Principal Issues: Whether refund interest should be added into income.
Position: Yes
Reasons: Legislation. Under paragraph 12(1)(c) of the Act any amount received or receivable by a taxpayer in the year as, on account of, in lieu of payment or in satisfaction of, interest has to be included into a taxpayer's income.
January 14, 2013
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your correspondence about your income tax affairs and those of the estate of your late father, XXXXXXXXXX. I can give you the following confidential information because you are the executor of the estate. I apologize for the delay in responding.
I regret that you are displeased with the time the Canada Revenue Agency (CRA) took to review your objection. You filed your objection in XXXXXXXXXX. In its letter of May 21, 2008, the Appeals Division of the XXXXXXXXXX Tax Services Office informed you that your file would be assigned to an appeals officer for review in six to nine months. As part of its review, the Appeals Division sought expert advice on the evaluation of the fair market value of your late father's property, which took some time to be completed. The CRA confirmed its decision in a notice of confirmation dated August 17, 2010.
You filed an appeal with the Tax Court of Canada in XXXXXXXXXX. On XXXXXXXXXX, the Tax Court rendered a judgement. Following the judgement, the CRA reassessed the XXXXXXXXXX income tax and benefit return on XXXXXXXXXX, according to the terms of the consent to judgment. I am satisfied that the CRA made every effort to handle your case promptly.
The CRA will review your late father's return to decide if it can consider providing any relief on the interest charged on the XXXXXXXXXX tax debt. The Income Tax Act gives CRA officials the discretion to waive or cancel all or part of the interest and penalties charged to a tax account. Officials generally exercise this discretion when taxpayers have not complied with of the Act because of circumstances beyond their control or because of CRA errors or delays.
If you have questions about the review, I invite you to contact XXXXXXXXXX, an appeals officer at the XXXXXXXXXX Tax Services Office, by writing to XXXXXXXXXX, or by calling XXXXXXXXXX. XXXXXXXXXX is aware of our correspondence and will be pleased to assist you.
You wrote about having to add to taxable income the refund interest received on the adjustment in the year it was received. Under paragraph 12(1)(c) of the Act, any interest received or receivable by a taxpayer in a tax year has to be included in the taxpayer's income for that tax year.
I trust that the information I have provided is helpful.
Yours sincerely,
Gail Shea, P.C., M.P.
c.c.: XXXXXXXXXX
XXXXXXXXXX Tax Services Office