In 2001, the first taxpayer transferred the commuted value of his entitlements under his registered pension plan to a new pension plan established by a newly-incorporated corporation which was to employ him as its only employee in a start-up business. The new business was unsuccessful, and the taxpayer only received (at most) modest employment income before the business was discontinued.
The Minister revoked the new pension plan retroactively, and added the transferred amount to the taxpayer's income for 2001, on the basis that the primary purpose of the new plan was to shelter, under s. 147.3, the transfer out of the old plan rather than to generate periodic pension benefits in respect of the services of an employee, as required by Reg. 8502(a). The reassessment was made beyond the normal reassessment period on the basis that the taxpayer (1) misrepresented to CRA the facts upon which the registration of the new plan rested, and (2) two years later, untruthfully responded to questions from CRA on audit.
Bocock J allowed the taxpayer's appeal. He reasonably intended at the time of registration in 2001 to satisfy the requirements of Reg. 8502(a).
Furthermore, his 2003 misrepresentations (made on his behalf by agents) did not open up the 2001 year for reassessment (paras. 57, 58):
[T]he misrepresentation (whether in a return or in the supply of information) affording a reassessment beyond the normal reassessment period must reasonably be regarded as relating to a return or information applicable to the reassessed tax year. Misrepresentations reasonably related to a period subsequent cannot be regarded as extending, by virtue of the limitation in subsection 152(4.01) of the Act, reassessment rights to a previous taxation year otherwise beyond normal reassessment where such facts do not relate to the basis upon which registration rested. ...
To do otherwise creates a "time machine" effect where then current statements about facts in 2003 may be applied to years and bases for decisions which are outside the normal reassessment periods notwithstanding that reasonable beliefs held and facts available in 2001 had not yet been blessed with the corrective certainty of the fullness of time.
Essentially the same approach was applied to similar facts respecting the other two taxpayers.