On December 15, 1996 the taxpayer exchanged common shares of a company for preferred shares, of the company, and on December 20, 1996 the company redeemed a portion of the preferred shares. The taxpayer provided a waiver in respect of the first (share exchange) transaction and the Minister assessed the taxpayer under s. 86(2) in respect of that transaction. Following the filing by the taxpayer of a Notice of Objection to that reassessment, the Minister then determined that s. 86(2) did not apply to the first transaction and that s. 84(3) instead applied to deem the taxpayer to have received a dividend under the subsequent share redemption; and purported (well beyond the normal reassessment period) to reassess the taxpayer a second time on that basis.
In finding that the second reassessment was invalid, Rip J. stated (at para. 13):
"It is quite clear that the Minister cannot base a reassessment on a substantive issue that is not specified in a waiver or cannot be regarded as relating to the substantive issue that is specified in the waiver."