The Minister assessed Part XI.1 tax on the appellant RRSP (“Grenon RRSP”), which held non-qualified investments, computed at 1% of the non-qualified investments' acquisition date value. However, by virtue of s. 146(10), Part XI.1 tax did not apply where the acquisition date value was included in the income of the annuitant (Grenon). This was not done because he had not reported such amounts, and those years became statute-bared. Although the Crown accepted that the Minister did not have a choice as to whether to assess the annuitant pursuant to s. 146(10) or the RRSP pursuant to s. 207.1(1), the Crown indicated that no amount "was included in the annuitant's income," as required for the exception from Part XI.1 tax to apply, so that such assessment of Part XI.1 tax could be made.
In rejecting this position, Monaghan JA noted (at para. 303) that s. 56(1) provides that "there shall be included in computing the income of a taxpayer for a taxation year" the amount described in that section, including "amounts required by section 146 in respect of a [RRSP] … to be included in computing the taxpayer's income for the year," and s. 146(10), in turn, stated that where an RRSP acquired a non-qualified investment, the acquisition date value "shall be included in computing the income for the year of the taxpayer who is the annuitant." She stated (at para. 304) that such language thus “mandates” the inclusion in the annuitant’s income irrespective of whether such income was reported or assessed by the annuitant.
Furthermore, the Grenon RRSP had neither participated in, nor had a right to participate in, how Mr. Grenon reported his income nor how the Minister assessed Mr. Grenon's returns. Thus, for purposes of determining its tax liability, Grenon RRSP could not be bound by the income Mr. Grenon reported, nor by the basis on which the Minister assessed Mr. Grenon's returns.
Accordingly, to challenge its Part XI.1 assessment, Grenon RRSP was entitled to attack the correctness of the facts underlying Mr. Grenon's assessments. As the acquisition date value was included in Mr. Grenon's income under s. 146(10), the Part XI.1 tax exception was available to the Grenon RRSP.