auditor may not be quite as dramatic but the consequences can be drastic. Let’s create our own fictional case to see why.

Imagine a client of mine, who we will call “Bart,” owns all of the shares of a corporation that builds and sells condominiums. Ever since his mother “Marge” kicked his father “Homer” out of the house, Bart has been letting his dad stay in one of the unsold, unoccupied condominiums in his newest development. Since Marge has the family car, Bart also gave Homer a company vehicle to keep.

It seems like an ideal situation for all parties: Bart is doing a good deed for his father, Marge has the house to herself and Homer has a free place to stay and free transportation. Unfortunately, one day the CRA calls Bart to tell him that they will be auditing his corporation. Regrettably, Bart fails to inform me of the upcoming audit.

by Marc Weisman of Torkin Manes LLP

As part of my tax and estates practice, I frequently advise executors on tax and estates matters. The recent decision of the Federal Court of Canada in Rosenberg Estate v. Canada (National Revenue) 2011 DTC 5075 highlights the importance of filing final tax returns on time to avoid penalties to the estate.

This was not a simple estate. Mr. Rosenberg passed away on June 14, 2003 without a Will and therefore without an executor. The court appointed a liquidator (Quebec term for estate trustee) on November 3, 2003. The heirs were in dispute. There was also an undeclared offshore bank account that ultimately resulted in a voluntary disclosure. The liquidator had instructed Mr. Rosenberg’s accountant to prepare and file the terminal return and remit a payment on account of the tax owing. The accountant failed to file the terminal return on time and the liquidator appointed a new accountant. Neither the liquidator nor the accountant had sufficient information to determine the precise amount of tax owing by the filing deadline of the terminal return. Further, the liquidator had to deal with all of the complications of an intestacy and disputes between the heirs.