October 15, 2012
When it comes to tax matters and mistakes, the question is, can a taxpayer fix the error?
Under Canadian law, taxpayers are taxed on their actual legal relationships and transactions, not on what they intend those to be. In an appeal of a tax assessment, the tax court determines the correctness of the assessment and not its fairness or appropriateness.
However, because taxpayers make mistakes, a question arises as to how, if at all, a taxpayer can fix mistakes that have produced an unintended tax result.
One solution is to seek a rectification order, which is an equitable remedy granted by a provincial superior court that can retroactively correct mistakes in documents that don’t accord with the parties’ agreement. However, a court will generally only grant rectification where the applicant can show that the parties to an agreement had a common and continuing intention, and that the written instrument does not reflect the true agreement of the parties.
To read the full article, please visit the CA Magazine website.