Extensive expertise allows SpenceDrake Tax Law to devise effective solutions for individuals and businesses. Below are a few select case studies…
We assisted a taxpayer with a second level review of their Taxpayer Relief Request. Originally, they completed the request on their own asking for penalty and interest relief. The Canada Revenue Agency (CRA) denied their request in full.
Following our submission of a request for a second level review, CRA reconsidered their original decision and agreed with our position. The taxpayer was provided relief from all penalties and interest as we had requested.
We filed a notice of objection on behalf of our client arguing that the Canada Revenue Agency’s audit decision was incorrect. CRA claimed our client had unreported cryptocurrency capital gains and assessed an extremely high gross negligence penalty. Our objection was allowed in full, with the removal of over $100,000 of capital gains and the deletion of a gross negligence penalty of over $375,000.
As a result of an audit, CRA readjusted the majority of our client’s filing position substantially increasing the tax owing. With a Tax Court Appeal we were able to reverse ~50% of CRA’s reassessments.
A client’s successful business was subjected to a Net Worth Audit, which the Tax Court of Canada refers to as a “blunt instrument.”
The business accounting books and records were in poor shape and the client used bank accounts for both personal and business transactions, in significant amounts. The auditor reviewed the client’s records and bank accounts and decided to assume that all business income that flowed through a personal account was attributed directly to her. She reported $70,000 in income that year.
Nevertheless, CRA increased her personal income by over $2,600,000, relying on the assumption that all the funds that streamed in and out of a personal account were paid directly to her. Any experienced Tax Lawyer or Accountant will tell you that punitive inflated audit outcomes such as this are not uncommon, especially if the taxpayer is unrepresented.
A Tax Lawyer disputed the Net Worth Audit tax assessment. A Notice of Objection was filed in an effort to convince a CRA Appeals Officer that the auditor’s accounting was indefensible in court.
If the inflated assessment wasn’t appealed, the client would have lost her business due to CRA collections actions making it impossible for her to function (e.g. seizing bank accounts or operating lines of credit). Or she would have been forced into bankruptcy. Either way a successful business and jobs would have been destroyed for naught.
Our client was assessed GST/HST for approximately $250,000. They were surprised by the assessments and apparently did not receive related letters from CRA. With an extension request, we were able to dispute the inflated assessments by filing a Notice of Objection, which was accepted in full by CRA.
A United States Financial Technology (Fintech) corporation with $2B in assets sought a legal opinion on the tax implications related to a Canadian entity. Research was conducted accordingly and eventually we created and implemented the Canadian corporation.
A Director of a corporation can be held jointly liable for tax debts of the corporation under certain conditions. One being that a Director must be assessed within 2 years of resignation.
In this case, a client received a +$500,000 Director Liability assessment warning from CRA. However, he claimed to have resigned from the corporation more than 2 years prior. When the dispute began he was unrepresented and when he approached us for a consultation, CRA was in the process of officially assessing him for the debt per a Director Liability assessment.
Once retained, we immediately requested additional time to provide our rebuttal to the threatened assessment. We subsequently reviewed the facts and related documents provided by the client and the disclosure provided by CRA upon request. We were able to prove that the client had resigned more than 2 years prior and could not be held liable for the outstanding debt of the corporation.
CRA has been targeting subcontractor expenses. A CRA auditor denied 100% of our client’s Input Tax Credits for GST/HST paid on subcontractor expenses and applied Gross Negligence Penalties. With a Notice of Objection we recovered $555,932.62 of $684,890.81 including removal of the Gross Negligence Penalties. With a second Notice of Objection we recovered approximately 90% of the outstanding Input Tax Credits.
The corporation conducted innovative work but a significant portion of their SR&ED tax credit claim was denied in this particular year. The client was technically advanced and handled the audit without representation. However, about 50% of their claim was denied after audit.
We were retained to appeal the SR&ED claim denial in the Tax Court of Canada. To do that we first filed a Notice of Objection and 90 days following we filed a Tax Court Appeal. We drafted and submitted highly technical pleadings and the appeal was settled early. In subsequent years, the client’s SR&ED tax credit claims were accepted as filed without audit.
A Director of a corporation can be held liable for tax debts of a corporation under certain conditions. One being that a Director must be assessed within 2 years of resignation. In this case, CRA had already assessed the former Director for the outstanding tax debt of the corporation.
Therefore, it was necessary to file a Notice of Objection in order to dispute the assessment with a CRA Appeals Officer. We were able to establish that our client was no longer a Director of the corporation using various legal arguments and supporting evidence.
The client, who resided in Europe but had lived in Canada for a period, failed to report Canadian source income for many years, including from multiple investments with a Canadian bank. He also received child tax benefits as a non-resident of Canada. We filed a detailed voluntary disclosure application and requested 90-days to file the requisite tax returns and a payment plan for the tax owing. The disclosure was accepted under the General program which ensured no financial penalties (50% of the tax owing) as well as no criminal penalties and partial interest relief for the tax owing.
CRA has been targeting subcontractor expenses. A CRA auditor denied 100% of our client’s Input Tax Credits for GST/HST paid on subcontractor expenses. With two Notices of Objection we recovered about 95% of the Input Tax Credits. Below is a result of the second Notice of Objection.
Our client filed a series of personal tax returns late including those due during the COVID-19 Pandemic. CRA assessed the taxpayer penalties and interest on the late filings. We assisted the taxpayer with a taxpayer relief request explaining the reason for the late filing and the justification for the deletion of penalties and interest under the Taxpayer Relief rules. We were successful in having all penalties and interest reversed saving our client over $45,000.
We assisted a taxpayer who was penalized by CRA for not filing his T1135 offshore verification form for the 2021 tax year. Following our taxpayer relief submission, the penalty and associated interest were cancelled in full.