On December 9, 2016, the Supreme Court of Canada released its decision in AG (Canada) v. Fairmont Hotels Inc. (2016 SCC 56) in which the Court modified the common law test for rectification where the taxpayer has suffered an unintended and adverse tax result.
A general intent to avoid or minimize tax is no longer sufficient to support an application for rectification.
The Court also clarified the standard of proof in respect of evidence of the parties’ intent on a rectification application.
The implications of the Supreme Court’s decision in Fairmont are far-reaching, as the Court has significantly changed the threshold requirements for granting rectification in tax cases.
Tax professionals should consider this decision carefully with a view to appreciating the newly-restated test for tax rectifications in determining the appropriate manner for correcting mistakes that result in unintended and adverse tax consequences.
A more thorough analysis and a detailed summary of this decision on our Canadian Tax Litigation blog.