CaseNotes for February, 2020

Robitaille v. The Queen, 2019 TCC 200 by Jason Lau

Facts

During 2016, Mr. Robitaille received a $40,000 cheque from his wholly-owned corporation, and Mr. Robitaille intended this amount to be a management fee includable in his income. On July 21, 2016, Mr. Robitaille went to an automated teller machine to deposit the cheque. In his haste to get the matter over with, Mr. Robitaille inadvertently selected his TFSA as the recipient account. The error went unnoticed until June 14, 2017, when a CRA official notified Mr. Robitaille that his TFSA was in an over-contributed state by $39,500 and that a withdrawal of $29,000 would have to be made in order to bring the account into compliance. Robitaille immediately withdrew $29,000 from the TFSA the same day. The Minister issued an assessment in respect of Mr. Robitaille's 2016 taxation year for $2,370 on the over-contribution amount under Part XI.01 of the Act. Issue

Was the Minister correct in issuing an assessment to Mr. Robitaille under Part XI.01 of the Act in respect of the TFSA over-contribution, even though it was inadvertent and the amount was withdrawn immediately after the error was discovered?

Decision

The court found in favour of the Minister, and Mr. Robitaille's claim was dismissed.

Ratio

Mr. Robitaille's inadvertent deposit to his TFSA caused him to have an "excess TFSA amount" as defined under subsection 207.01(1) of the Act. Section 207.02 of the Act imposes a 1% tax on the highest excess amount of the month, per month, until the excess amounts are withdrawn from the account.

The Minister's assessment of Part XI.01 tax was purely mechanical in nature. As none of the facts of the case were in dispute, nor was the Minister's application of the Act called into question, the court had no choice but to dismiss Mr. Robitaille's claim.

Takeaway

As noted by the Minister's counsel, the Tax Court of Canada had no ability to provide relief in respect of the Part XI.01 assessment. Mr. Robitaille's correct avenue of recourse would have been to apply for a cancellation of tax under subsection 207.06(1) of the Act.

Subsection 207.06(1) of the Act allows for the Minister to provide administrative relief and waive or cancel taxes assessed under Part XI.01 if the taxpayer can demonstrate i) the tax liability arose "as a consequence of a reasonable error" and ii) the excess amounts were withdrawn from the TFSA without delay. Note that if a person applies for relief under subsection 207.06(1) of the...