Greenstreet v. HMQ 2019 TCC 237

Greenstreet Tax Court Decision Link

Decision & Analysis

This Tax Court decision involves investment income that the taxpayer did not believe was taxable because the CRA advised him back in the 1960’s that it was not taxable. Let’s look at the facts of the case.

Sunlife Insurance Policy

Sunlife issued a T5 indicating that the Appellant had $22,337.52 in other income from Canadian sources in 2016 and the Appellant acknowledged receiving $27,090 from Sunlife in 2016. The Appellant’s position was that regardless of the correct amount to be included on his return, no amount from Sunlife was taxable to him.  The Appellant’s argument was predicated on a series of events occurring some 50 years ago.

The Appellant testified that he bought an insurance policy with Sunlife in 1965.  His understanding was that the policy possessed an insurance component and an investment component, and he testified that the insurance salesperson advised him that the policy was not taxable.  The Appellant also testified that the CRA (then Revenue Canada) also told him over the phone that life insurance policies were not taxable.  The discrepancy between what the Appellant acknowledged receiving and the different amount on the T5 also supported this notion, since it seemed Sunlife was only reporting what it believed to be the taxable portion of the policy.

Justice Graham explained the complicated nature of insurance taxation in his reasons.  He surmised that the Appellant may have purchased a ‘whole life’ policy, since in the 1960’s the investment component of whole life policies was generally not taxable.  The rules did however change in 1970:

 However, new rules for the taxation of whole life policies came into effect in 1970. In simple terms, the new rules treated a policyholder who surrendered his or her policy as having disposed of the policy. The modern equivalent of those rules is found in paragraph 56(1)(j) and subsection 148(1) of the Act. The rules require the policyholder to report the difference between the proceeds he or she receives and the adjusted cost base of the policy (being the excess of the premiums he or she had paid over the cost of pure insurance) in his or her income. (paragraph 7)

Justice Graham found that the amount was nevertheless taxable because a) he had no evidence before him regarding the terms of the Sunlife policy and b) Sunlife itself characterized the amount as taxable.

Other Income

The Minister also pleaded that the Appellant failed to report $545 in interest income, $6 in foreign non-business income, $9 in taxable capital gains, $1,144 in dividend income and $138 in other income in 2016. The Appellant argued that a) he did not receive the T-slips in question b) the T-slips were issued after the statutory deadline for issuing them c) amounts reported on many of the T-slips had already been covered on other T-slips and d) many of the T-slips were not for investments that he had made.

The Appellant’s strongest argument was that he did not receive the slips.  But as Justice Graham found, receipt is a relevant factor only to determine if the Appellant should be penalized and not whether he earned the income, since taxpayer must pay tax on their income whether they receive a T-slip for it or not.  All arguments were dealt with by Justice Graham and were summarily dismissed.

Omission Penalty

Subsection 163(1) provides for a strict liability penalty where a taxpayer repeatedly fails to report income.  The repeat omission penalty can be applied if the following conditions are met:

  • there was unreported income of at least $500 in the year for which the penalties are to be applied;
  • the taxpayer has not been assessed a gross negligence penalty under subsection 163(2) in respect of that unreported income;
  • there was unreported income of at least $500 in one of the taxpayer’s three preceding taxation years;
  • the taxpayer does not prove that he or she exercised due diligence in filing his or her tax return for the year for which the penalties are to be applied; and
  • the taxpayer does not prove that he or she exercised due diligence in filing his or her tax return for each preceding year for which the Respondent proves there was unreported income.

Justice Graham found that all conditions had been satisfied and that the Appellant was, therefore, liable to the penalty.  The Appellant had failed to report investment income in the past and failed to establish due diligence.  Importantly, the Appellant did not provide a plausible explanation as to why such a large number of slips from a variety of different investments would all have failed to be delivered year after year. In the circumstances “… a diligent taxpayer would have kept track of his or her investments, known which T-slips he or she should have been receiving and taken precautions to ensure that he or she had all of those slips before filing his or her return. Mr. Greenstreet took no such steps.” (paragraph 32)


First, keep in mind that the Judge makes clear that a taxpayer must pay tax in investment income, even if they do not receive a T slip.  Second, if the taxpayer intends to argue that an amount is not taxable, bring some evidence about that amount to Court.  Here, the Judge said he did not have any evidence before him about the terms of the Sunlife Policy.

Call Ummat Tax Law to resolve your tax disputes (905) 336-8924.