,canada ,cu/oms & ,rev5ue ,ag5cy ,9=m,n ,circul> ,,ic#ja-a ,?ird-,"py ,civil ,p5alties ,9 "o volume ,pr9t pages #a-ag ,brl pages ;i-;v & #a-hg ,9dex ,brl page ,9=m,n ,circul> """"""""""""""""""""" #a ,3t5ts """""""""""""""""""""""""""""" #a ,=e^w """"""""""""""""""""""""""""""" #e ,9troduc;n """""""""""""""""""""""""" #f ,! ,law """"""""""""""""""""""""""""" #h 8,plann] ,p5alty0 """""""""""""""" #aj 8,plann] ,p5alty0 ,am.t """""""""" #aa 8,prep>] ,p5alty0 """""""""""""""" #aa 8,prep>] ,p5alty0 ,am.t """""""""" #ab ,applic,n (! ,legisl,n """"""""""""" #ae ,9t]pret,n & ,4cus.n """"""""""""""" #ah ,p]son """"""""""""""""""""""""""" #ah ,false ,/ate;t """"""""""""""""""" #ai ,/ate;t """""""""""""""""""""""""" #bj ,culpa# ,3duct """"""""""""""""""" #ba ,tantam.t 6,9t5;nal ,3duct """"""" #bb ,9di6];e """"""""""""""""""""""""" #bc ,wil;l1 ,reck.s1 or ,wanton ,4reg>d (! ,law """""""""""""""" #bd ,"picipate """"""""""""""""""""""" #be ,subord9ate """""""""""""""""""""" #be ,cl]ical or ,secret>ial ,s]vices #bg ,9dex ,gd ,fai? ,reli.e """""""""""""""" #bh ,exclud$ ,activ;y """""""""""""""" #cj ,gross ,5title;ts """""""""""""""" #ca ,two or ,m ,false ,/ate;ts """"""" #cb ,special ,rules = ,valu,n ,activities """""""""""""""""""" #cc ,rev]se ,onus ,rule """""""""""""" #cf ,multiple ,assess;ts """"""""""""" #cg ,exemp;n = ,employees """""""""""" #da ,burd5 ( ,pro( """"""""""""""""""" #dc ,o!r ,issues """"""""""""""""""""""" #dd ,profes.nal ,/&>ds & ,t]ms ( ,5gage;t """"""""""""""""""""""" #dd ,guid.e 6,practi;n]s """"""""""""" #df ,false ,/ate;ts 9 ,prior ,ye>s """ #dg ,p]sons ,subject 6,p5alties """""" #di ,price ,adju/;t ,clause """""""""" #ej ,notices ( ,objec;n & ,app1ls 6! ,c\rt """""""""""""""""""""""""" #eb ,! ,g5]al ,anti-,avoid.e ,rule """ #ec ,non-,resid5ts ;iii """"""""""""""""""" #ed ,process """"""""""""""""""""""""""" #ed ,p]iodic ,update """"""""""""""""""" #ei ;iv ,9dex ,app5dix--,examples """""""""""""""" #ei ,situ,ns ,": ! ,p5alty ,wd ,g5],y ,n ,apply """""""""""""""""""""""" #ei ,example #a3 ,gd ,fai? ,reli.e on ,cli5t's ,9=m,n """"""""""" #ei ,example #b3 ,reli.e on ,9=m,n ,provid$ 0,ano!r ,profes.nal #fa ,example #c3 ,h"o/ ,]ror """"""" #fb ,example #d3 ,reconcil+ ,9consi/5t ,9=m,n """""""""""" #fc ,example #e3 ,foll[+ ,,ccra ,adm9i/rative ,policy """""""" #fd ,example #f3 ,mak+ ,su6ici5t ,9quiries """""""""""""""""""" #ff ,example #g3 ,4cus.n ,reg>d+ ,volunt>y ,4closure """""""""" #fh ,situ,ns ,": ! ,p5alty ,cd ,apply "" #fi ,3duct ,t ,is ,tantam.t 6,9t5;nal ,3duct """"""""""""""" #fi ,example #h3 ,delib]ate ,ov]- ,valu,n 9 a ,tax ,%elt]-,l ,>range;t """""""""""""""""""" #fi ;v ,9dex ,example #i3 ,delib]ate ,ov]- ,valu,n 9 an ,abusive ,tax ,%elt] """"""""""""""""""""""" #ga ,example #aj3 ,promo;n ,9volv+ a ,false ,/ate;t """"""""""""" #gc ,example #aa3 ,promot+ ,non- ,compli.e ,)! ,,eta """""""""" #gd ,3duct ,: ,describes an ,9di6];e z 6,:e!r ,"! ,is ,-pli.e ,)! ,legisl,n """""""""""""""""""""" #gf ,example #ab3 ,9di6];e ,:5 ,"! ,is a ,lack ( ,9=m,n ,submitt$ """""""""""""""""""" #gf ,example #ac3 ,9=m,n a ,tax ,prep>] ,is ,r1sonably ,expect$ 6,"k """""""""""""""" #gg ,example #ad3 ,delib]ately ,ov]/at$ ,tax ,cr$its """""""" #gi ,3duct ,demon/rat+ a ,wil;l1 ,reck.s1 or ,wanton ,4reg>d (! ,law """"""""""""""""""""""""""" #hj ,example #ae3 ,ignor+ a ,c\rt ;vi ,deci.n """""""""""""""""""""" #hj ;vii ,9dex ,example #af3 ,9di6];e ,reg>d+ ,p]sonal ,exp5ses ,claim$ z ,busi;s ,exp5ses """"""""""""" #ha ,example #ag3 ,9come ,splitt+ ,:5 ,s]vices ,>e ,n ,r5d]$ """ #hc ,example #ah3 ,possi# ,wil;l ,bl;s """""""""""""""""""""""" #hd ;viii ;ix ,canada ,cu/oms #a & ,rev5ue ,ag5cy ,9=m,n ,circul> ,numb]3 ,,ic #ja-a ,date3 ,septemb] #ah1 #bjja ,subject3 ,?ird-,"py ,civil ,p5alties ,y c f9d 9=m,n & mo/ ( \r public,ns on \r ,web site at _+www.ccra.gc.ca_:4 ,3t5ts ,=e^w ,9troduc;n 7#a-d7 ,! ,law 7#e-f7 8,plann] ,p5alty0 7#g7 8,plann] ,p5alty0 ,am.t 7#h7 8,prep>] ,p5alty0 7#i7 8,prep>] ,p5alty0 ,am.t 7#aj-ab7 ,applic,n (! ,legisl,n 7#ac-ai7 ,9t]pret,n & ,4cus.n ,p]son 7#bj-ba7 ,false ,/ate;t 7#bb7 ,3t5ts a#a ,/ate;t 7#bc7 ,culpa# ,3duct 7#bd7 ,tantam.t 6,9t5;nal ,3duct 7#be7 ,9di6];e 7#bf-bg7 ,wil;l1 ,reck.s1 or ,wanton ,4reg>d (! ,law 7#bh7 ,"picipate 7#bi7 ,subord9ate 7#cj-ca7 ,cl]ical or ,secret>ial ,s]vices 7#cb-cc7 ,gd ,fai? ,reli.e 7#cd-cf7 ,exclud$ ,activ;y 7#cg-ci7 ,gross ,5title;ts 7#dj7 ,two or ,m ,false ,/ate;ts 7#da7 ,special ,rules = ,valu,n ,activities 7#db-dg7 ,rev]se ,onus ,rule 7#dh-di7 ,multiple ,assess;ts 7#ej-ef7 ,exemp;n = ,employees 7#eg-ei7 ,burd5 ( ,pro( 7#fj7 ,o!r ,issues ,profes.nal ,/&>ds & ,t]ms ( ,5gage;t 7#fa-fd7 ,guid.e 6,practi;n]s 7#fe-ff7 ,3t5ts b#a ,false ,/ate;ts 9 ,prior ,ye>s 7#fg7 ,p]sons ,subject 6,p5alties 7#fh-fi7 ,price ,adju/;t ,clause 7#gj-gc7 ,notices ( ,objec;n & ,app1ls 6! ,c\rt 7#gd-gf7 ,! ,g5]al ,anti-,avoid.e ,rule 7#gg7 ,non-,resid5ts 7#gh7 ,process 7#gi-ia7 ,p]iodic ,update 7#ib7 ,app5dix--,examples ,situ,ns ,": ! ,p5alty ,wd ,g5],y ,n ,apply ,example #a3 ,gd ,fai? ,reli.e on ,cli5t's ,9=m,n ,example #b3 ,reli.e on ,9=m,n ,provid$ 0,ano!r ,profes.nal ,example #c3 ,h"o/ ,]ror ,example #d3 ,reconcil+ ,9consi/5t ,9=m,n ,example #e3 ,foll[+ ,,ccra ,adm9i/rative ,policy ,example #f3 ,mak+ ,su6ici5t ,9quiries ,3t5ts c#a ,example #g3 ,4cus.n ,reg>d+ ,volunt>y ,4closure ,situ,ns ,": ! ,p5alty ,cd ,apply ,3duct ,t ,is ,tantam.t 6,9t5;nal ,3duct ,example #h3 ,delib]ate ,ov]-,valu,n 9 a ,tax ,%elt]-,l ,>range;t ,example #i3 ,delib]ate ,ov]-,valu,n 9 an ,abusive ,tax ,%elt] ,example #aj3 ,promo;n ,9volv+ a ,false ,/ate;t ,example #aa3 ,promot+ ,non- ,compli.e ,)! ,,eta ,3duct ,: ,describes an ,9di6];e z 6,:e!r ,"! ,is ,-pli.e ,)! ,legisl,n ,example #ab3 ,9di6];e ,:5 ,"! ,is a ,lack ( ,9=m,n ,submitt$ ,example #ac3 ,9=m,n a ,tax ,prep>] ,is ,r1sonably ,expect$ 6,"k ,example #ad3 ,delib]ately ,ov]/at$ ,tax ,cr$its ,3duct ,demon/rat+ a ,wil;l1 ,reck.s1 or ,wanton ,4reg>d (! ,law ,3t5ts d#a ,example #ae3 ,ignor+ a ,c\rt ,deci.n ,example #af3 ,9di6];e ,reg>d+ ,p]sonal ,exp5ses ,claim$ z ,busi;s ,exp5ses ,example #ag3 ,9come ,splitt+ ,:5 ,s]vices ,>e ,n ,r5d]$ ,example #ah3 ,possi# ,wil;l ,bl;s --------------------------------------#b ,=e^w ,? 9=m,n circul> provides a frame"w =! applic,n ( ?ird-"py civil p5alty provi.ns 9 sec;n #afc.b (! ,9come ,tax ,act & sec;n #bhe.a (! ,excise ,tax ,act4 ,! ?ird-"py civil p5alty provi.ns evolv$ f a ne$ 6det] tax %elt] or tax %elt]-l promo;ns ) 9flat$ asset values & faulty assump;ns4 ,:5 ! ?ird-"py civil p5alty provi.ns 7 9clud$ 9 ! #aiii f$]al budget1 !y al 3ta9$ p5alties = ^? p]sons :o c\nsel or assi/ o!rs 9 fil+ false returns or :o turn a bl eye 6false 9=m,n submitt$ 0taxpay]s = tax purposes4 ,=e^w a#b ,prior 6! 9troduc;n (! legislative provi.ns1 ! ,de"p;t ( ,f9.e /at$ t ^! p5alties 7 9t5d$ 6apply to 8egregi\s0 situ,ns4 ,:ile z m* preci.n z possi# has be5 9clud$ 9 ? docu;t1 giv5 ! myriad situ,ns t c o3ur1 x is recogniz$ t judge;t w 2 ne$$ :5 apply+ ! law 6! facts >is+ 9 any "picul> case4 ,? circul> w 2 ref9$1 bas$ on exp]i;e1 6provide fur!r cl>ific,n z nec4 ,9troduc;n #a4 ,? 9=m,n circul> \tl9es guidel9es & processes (! ,canada ,cu/oms & ,rev5ue ,ag5cy 7,,ccra7 =! applic,n (! ?ird- "py civil p5alties 9 sec;n #afc.b (! ,9come ,tax ,act 7,,ita7 & sec;n #bhe.a (! ,excise ,tax ,act 7,,eta74 ,! t]m 8taxpay]0 us$ )9 ? circul> al applies to 8regi/rant0 "u ! ,,eta4 #b4 ,! ,canadian tax sy/em is bas$ on ! pr9ciple ( self-assess;t4 ,taxpay]s >e responsi# = fil+ _! tax returns ,9troduc;n b#b a3urately1 tru?;lly1 & on "t4 ,tax legisl,n 3ta9s v>i\s m1sures 65c\rage -pli.e1 9clud+ p5alties = taxpay]s :o provide false or misl1d+ 9=m,n relat+ 6tax matt]s4 ,until ! ?ird-"py civil p5alties came 96=ce on ,june #bi1 #bjjj1 "! 0 no civil p5alty provi.n t appli$ 6^? :o c\nsel o!rs 6file _! returns bas$ on false or misl1d+ 9=m,n1 or :o turn a bl eye 6false 9=m,n provid$ 0_! cli5ts = tax purposes4 #c4 ,! objective (! ?ird-"py civil p5alties is 6det] ?ird "pies f mak+ false /ate;ts or omis.ns 9 rel,n 69come tax or gds & s]vices tax/h>moniz$ sales tax 7,,gst/,,hst7 matt]s4 ,^! p5alties >e direct$ at 5sur+ tax -pli.e 0det]r+ 2havi\r t results 9 non-compli.e4 #d4 ,! ,canadian tax sy/em has b5efit$ f a coop]ative rel,n%ip 2t profes.nal advisors & ,canada's tax adm9i/r,n1 ! ,,ccra4 ,s9ce t rel,n%ip is #g ,9troduc;n c#b critic,y important 6all ,canadians1 & 6! 3t9u$ h1l? ( \r tax,n sy/em1 ! ,,ccra is -mitt$ 6apply+ ! p5alties fairly1 3si/5tly & only :5 cle>ly ju/ifi$4 ,! ,,ccra recognizes t tax profes.nals h a responsibil;y 6act 9 ! be/ 9t]e/s ( _! cli5ts1 & ? 9cludes ! "r 6m9imize _! tax liabil;y )9 ! law4 ,! ,law #e4 ,! legislative /ructures "u sec;n #afc.b (! ,,ita & sec;n #bhe.a (! ,,eta >e v simil>4 ,= ea* subsec;n "u sec;n #afc.b (! ,,ita "! is a correspond+ subsec;n "u sec;n #bhe.a (! ,,eta4 ,"!=e1 z a g5]al rule1 ? circul> w ref] 6! relevant subsec;n or p>agraph only4 ,= example1 subsec;n #afc.b7#b7 (! ,,ita & subsec;n #bhe.a7#b7 (! ,,eta w 2 ref]r$ 6z subsec;n 7#b74 ,": "! >e di6];es 2t ! two ,acts1 a -plete ref];e w 2 giv5 &! di6];es w 2 4cuss$4 ,al1 "?\t ! #h ,! ,law d#b re/ (! docu;t1 :5 ! ,,eta is m5;n$1 x w ref] only 6! ,,gst/,,hst provi.ns t >e f.d 9 ,"p ,,ix (! ,,eta4 #f4 ,bo? sec;n #afc.b (! ,,ita & sec;n #bhe.a (! ,,eta provide = two p5alties1 "o direct$ prim>ily at ^? :o prep>e 7or "picipate in71 sell or promote a tax %elt] or tax %elt]-l >range;t1 &! o!r direct$ at ^? :o provide tax-relat$ s]vices 6a taxpay]4 ,! f/ ( ^! two p5alties w 2 ref]r$ 6z ! 8plann] p5alty0 &! latt] w 2 ref]r$ 6z ! 8prep>] p5alty0 "?\t ! re/ ( ? circul>4 ,al1 al? m5;n is made 9 ! circul> ( tax profes.nals1 tax return prep>]s1 a3.tants1 advisors1 practi;n]s1 brok]s1 tax or f9ancial plann]s1 apprais]s1 valuators1 & tax %elt] promot]s1 ! ?ird-"py civil p5alty provi.ns apply 6any p]son 7def9$ 9 p>agraphs #bj & #ba7 5gag$ 9 activities describ$ 9 p>agraphs #g & #i4 #i 8,plann] ,p5alty0 e#b #g4 ,subsec;n 7#b71 ! 8plann] p5alty10 provides =a p5alty on a p]son :o makes1 furni%es1 "picipates 9 ! mak+ (1 or causes ano!r p]son 6make or furni% a /ate;t t ! p]son "ks1 or wd r1sonably 2 expect$ 6"k b = circum/.es am.t+ 6culpa# 3duct1 is a false /ate;t t cd 2 us$ 0ano!r p]son =a purpose (! ,,ita or =a purpose (! ,,eta4 ,unlike ! prep>] p5alty 7def9$ 9 p>agraph #i71 ! p]son :o cd use ! false /ate;t does n ne$ 6be id5tifi$ 9 ord] 6apply ? p5alty4 ,examples ( :5 ? subsec;n cd 2 applica# >e3 --tax %elt] promot]s hold+ sem9>s or pres5t,ns 6provide 9=m,n 9 respect (a specific tax %elt]2 & --apprais]s & valuators prep>+ a report =a propos$ s*eme/%elt] t cd 2 us$ 0unid5tifi$ 9ve/ors4 #aj 8,plann] ,p5alty0 ,am.t f#b #h4 ,subsec;n 7#c7 provides t ! p5alty 6: a p]son is lia# "u subsec;n 7#b7 =a false /ate;t is 4#a1jjj4 ,h["e1 :5 a false /ate;t is made 9 ! --------------------------------------#c c\rse (a plann+ activ;y or a valu,n activ;y1 ! p5alty am.t is ! grt] ( 4#a1jjj or ! total (! p]son's gross 5title;ts =! plann+ or valu,n activ;y 7calculat$ at ! "t at : ! ,notice ( ,assess;t (! p5alty is s5t 6! p]son74 8,prep>] ,p5alty0 #i4 ,subsec;n 7#d71 ! 8prep>] p5alty10 provides =a p5alty on a p]son :o makes1 or "picipates in1 ass5ts to1 or acquiesces 9 ! mak+ (a /ate;t to1 0or on 2half ( ano!r p]son t ! p]son "ks1 or wd r1sonably 2 expect$ 6"k b = circum/.es am.t+ 6culpa# 3duct1 is a false /ate;t t cd 2 us$ 0or on 2half (! o!r p]son =a purpose (! #aa 8,prep>] ,p5alty0 a#c ,,ita/,,eta4 ,despite ! "n 8prep>] p5alty10 x c apply 6any p]son 9 ! a=em5;n$ situ,n & is n limit$ 6a tax return prep>]4 ,subsec;n 7#d7 wd 2 applica# 6! tax return prep>] = ea* 9ve/or or taxpay] t c 2 id5tifi$4 ,examples wd 9clude3 --a p]son prep>+ a tax return =a specific taxpay]2 --a p]son provid+ tax advice 6a specific taxpay]2 & --an apprais] or valuator prep>+ a report =a specific taxpay] or a numb] ( p]sons :o c 2 id5tifi$4 8,prep>] ,p5alty0 ,am.t #aj4 ,=a p5alty levi$ "u ! ,,ita1 subsec;n #afc.b7#e7 provides t ! p5alty 6: a p]son is lia# "u subsec;n 7#d7 9 respect (a false /ate;t is ! grt] (3 a7 4#a1jjj1 & b7 ! less] (3 #ab 8,prep>] ,p5alty0 ,am.t b#c 7;i7 ! p5alty 6: ! o!r p]son 7i4e41 ! p]son :o cd use ! false /ate;t =a purpose (! ,,ita7 wd 2 lia# "u subsec;n #afc7#b7 if ! o!r p]son made ! /ate;t 9 a return fil$ =! purposes (! ,,ita & knew t ! /ate;t 0 false2 & 7;ii7 ! total ( 4#ajj1jjj &! p]son's gross -p5s,n1 at ! "t at : ! ,notice ( ,assess;t (! p5alty is s5t 6! p]son1 =! false /ate;t t cd 2 us$ 0or on 2half (! o!r p]son4 #aa4 ,=a p5alty levi$ "u ! ,,eta1 subsec;n #bhe.a7#e7 provides t ! p5alty 6: a p]son is lia# "u subsec;n 7#d7 9 respect (a false /ate;t t cd 2 us$ 0or on 2half (! o!r p]son is ! grt] (3 a7 4#a1jjj1 & b7 ! less] (3 7;i7 ! total ( 4#ajj1jjj &! p]son's gross -p5s,n1 at ! "t at : ! ,notice ( ,assess;t (! p5alty is #ac s5t 6! p]son =! false /ate;t c#c 8,prep>] ,p5alty0 ,am.t t cd 2 us$ 0or on 2half (! o!r p]son2 & 7;ii7 #ej@3p (! decr1se 9 ! tax liabil;y or 9cr1se 9 ! net refund or rebate claim caus$ 0! report+ (a false /ate;t 0! o!r p]son1 if ! sec;n #bhe p5alty 0 appli$ 6! o!r p]son4 #ab4 ,subsec;ns 7#b7 & 7#d71 3c]n+ ! plann] p5alty &! prep>] p5alty1 cd bo? apply 6! same false /ate;t4 ,h["e1 subsec;n 7#ad7 provides t a p]son :o is lia# 6pay p5alties "u bo? subsec;ns 7#b7 & 7#d7 =! same false /ate;t is requir$ 6pay p5alties t >e n m ?an ! grt] (! p5alty "u subsec;n 7#b7 &! p5alty "u subsec;n 7#d74 ,examples wd 9clude3 --a brok] remun]at$ = promo;nal pres5t,ns (a tax %elt] t is us$ 09ve/ors t c 2 id5tifi$2 & #ad 8,prep>] ,p5alty0 ,am.t d#c --tax plann]s1 apprais]s &/or valuators prep>+ a report =a propos$ s*eme/%elt] t is us$ 09ve/ors :o c 2 id5tifi$4 ,applic,n (! ,legisl,n #ac4 ,! ?ird-"py civil p5alty provi.ns apply 6/ate;ts made af ,june #bi1 #bjjj4 ,! p5alties may apply 6any false /ate;t made af ? date4 ,:ile "! is no /atutory limit,n reg>d+ ! "t p]iod dur+ : an assess;t ( ^! p5alties has 6be issu$1 9 practice1 we d n =esee ! p5alty 2+ appli$ 9 a p]iod t is 2y ! legislat$ record ret5;n p]iod ( six ye>s4 ,h["e1 x %d 2 not$ t "! >e no "t re/ric;ns = assess;ts 9 cases ( fraud4 #ad4 ,:5 two or m p]sons >e 9volv$ 9 ! mak+ (a false /ate;t1 ! ,,ccra may apply ! p5alties 6ea* (! p]sons4 ,see p>agraphs #bj & #ba =a m detail$ 4cus.n (! t]m 8p]son40 #ae ,applic,n (! ,legisl,n e#c #ae4 ,:5 3sid]+ ! applic,n (! ?ird-"py civil p5alties1 ! ,,ccra w respect ! 9t5;n (! legisl,n4 ,specific,y1 x is m1nt 6apply 6^? p]sons :o c\nsel & assi/ o!rs 9 mak+ false /ate;ts :5 !y file _! returns or :o >e wil;lly bl 6obvi\s 8]rors0 :5 prep>+1 fil+ or assi/+ ano!r p]son 9 fil+ a return4 ,x al is 9t5d$ 6apply 6>range;ts & plans t 3ta9 false /ate;ts1 (t5 )\t ! k (! cli5t4 ,^! >e m>ket$ typic,y z tax %elt] & tax %elt]-l >range;ts t may 2 defective 2c ( ov]valu,ns ( prop]ty1 excessive or 9flat$ co/s1 or lack ( busi;s activ;y4 ,tax %elt]-l >range;ts >e ^? >range;ts t d n fit 96! def9i;n (a 8tax %elt]0 9 subsec;n #bcg.a7#a7 (! ,,ita1 b !y provide simil> tax b5efits4 #af4 ,! legisl,n is n 9t5d$ 6apply to3 --tax-plann+ >range;ts t -ply )! law2 --h"o/ mistakes or ov]sie adm9i/ratively a3epta# 6! ,,ccra4 #ag4 ,:e!r p5alties w 2 assess$ 9 a giv5 situ,n ": a false /ate;t 0 made "k+ly or 9 circum/.es am.t+ 6culpa# 3duct w dep5d ^u ! facts (! situ,n4 ,factors t may 2 relevant 9clude3 --:e!r ! posi;n tak5 is obvi\sly wr;g1 unr1sona#1 &/or 3tr>y 6well-e/abli%$ case law2 --3sid]+ ! advisor's exp]i;e )! relevant subject matt] & k (! taxpay]'s specific circum/.es1 ! ext5t ( "k+ or delib]ate "picip,n 9 false /ate;ts2 --! degree 6: ! culpa# 3duct repres5ts ! mo/ a7ressive & blatantly abusive 2havi\r2 --! ext5t 6: "! is a patt]n ( rep1t$ abuse2 & #ag ,applic,n (! ,legisl,n a#d --:e!r ! reduc;n ( taxes is significant4 #ah4 ,9 ! abs;e ( rep1t$ abusive 2havi\r1 or widespr1d impact1 z wd 2 ! case (a practi;n] :o c\nsels a numb] ( cli5ts 6*1t 9 small am.ts1 ! ,,ccra does n 9t5d 6focus on situ,ns 9volv+ small am.ts4 #ai4 ,p]sons :o >e subject 6a ?ird-"py civil p5alty cd al 2 subject 6crim9al prosecu;n if ! activities "utak5 on 2half ( _! cli5t7s7 3/itute tax eva.n z describ$ 9 sec;n #bci (! ,,ita &/or sec;n #cbg (! ,,eta4 ,9t]pret,n & ,4cus.n ,p]son #bj4 ,! t]m 8p]son0 is def9$ 9 subsec;n #bdh7#a7 (! ,,ita z an 9dividual1 corpor,n or any 5t;y exempt f ,"p ;,i tax4 ,! t]m 8p]son0 is al def9$ 9 subsec;n #afc.b7#a7 (! ,,ita #ah ,p]son b#d 69clude a "pn]%ip4 ,fur!rmore1 subsec;n #afc7#b.i7 (! ,,ita provides1 9 "p1 t ": a "pn]%ip is lia# 6a p5alty "u sec;n #afc.b1 ! assess;t1 pay;t ( tax & app1l provi.ns apply 9 respect (! p5alty z if ! "pn]%ip 7 a corpor,n4 #ba4 ,z p] subsec;n #abc7#a7 (! ,,eta1 ! t]m 8p]son0 m1ns an 9dividual1 a "pn]%ip1 a corpor,n1 ! e/ate (a dec1s$ 9dividual1 a tru/1 or a body t is a society1 union1 club1 associ,n1 -mis.n1 or o!r organiz,n ( any k9d4 ,false ,/ate;t #bb4 ,a false /ate;t is an 9correct /ate;t1 9clud+ a /ate;t t is misl1d+ 2c ( an omis.n f ! /ate;t1 reg>d.s ( :e!r ! p]son mak+1 "picipat+ in1 or ass5t+ 6! mak+ (1 ! /ate;t has any 9t5;n 6dcv4 ,h["e1 n e false /ate;t wd 2 subject 6! ?ird-"py civil p5alty4 ,example #c at ! 5d (! circul> describes a situ,n 9 : a false #ai ,false ,/ate;t c#d /ate;t result$ f an h"o/ ]ror &a p5alty 0 n 3sid]$4 ,9 ord] =! ?ird-"py civil p5alties 6be 3sid]$1 a p]son m/ "k1 or 2 r1sonably expect$ 6"k1 b = circum/.es am.t+ 6culpa# 3duct 7expla9$ 9 p>agraph #bd71 t ! /ate;t is a false /ate;t t cd 2 us$ =a purpose (! ,,ita/,,eta4 ,! m1n+ (a false /ate;t is al modifi$ 0subsec;n 7#h7 6deem two or m false /ate;ts 6be "o false /ate;t 9 cases :5 "! is "o or m plann+ activities t relate 6a "picul> >range;t1 5t;y1 plan1 prop]ty or s*eme 7s* z a tax %elt]1 a tax %elt]-l >range;t or fl[-"? %>es7 or a valu,n activ;y t relates 6a "picul> prop]ty or s]vice4 ,? deem+ provi.n does n apply 6subsec;ns 7#d7 & 7#e71 ! 8prep>] p5alty40 ,/ate;t #bc4 8,/ate;t0 9cludes an oral or docu;t>y repres5t,n 9clud+ ^? 9 #bj ,/ate;t d#d electronic =mat4 ,examples 9clude 9=m,n provid$ on tax returns1 tax cr$it =ms1 elec;n =ms1 correspond;e1 9voices1 don,n receipts1 /ate;ts1 valu,n reports1 c]tific,ns1 profes.nal op9ions1 f9ancial /ate;ts & _! notes1 3tracts1 prospectuses1 sell+ docu;ts1 & o!r public,ns4 ,culpa# ,3duct #bd4 8,culpa# 3duct0 m/ 2 pres5t 9 ! abs;e ( actual k (a false /ate;t1 9 ord] =! ?ird-"py civil p5alties 6be 3sid]$4 ,culpa# 3duct ref]s 63duct t is n simply an h"o/ ]ror ( judge;t or failure 6ex]cise r1sona# c>e 7i4e41 ord9>y neglig;e74 ,z /at$ 9 ! ,revis$ ,explanatory ,notes ,relat+ 6,9come ,tax1 issu$ 9 ,decemb] #aiii 0! ,de"p;t ( ,f9.e1 ! 3cept 8culpa# 3duct0 is def9$ ) ref];e 6! types ( 3duct 6: ! c\rts h 3sid]$ apply+ a civil p5alty "u ! tax law 7i4e41 #ba ,culpa# ,3duct e#d crit]ia 3sid]$ = subsec;n #afc7#b7 gross neglig;e p5alty 9 ! case ( ,luci5 ,v5ne v4 ,h] ,maje/y ! ,que51 #hd ,,dtc #fbdg 7,,fctd774 8,culpa# 3duct0 ref]s 63duct 7an act or a failure 6act7 t is tantam.t 69t5;nal 3duct1 %[s an 9di6];e z 6:e!r ! ,,ita/,,eta is -pli$ )1 or %[s a wil;l1 a reck.s or a wanton 4reg>d (! law4 ,tantam.t 6,9t5;nal ,3duct #be4 ,! expres.n 8tantam.t 69t5;nal 3duct0 9 ! def9i;n ( culpa# 3duct m1ns 3duct t is --------------------------------------#e equal1 9 e6ect1 69t5;nal 3duct1 i4e41 a p]son's 3duct 7an act or failure 6act7 %[s t ! p]son m/ h 9t5d$ 6make 7or "picipate 9 or ass5t 6! mak+ (7 a false /ate;t4 #bb ,9di6];e a#e #bf4 ,! expres.n 8%[s an 9di6];e z 6:e!r ? ,act is -pli$ )0 9 ! def9i;n ( culpa# 3duct describes ! passive aspect ( culpa# 3duct4 ,! expres.n m1ns t ! p]son's ac;ns or failure 6act 9dicate t ! p]son 0 wil;lly bl reg>d+ ! facts or ! applic,n (! tax legisl,n4 ,! p]son suspects t ! situ,n dem&s t c]ta9 "qs 2 ask$4 ,h["e1 9quiries >e n made 2c ! p]son wd !n possess ! k (! false /ate;t4 ,? 2havi\r 0 a4ress$ 9 ,sirois 7,l4,c47 v4 ,canada1 #aiie ,c>swell,nat #eee1 ,7#aiie7' #b ,c4,t4,c4 #bfdh 7,,tcc7 : relates 6subsec;n #afc7#b7 (! ,,ita1 gross neglig;e on ! "p (! taxpay]4 ,! c\rt describ$ ! taxpay]'s 2havi\r z 8,he buri$ 8 h1d 9 ! s&40 #bg4 ,! 89di6];e /&>d0 is 3sid]$ 6be m* grt] ?an t ( ord9>y neglig;e4 ,x is m or less equival5t 6! /&>d us$ 6m1sure ! purpose;l act ( wil;l1 reck.s or wanton 4reg>d (! law4 ,z /at$ 9 #bc ,9di6];e b#e ,g]ald ,malleck v4 ,h] ,maje/y ! ,que51 #ih ,,dtc #ajai 7,,tcc7 on page #ajba1 8,"! is1 h["e1 ll1 if any1 di6];e 2t approa*+ 8! will;l1 ! reck.s1 ! wanton10 & 9di6];e z 6:e!r ! law is -pli$ ) or n40 ,wil;l1 ,reck.s1 or ,wanton ,4reg>d (! ,law #bh4 ,! expres.n 8%[s a wil;l1 reck.s or wanton 4reg>d (! law0 9 ! def9i;n ( culpa# 3duct po9ts 6! situ,n ": a r1sona#1 prud5t p]son wd "k t x is hi] decides 6foll[ ! 9/ruc;ns ( 8 ,canadian resid5t cli5t & n report ! cli5t's =eign 9ve/;t 9come on ! tax return4 ,! prep>] is r1sonably expect$ 6"k t ! _wwide 9come (a ,canadian resid5t is taxa# 9 ,canada4 ,! prep>] wd 2 demon/rat+ wil;l or wanton #bd ,wil;l1 ,reck.s1 ,wanton c#e 4reg>d (! law if he or %e "picipates 9 a fil+ posi;n t is cle>ly 3tr>y 6! legisl,n4 ,"picipate #bi4 ,! def9i;n ( 8"picipate0 9cludes caus+ a subord9ate 6act or 6omit 9=m,n1 & 6"k (1 & 6n make a r1sona# attempt 6prev5t1 ! "picip,n 0a subord9ate 9 an act or omis.n ( 9=m,n4 ,subord9ate #cj4 ,! def9i;n ( 8subord9ate0 relat+ 6a "picul> p]son 9cludes n only employees1 b al o!r p]sons ov] ^: activities ! "picul> p]son has direc;n1 sup]vi.n or 3trol4 ,= example1 if a "picul> p]son provides direc;ns to1 sup]vises or 3trols ! activities ( ano!r p]son :o is n an employee (! "picul> p]son or ( any"o else 7z 9 ! case (a self-employ$ #be ,subord9ate d#e p]son71 ! o!r p]son wd 2 3sid]$ 6be a subord9ate (! "picul> p]son =! purpose ( det]m9+ :e!r ! "picul> p]son "picipat$ 9 mak+ a false /ate;t4 ,? provi.n may apply 9 a situ,n ": a promot]1 advisor or tax return prep>] c>ves \ c]ta9 activities relat+ 6! mak+ (a false /ate;t & subcontracts ^! activities 6an app>5tly unrelat$ p]son 7in ord] 6ma9ta9 t he or %e did n "picipate 9 ! mak+ (! false /ate;t74 #ca4 ,an excep;n lies )9 ! def9i;n ( 8subord9ate40 ,specific,y1 if a "picul> p]son is a memb] (a "pn]%ip1 a p]son report+ to 7i4e41 activities (! p]son 2+ direct$1 sup]vis$ or 3troll$ by7 ! "picul> p]son is n a subord9ate ( ano!r "pn] solely 2c ! o!r "pn] is a memb] (! "pn]%ip4 ,9 o!r ^ws1 a p]son :o reports 6a "picul> "pn] is a subord9ate ( t "picul> "pn] & n ( any o!r "pn] un.s t p]son al reports 6t o!r "pn]4 #bf ,cl]ical or ,secret>ial e#e ,s]vices #cb4 ,subsec;n 7#i7 provides t a p]son is n 3sid]$ 6h made or furni%$1 or "picipat$ in1 ass5t$ 6or acquiesc$ 9 ! mak+ (1 a false /ate;t solely 2c ! p]son provid$ cl]ical s]vices 7o!r ?an bookkeep+ s]vices7 or secret>ial s]vices relat+ 6! /ate;t4 #cc4 ,=! purposes (! ?ird-"py civil p5alties1 cl]ical & secret>ial duties d n 9clude any 9volve;t 9 ! prep>,n ( f9ancial a3.ts4 ,cl]ical & secret>ial duties >e 3sid]$ 6be ( an adm9i/rative nature1 s* z typ+ or =matt+1 )\t hav+ any reg>d 63t5t o!r ?an ! a3urate reproduc;n ( orig9als t >e prep>$ 0o!rs4 ,bookkeep+ s]vices wd 9clude record+ busi;s a3.ts & transac;ns & cd l1d 6p5alties4 #bg ,gd ,fai? ,reli.e f#e #cd4 ,subsec;n 7#f7 provides = an excep;n 6culpa# 3duct 7r ?an actual k74 ,? excep;n provides t an advisor :o acts on 2half (! o!r p]son 7i4e41 ! p]son :o cd use ! false /ate;t =a purpose (! ,,ita/,,eta7 is n 3sid]$ 6h act$ 9 circum/.es am.t+ 6culpa# 3duct relat+ 6a false /ate;t solely 2c ! p]son 7ref]r$ 6z ! advisor7 reli$1 9 gd fai?1 on 9=m,n provid$ 6! advisor by1 or on 2half (1 ! o!r p]son1 or 2c --------------------------------------#f ( s* reli.e1 fail$ 6v]ify1 9ve/igate1 or correct ! 9=m,n 7i4e41 did n look 96! a3uracy (! 9=m,n74 #ce4 ,gd fai? is describ$ z 8h"o/y ( 9t5;n1 & freedom f k ( circum/.es : "\ 6put ! hold] on 9quiry40 ,! gd fai? reli.e excep;n is availa# :5 ! 9=m,n us$ 0! advisor or tax return prep>] is n on xs face1 cle>ly false1 or obvi\sly unr1sona# 6a prud5t p]son or does n raise obvi\s "qs 9 ! m9d #bh ,gd ,fai? ,reli.e a#f (! advisor or tax return prep>]4 ,9 o!r ^ws1 a p]son may rely on 9=m,n 9 gd fai? 9 ! abs;e (a r1son t cd cause a r1sona# & prud5t p]son 62lieve t ! 9=m,n cd 2 9correct4 ,"! may 2 situ,ns :5 a4i;nal "qs w h 6be ask$ 2f ! p]son c satisfy hmf or h]f t ! 9=m,n is cr$i# 7i4e41 3si/5t )! p]son's k74 ,a p]son may wi% 6docu;t ? supple;t>y 9=m,n if x ne$s 6be ref]r$ 6at a lat] date4 ,! gd fai? reli.e excep;n is re/rict$ 6a p]son :o acts on 2half (! o!r p]son :o cd use ! false /ate;t =a purpose (! ,,ita/,,eta4 #cf4 ,z p] subsec;n 7#g71 ! reli.e 9 ! gd fai? excep;n does n apply 6a /ate;t t a p]son makes1 "picipates 9 or ass5ts 6in ! c\rse ( an 8exclud$ activ;y10 z def9$ 9 p>agraph #cg4 ,z a result1 ! gd fai? reli.e excep;n is n applica# 6a p]son :o is sell+ or promot+1 or a3ept+ 3sid],n =! promo;n or sale (a fl[ "? %>e1 a tax %elt] or a tax %elt]-l >range;t4 #bi ,exclud$ ,activ;y b#f #cg4 ,! t]m 8exclud$ activ;y8m1ns ! activ;y ( promot+ or sell+ 7:e!r z a pr9cipal or ag5t1 or directly or 9directly7 an >range;t ": x c r1sonably 2 3sid]$ t ! >range;t 3c]ns a fl[-"? %>e1 a tax %elt]1 or an >range;t ": "o (! ma9 purposes = "picip,n 9 ! >range;t is 6obta9 a tax b5efit 7a tax %elt]-l >range;t74 ,x al 9cludes a3ept+ 7:e!r z a pr9cipal or ag5t1 or directly or 9directly7 3sid],n =! sale or promo;n ( s* an >range;t4 ,s9ce tax %elt]s & fl[ "? %>es >e n relevant =! purposes ( ,,gst/,,hst1 ^! t]ms >e n 9clud$ 9 ! def9i;n ( 8exclud$ activ;y0 9 subsec;n #bhe.a7#a7 (! ,,eta4 ,only a tax %elt]-l >range;t wd 2 3sid]$ an 8exclud$ activ;y0 = ,,gst/,,hst purposes4 #ch4 ,g5],y1 ! use ( rollov] provi.ns1 e/ate freezes & o!r 3v5;nal tax-plann+ te*niques >e n 3sid]$ exclud$ #cj ,exclud$ ,activ;y c#f activities :5 ! activ;y is c>ri$ on =a fee =a specific cli5t4 ,! cli5t rcvs advice t is tailor$ 6! cli5t's facts1 circum/.es & ne$s4 ,h["e1 if a tax plan is prep>$ =a specific cli5t & is subsequ5tly promot$ or sold 6o!r cli5ts1 x may fall )9 ! ambit ( exclud$ activ;y s9ce x wd no l;g] 2 cli5t-specific advice4 #ci4 ,z /at$ 9 p>agraph #cf1 :5 an activ;y is an exclud$ activ;y ! gd fai? reli.e excep;n is n applica#4 ,h["e1 det]m9,n ( :e!r ! civil p5alties wd apply wd / dep5d on ! exi/;e (a false /ate;t &! k "!(1 or ! r1sona# expect,n ( s* k b = circum/.es am.t+ 6culpa# 3duct4 ,gross ,5title;ts #dj4 8,gross 5title;ts0 m1ns all ! am.ts 6: ! p]son1 or ano!r p]son n d1l+ at >m's l5g? )! p]son1 is 5titl$ 9 respect (a plann+ activ;y or a #ca ,gross ,5title;ts d#f valu,n activ;y4 ,! am.ts 9clud$ >e am.ts t >e receiva# or rcvd1 ei absolutely or 3t+5tly1 ei 2f or af t "t (! plann+ or valu,n activ;y4 ,two or ,m ,false ,/ate;ts #da4 ,subsec;n 7#h7 tr1ts two or m false /ate;ts made or furni%$ 0a p]son 9 ! c\rse ( "o or m plann+ activities 7or a valu,n activ;y7 z "o false /ate;t =! purpose ( apply+ ! plann] p5alty relat+ 6! p]son's false /ate;ts4 ,? is ! case :5 a p]son made or furni%$ false /ate;ts 9 ! c\rse ( "o or m plann+ activities t >e =a "picul> >range;t1 5t;y1 plan1 prop]ty1 or s*eme or 9 ! c\rse (a valu,n activ;y t is 9 respect (a "picul> prop]ty or s]vice4 ,= example1 a tax-plann+ s*eme cd 9clude two false /ate;ts3 ! ov]- valu,n ( prop]ty1 &! ov]/ate;t ( exp5ses4 ,^! two /ate;ts wd 2 deem$ 6be "o false /ate;t =! purposes #cb ,two or m false /ate;ts e#f ( apply+ ! plann] p5alty4 ,h["e1 9 ! case (! prep>] p5alty1 "o false /ate;t us$ 9 a numb] ( returns wd 2 3sid]$ multiple false /ate;ts4 ,special ,rules = ,valu,n ,activities #db4 ,subsec;n 7#aj7 provides a special rule t applies 6a /ate;t made 0a p]son :o expresses an op9ion on ! value (a prop]ty or s]vice 7ref]r$ 6z ! 8/at$ value07 or 0a p]son :o uses t /at$ value 9 ! c\rse ( an exclud$ activ;y4 ,a /ate;t z 6! /at$ value is deem$ 6be a false /ate;t t ! p]son wd r1sonably 2 expect$ 6"k1 b = circum/.es am.t+ 6culpa# 3duct1 if ! /at$ value is \tside 7ei hi<] or l[] ?an7 a range ( values4 ,? is call$ ! 8rev]se onus rule10 : is m fully describ$ 9 p>agraph #dh4 ,h["e1 if ! 8/at$ value0 #cc ,special ,rules f#f is di6]5t f ! fair m>ket value b is )9 ! range1 x may / 2 a false /ate;t4 #dc4 ,! bottom ( ? range corresponds 6! results ( multiply+ ! prescrib$ p]c5tage ref]r$ 6in p>agraph 7#aj77a7 0! fair m>ket value 7z det]m9$ 0! ,,ccra1 subject 6v>i,n 0a c\rt on an app1l7 (! prop]ty or s]vice4 ,! top ( ? range corresponds 6! results ( multiply+ ! prescrib$ p]c5tage ref]r$ --------------------------------------#g 6in p>agraph 7#aj77b7 0! fair m>ket value (! prop]ty or s]vice4 #dd4 ,at ! "t ( public,n ( ? docu;t1 ! regul,ns prescrib+ p]c5tages h n yet be5 issu$4 ,:5 !y >e issu$1 we w provide fur!r 9=m,n z 6h[ !y apply4 ,9 ! m1n"t1 a false /ate;t 9 respect ( valu,n ( prop]ty or s]vice w 2 tr1t$ l any o!r false /ate;t1 s9ce ! rev]se onus rule w n 2 applica#4 ,specific,y1 ! onus is on ! ,,ccra 6prove ! exi/;e (a false /ate;t made ) k or 9 circum/.es am.t+ 6culpa# 3duct4 #cd ,special ,rules a#g ,factors 6be 3sid]$ 9 det]m9+ :e!r p5alties wd 2 assess$ 9clude factors s* z ^? li/$ 9 p>agraph #ag4 #de4 ,! ,,ccra has well-e/abli%$ ,r1l ,e/ate ,appraisal & ,busi;s ,equ;y ,valu,n programs4 ,! objective (! ,r1l ,e/ate ,appraisal ,program is 6provide an e6ective & e6ici5t appraisal s]vice 9volv+ fair m>ket value det]m9,ns ( r1l e/ate & o!r tangi# prop]ty4 ,! ,,ccra apprais]s foll[ profes.nal /&>ds z set \ 0! ,appraisal ,9/itute ( ,canada & l',ordre des @evaluateurs agr@e@es du ,qu@ebec4 #df4 ,! ,busi;s ,equ;y ,valu,n ,program is responsi# = advis+ z 6! fair m>ket value det]m9,ns ( private & public securities1 "pn]%ips1 proprietor%ips1 copy"rs1 royalties1 pat5ts1 gdwill1 f9ancial 9/ru;ts & o!r busi;s equities = tax purposes4 ,x provides exp]t op9ions on te*nical valu,n & relat$ issues1 prep>$ 9 a3ord.e ) curr5t profes.nal /&>ds & e?ics1 z set #ce ,special ,rules b#g \ 0! ,canadian ,9/itute ( ,*>t]$ ,busi;s ,valuators4 #dg4 ,! /&>ds foll[$ 0ea* gr\p promote & ma9ta9 a hi< level ( public tru/ 9 profes.nal valu,n & appraisal practices 0e/abli%+ require;ts = v>i\s types ( assign;ts4 ,^! /&>ds cov] e?ical issues1 : set \ ! require;ts = 9tegr;y1 im"pial;y1 objectiv;y1 9dep5d5t judge;t & e?ical 3duct4 ,! rev]se onus rule1 once 9 e6ect1 wd only 2 9vok$ af ! ,,ccra _h us$ ! abv pr9ciples & me?odology 9 >riv+ at a fair m>ket value4 ,rev]se ,onus ,rule #dh4 ,z /at$ 9 p>agraph #db1 if ! /at$ value (a prop]ty or s]vice lies \tside ! range1 a rev]se onus rule w apply1 : m1ns ! p]son :o made ! false /ate;t m/ e/abli% t ! valu,n 0 r1sona# 9 ! #cf ,rev]se ,onus ,rule c#g circum/.es1 made 9 gd fai?1 & n bas$ on unr1sona# or misl1d+ assump;ns4 #di4 ,until ! p]c5tages >e prescrib$ 9 ! regul,ns1 ! deem+ provi.n is n e6ective4 ,? m1ns ! ,,ccra w h 6demon/rate t a false /ate;t 0 made ei "k+ly1 or 9 circum/.es am.t+ 6culpa# 3duct4 ,multiple ,assess;ts #ej4 ,subsec;n 7#ab7 provides rules =! purpose ( apply+1 6a p]son1 ! ?ird-"py civil p5alties 9 sec;n #afc.b (! ,,ita or sec;n #bhe.a (! ,,eta4 #ea4 ,p>agraph 7#ab77a7 applies 6cases 9 : a p]son is assess$ a plann] p5alty at a "picul> "t reg>d+ a specific plann+ or valu,n activ;y1 & ano!r assess;t (! p5alty is made at a lat] "t reg>d+ ! same activ;y4 ,if ! p5alty is reassess$ 2c ! gross 5title;ts (! p]son >e grt] at ! subsequ5t "t1 !n "u subp>agraph 7#ab77a77;i71 ! #cg ,multiple ,assess;ts d#g reassess;t (! p5alty at t lat] "t1 : w am.t 6! net 9cr1se1 is 3sid]$ 6be a sep>ate p5alty 7= an example see p>agraph #ec74 ,9 any o!r case 7i4e41 ! gross 5title;ts (! p]son >e less] at ! subsequ5t "t71 ! ,notice ( ,assess;t (! e>li] p5alty is deem$ n 6h be5 s5t4 #eb4 ,p>agraph 7#ab77b7 excludes c]ta9 am.ts f a p]son's gross 5title;ts 7in respect (a plann+ or a valu,n activ;y 9 : "! is a false /ate;t made or furni%$ 0! p]son74 ,9 g5]al1 ? rule op]ates 6base ea* assess;t (a p5alty "u ! plann] p5alty =a false /ate;t on ! 9cr1se 9 gross 5title;ts (! p]son n c.t$ 9 calculat+ ! am.t (! p]son's p5alty previ\sly assess$ =! false /ate;t4 ,h["e1 :5 ! f/ ,notice ( ,assess;t is deem$ n 6h be5 s5t 0virtue ( subp>agraph 7#ab77a77;ii71 p>agraph 7#ab77b7 does n apply 6reduce ! am.t (! second assess;t1 s9ce ! orig9al ,notice ( ,assess;t is deem$ n 6h be5 s5t4 ,z a result1 ! #ch ,multiple ,assess;ts e#g p5alty am.t on ! second assess;t 9 t case is bas$ on ! p]son's total gross 5title;ts at ! "t t ,notice ( ,assess;t is s5t4 #ec4 ,z an example1 suppose t a p]son is assess$ a plann] p5alty at a "picul> "t 9 ! am.t ( 4#aj1jjj1 : repres5ts ! am.t (! p]son's gross 5title;ts f a plann+ activ;y at t "t4 ,at a lat] "t1 x is 4cov]$ t ! p]son's gross 5title;ts f ! same plann+ activ;y h 9cr1s$ 64#be1jjj & ano!r assess;t (a p5alty is made at t lat] "t1 "u subsec;n 7#b7 ag/ ! p]son4 ,! e6ect ( subp>agraph 7#ab77a77;i7 9 ^! circum/.es is 6deem ! second assess;t 6be ! assess;t (a second p5alty1 &! e6ect ( p>agraph 7#ab77b7 is 6reduce ! p]son's gross 5title;ts at ! lat] "t 64#ae1jjj1 9 ord] 6take 96a3.t ! previ\s assess;t ( 4#aj1jjj4 ,?us1 ! 5d result is t ! p]son is lia# 6pay two p5alties3 "o ( 4#aj1jjj z (! #ci ,multiple ,assess;ts f#g "picul> "t1 & ano!r ( 4#ae1jjj z (! lat] "t4 #ed4 ,z ano!r example1 suppose t ! facts >e ! same z 9 p>agraph #ec1 except t at ! "t (! f/ assess;t ! p]son's gross 5title;ts 7 4#gjj4 ,9 t case1 ! p]son wd h be5 assess$ 4#a1jjj "u p>agraph 7#c77a7 at t "t 7i4e41 ! m9imum am.t (! p5alty74 ,:5 ! p]son is assess$ at ! lat] "t1 --------------------------------------#h p>agraph 7#ab77b7 reduces ! p]son's gross 5title;ts at t lat] "t 04#a1jjj1 ! am.t (! previ\s assess;t (! p5alty4 ,z well1 subp>agraph 7#ab77a77;i7 deems ! second assess;t 6be ! assess;t (a second p5alty4 ,9 ^! circum/.es1 ! p]son wd 2 lia# 6pay a p5alty ( 4#a1jjj z (! "t (! f/ assess;t & wd 2 lia# 6pay a second p5alty ( 4#bd1jjj 7gross 5title;ts ( 4#be1jjj m9us 9itial assess;t ( 4#a1jjj7 at ! lat] "t4 #dj ,multiple ,assess;ts a#h #ee4 ,9 %ort1 ! am.t (! gross 5title;ts us$ =! calcul,n (! second assess;t is calculat$ 0total+ ! gross 5title;ts 6date & reduc+ t am.t 0! p5alty alr assess$4 #ef4 ,subsec;n 7#ab77c7 d1ls )! calcul,n (a prep>] p5alty4 ,! am.t (! gross -p5s,n relat+ 6! false /ate;t is ! total (! gross -p5s,n 6date less ! am.t (! prep>] p5alty alr assess$4 ,exemp;n = ,employees #eg4 ,subsec;n 7#ae7 provides t ! ?ird- "py civil p5alty provi.ns d n apply 6an employee (! 8o!r p]son0 7i4e41 ! p]son :o cd use ! false /ate;t7 ref]r$ 6in ! 8plann] p5alty0 or 8prep>] p5alty40 ,t is1 an employee is protect$ 0? exemp;n only = 8 employ]'s tax returns or 9=m,n4 ,x wd n apply 6! employees (! advisor or ! tax return prep>]4 ,! exemp;n 9 subsec;n 7#ae7 al does n ext5d 6employees :o >e #da ,exemp;n = ,employees b#h 5gag$ 9 exclud$ activities or :o >e specifi$ employees 7see p>agraph #eh74 ,"u subp>agraph 7#ae77b71 ! 3duct (! employee is attribut$ 6! employ] =! purpose ( apply+ subsec;n #afc7#b7 (! ,,ita or sec;n #bhe (! ,,eta 7! gross neglig;e p5alties7 6! employ]4 #eh4 ,a 8specifi$ employee0 (a p]son is def9$ 9 subsec;n #bdh7#a7 (! ,,ita 6m1n an employee (! p]son 7! o!r p]son z describ$ 9 p>agraph #eg7 :o is a specifi$ %>ehold] (! p]son1 or :o does n d1l at >m's l5g? )! p]son4 ,ess5ti,y1 a specifi$ %>ehold] (a corpor,n is a p]son :o [ns1 directly or 9directly1 #aj@3p or m (! issu$ %>es ( any class (! capital /ock (! corpor,n or a relat$ corpor,n4 ,? def9i;n applies 6sec;n #afc.b (! ,9come ,tax ,act & sec;n #bhe.a (! ,excise ,tax ,act4 #ei4 ,= c]ta9 corporate gr\ps1 employees ( "o corpor,n ma9ta9 ! a3.t+ records & d tax plann+ & tax return #db ,exemp;n = ,employees c#h prep>,n =! 5tire corporate gr\p4 ,s* employees >e n te*nic,y cov]$ 0! exemp;n provid$ 9 subsec;n 7#ae7 = _! "w relat$ 6o!r memb]s (! corporate gr\p4 ,h["e1 9 s* a situ,n1 ! ,,ccra wd assess ! prep>] p5alty ag/ ! employ] 7:e!r a resid5t or non-resid5t ( ,canada71 & n ! employee1 s9ce ! employee wd 2 3sid]$ 6h 5gag$ 9 3duct t result$ 9 a p5alty situ,n 9 ! c\rse (! employee's employ;t duties4 ,? policy w al apply 6o!r gr\ps ( organiz,ns t h 3solidat$ _! a3.t+ or tax func;ns 9 "o (! memb] organiz,ns4 ,! policy w n apply 9 ei (! situ,ns describ$ abv if ! 3solid,n 0 d"o1 or an employee 0 plac$ 9 ! 3solidat$ func;n1 6avoid ! ?ird-"py p5alty or z "p (a tax avoid.e >range;t4 ,burd5 ( ,pro( #fj4 ,"u subsec;n #afc7#c7 (! ,,ita & subsec;n #bhe.a7#af7 (! ,,eta1 & #dc ,burd5 ( ,pro( d#h aside f ! rev]se onus rule1 once 9 e6ect1 applica# 6valu,n activities1 ! burd5 ( pro( (! applicabil;y (! ?ird- "py civil p5alties w lie )! ,,ccra4 ,! /&>d ( evid;e us$ = ^! ?ird-"py p5alties is ! bal.e ( probabilities )! b5efit (! d\bt go+ 6! ?ird "py 7see p>agraph #fd = a4i;nal -;ts74 ,o!r ,issues ,profes.nal ,/&>ds & ,t]ms ( ,5gage;t #fa4 ,! a3.tants' ,notice 6,r1d] -munic,n1 z describ$ 9 ! ,canadian ,9/itute ( ,*>t]$ ,a3.tants ,h&book1 is n 3sid]$ 6be an admis.n ( 9di6];e z 6:e!r "! is -pli.e )! ,,ita/,,eta4 ,9 ord] =! civil p5alties 6apply1 "! m/ 2 a false /ate;t made "k+ly1 or 9 circum/.es am.t+ 6culpa# 3duct1 i4e41 "! >e obvi\s 9consi/5cies1 or ! 9=m,n suppli$ is obvi\sly 9correct1 #dd ,o!r ,issues e#h 9complete1 or o!rwise unsatisfactory1 )! result t ! f9ancial /ate;ts may 2 false or misl1d+4 ,? det]m9,n wd 2 made bas$ on ! facts4 #fb4 ,a 4claim] (! tax return prep>]'s responsibil;y = 9=m,n rcvd f ! cli5t does n absolve ! prep>] f ! p5alties if ! 3di;ns = apply+ ! p5alties exi/ 7describ$ 9 p>agraphs #g & #i74 #fc4 ,failure 6meet profes.nal /&>ds t give rise 6sanc;ns 0profes.nal bodies or f9ancial liabilities 6a cli5t 2c ( neglig;e or malpractice wd n necess>ily result 9 ! applic,n (! ?ird-"py civil p5alties4 ,ea* situ,n w h 6be 3sid]$ 9dividu,y 2f any p5alty assess;t o3urs4 ,! ,,ccra wd / h 6prove t ! p]son knew1 or wd r1sonably 2 expect$ 6"k1 b = circum/.es am.t+ 6culpa# 3duct1 t "! is a false /ate;t t c 2 us$ =a purpose (! ,,ita/,,eta4 #fd4 ,z /at$ 9 p>agraph #fj1 ! burd5 ( pro( lies )! ,,ccra4 ,! ,,ccra has 6prove1 on ! bal.e ( #de ,o!r ,issues f#h probabilities1 t an advisor or tax return prep>] knew (! false /ate;t or t culpa# 3duct exi/$ 9 a giv5 situ,n4 ,? c only 2 e/abli%$ 0review+ ! facts (! situ,n4 --------------------------------------#i ,guid.e 6,practi;n]s #fe4 ,dur+ 3sult,ns ) practi;n]s1 ! ,,ccra 0 ask$ 6provide guid.e reg>d+ be/ practices 6m9imize ! risk (a p5alty 2+ appli$4 ,9 response1 & recogniz+ audits g5],y o3ur af ! fact &! ,,ccra's att5dant reli.e on docu;t,n1 ! foll[+ su7es;ns >e (f]$3 --,record any 9=m,n suppli$ 0! cli5t4 --,docu;t any 3c]ns ab ! tru?;l;s1 a3uracy1 or 9consi/5cy 9 ! 9=m,n suppli$4 --,record "qs ask$ ab ^? 3c]ns4 --,record ! cli5t's responses4 --,record any fur!r 4cus.ns 6cl>ify 9consi/5cies or 3tradic;ns4 #df ,guid.e 6,practi;n]s a#i --,docu;t any rese>* 3duct$ &! results ( s* rese>*4 --,record any assump;ns made4 --,"q ! r1sona#;s ( /ate;ts & assump;ns4 --,record :y ! assump;ns >e r1sona#4 #ff4 ,on r>e o3a.ns1 ": a practi;n] 2lieves t he/%e is 2+ ask$ 6use a /ate;t t is cle>ly false or his #fg4 ,if an advisor or tax return prep>] f9ds hmf or h]f 9 a situ,n ": he or %e 4cov]s t ano!r p]son _h made a false /ate;t = tax purposes 7e4g41 he or %e obta9s a new cli5t & f9ds t ! previ\s a3.tant has made a false /ate;t71 ! new advisor or tax return prep>] #dg ,false ,/ate;ts b#i wd 2 expect$ 6rectify ! situ,n 6! ext5t t ! false /ate;t a6ects ! tax return (! curr5t ye>4 ,if ! advisor or prep>] advises 8 or h] cli5t 6make a volunt>y 4closure z describ$ 9 ,9=m,n ,circul> #jj-a1 ,volunt>y ,4closures ,program1 =! prior ye>s1 &! cli5t does n foll[ ? advice1 ! advisor or prep>] is n expos$ 6! ?ird-"py civil p5alties 9 respect ( prior ye>s4 ,if ! curr5t- ye> return does n reflect ! correc;ns 7= example1 an 9correct bal.e ( an undepreciat$ capital co/ s*$ule7 2c ! taxpay] did n agree 6x1 &! advisor or prep>] prep>$ ! return "k+ (! false /ate;t1 ! advisor or prep>] z well z ! taxpay] may 2 subject 6p5alties4 ,! advisor cd 2 subject 6! ?ird-"py civil p5alties1 &! p]son 6:om ! tax return 2l;gs cd 2 subject 6a gross neglig;e p5alty 7subsec;n #afc7#b7 (! ,,ita & sec;n #bhe (! ,,eta74 #dh ,p]sons ,subject 6,p5alties c#i #fh4 ,a corpor,n acts "? xs (fic]s 7i4e41 employees 9clud+ memb]s (! bo>d ( directors72 if an (fic] knew (! false /ate;t1 or 0 r1sonably expect$ 6"k b = culpa# 3duct1 bo? ! (fic] &! corpor,n miagraphs #bj & #ba1 a "pn]%ip is a 8p]son10 "!=e1 ! -;ts 9 p>agraph #fh apply 6a "pn]%ip & xs "pn]s4 ,h;e1 ! ?ird-"py civil p5alties may 2 assess$ on a "pn]%ip z well z xs "pn]s & employees 7i4e41 (! advisor or ! tax return prep>]74 #di ,price ,adju/;t ,clause d#i #gj4 ,9t]pret,n ,bullet9 ,,it-#afi1 ,price ,adju/;t ,clauses1 /ates t :5 a prop]ty is transf]r$ 9 a non->m's l5g? transac;n1 ! "pies (t5 9clude a price adju/;t clause 9 ! cov]+ agree;t "u : ! "pies may agree t if ! ,,ccra det]m9es t ! fair m>ket value (! prop]ty is grt] or less ?an ! price o!rwise det]m9$ 9 ! agree;t1 t price w 2 adju/$ 6take 96a3.t ! excess or ! %ortfall1 provid$ t all (! foll[+ 3di;ns >e met3 --,! agree;t reflects a bona fide 9t5;n (! "pies 6transf] ! prop]ty at fair m>ket value & >rives at t value =! purposes (! agree;t 0a fair & r1sona# me?od4 --,ea* (! "pies 6! agree;t notifies ! ,,ccra 0a lr atta*$ 6! return =! ye> 9 : ! prop]ty 0 transf]r$ --t he or %e is prep>$ 6h ! price 9 ! agree;t review$ 0! ,,ccra ac 6! price adju/;t clause1 #ej ,price ,adju/;t ,clause e#i --t he or %e w take ! nec /eps 6settle any result+ excess or %ortfall 9 ! price1 & --t a copy (! agree;t w 2 fil$ )! ,,ccra if & :5 requir$4 --,! excess or %ortfall 9 price is actu,y refund$ or pd1 or a legal liabil;y "!=e is adju/$4 #ga4 ,! 3di;n 6file a lr atta*$ 6! return1 z /at$ abv1 c 2 sub/itut$4 ,adm9i/ratively1 ! ,,ccra does a3ept a rollov] =m s* z ,t#bjeg1 ,t#bjeh or ,t#bjei1 fil$ )a 8yes0 answ] 6! "q 3c]n+ ! exi/;e (a price adju/;t clause z su6ici5t notice4 ,al1 9 circum/.es ": no =m is requir$ 7e4g41 sec;n #hf or #ea (! ,,ita71 ! ,,ccra has /at$ t simply n notify+ ! ,,ccra does n prev5t ,9t]pret,n ,bullet9 ,,it-#afi f 2+ appli$ if all (! o!r 3di;ns >e met4 -------------------------------------#aj #gb4 ,if all ! abv 3di;ns 9 p>agraph #gj 7 met1 "! wd n 2 a false /ate;t made ) actual k or 9 circum/.es am.t+ #ea ,price ,adju/;t ,clause a#aj 6culpa# 3duct s9ce ! "pies 7i4e41 ! v5dor1 ! buy]1 &! ,,ccra7 h agre$ 6agree on a revis$ value (! prop]ty transf]r$4 ,h;e1 ! ?ird-"py civil p5alties "u ! ,,ita wd n 2 applica#4 #gc4 ,if ! "pies 7i4e41 ! v5dor1 ! buy]1 &! ,,ccra7 d n agree on a revis$ value (! prop]ty transf]r$1 ! price adju/;t clause _c 2 appli$ & "! w 2 a false /ate;t due 6! di6];e 2t ! /at$ value &! fair m>ket value det]m9$ 0! ,,ccra4 ,h["e1 9 ord] =! ?ird-"py civil p5alties 6apply subject 6! rev]se onus rule describ$ 9 p>agraph #dh1 ! ,,ccra m/ prove t ! false /ate;t 0 made "k+ly or 9 circum/.es am.t+ 6culpa# 3duct4 ,notices ( ,objec;n & ,app1ls 6! ,c\rt #gd4 ,if af c>e;l 3sid],n (! repres5t,ns made 0! ?ird "py1 x is decid$ t a ?ird-"py p5alty is w>rant$ & an assess;t ag/ ! ?ird "py is #eb ,notices ( ,objec;n b#aj issu$1 ! normal objec;n & app1l proc$ures w apply4 #ge4 ,! role (! ,app1ls ,bran* is 6c>ry \ fair & im"pial reviews ( objec;ns 6! ,,ccra's assess;ts4 ,9 ! ev5t t an objec;n 9 respect (! ?ird-"py p5alty is n resolv$ at ? /age1 ! ?ird "py has ! op;n ( app1l+ 6! ,tax ,c\rt ( ,canada &1 z applica#1 6hi<] c\rts4 #gf4 ,"! is no ?ird-"py p5alty 9 ! abs;e (a false /ate;t4 ,": a taxpay] has fil$ a ,notice ( ,objec;n relat+ 6an assess;t >is+ f a false /ate;t 7= : ! plann] or prep>] has be5 p5aliz$71 x is ! ,app1ls ,bran*'s policy 6hold ! plann]'s or prep>]'s ,notice ( ,objec;n 9 abey.e p5d+ ! \tcome (! taxpay]'s objec;n or app1l4 ,! ,g5]al ,anti-,avoid.e ,rule #gg4 ,! p5alties >e n 9t5d$ 6apply 6>range;ts 0r1son only (a det]m9,n t !y >e subject 6! applic,n (! #ec ,! ,g5]al ,anti-,avoid.e c#aj g5]al anti-avoid.e rule 7,,gaar74 ,! ,,gaar applies only if an >range;t is o!rwise te*nic,y e6ective4 ,? m1ns t ! "picul> fil+ posi;n is bas$ on true /ate;ts r ?an false /ate;ts4 ,?us1 ! p5alties _c apply4 ,h["e1 if a p]son takes a fil+ posi;n 3tr>y 6well-settl$ jurisprud;e on an id5tical issue1 ! ?ird-"py civil p5alties wd 2 3sid]$4 ,non-,resid5ts #gh4 ,! ?ird-"py civil p5alty provi.ns apply 6non-resid5t p]sons4 ,= example1 ": an employee (a non-resid5t p>5t caus$ a ,canadian -pany 6file a return 3ta9+ a false /ate;t1 ! non-resid5t p>5t w 2 subject 6! p5alties z 4cuss$ 9 p>agraphs #eg 6#ei4 ,process #gi4 ,! ,,ccra 9t5ds 6/rictly 3trol ! applic,n (! p5alties4 ,proc$ural #ed ,process d#aj *ecks & bal.es >e 9 place 65sure t no "o p]son c direct ! applic,n (! p5alties or o!rwise 9appropriately apply ! p5alties4 ,9 a4i;n1 ! ,,ccra w e/abli% a ,h1dqu>t]s review -mittee1 ! ,?ird-,"py ,p5alty ,review ,-mittee 7,,tpprc74 ,x w 9clude1 =! =eseea# future1 s5ior repres5tatives f ! ,,ccra's ,-pli.e ,programs ,bran* & ,policy & ,legisl,n ,bran*1 & repres5tatives f ! ,de"p;ts ( ,f9.e & ,ju/ice4 #hj4 ,dur+ ! c\rse (a regul> audit1 an auditor may 4cov] circum/.es t prompt 3sid],n (! p5alties4 ,9 s* a situ,n1 ! auditor m/ f/ 3sult a manag] or a s5ior memb] designat$ 0manage;t (! field (fice 2f a p5alty audit is 9itiat$4 #ha4 ,:5 ! manage;t (! field (fice det]m9es t x is appropriate 63duct an audit (! ?ird "py1 x w 3sult or,y or 9 writ+ )a memb] (! te*nical sec;n 9 ,h1dqu>t]s t supports ! ,,tpprc4 #ee ,process e#aj #hb4 ,! memb] (! te*nical support sec;n (! ,,tpprc w 9=m ! field (fice :e!r ! situ,n 9dicates an egregi\s circum/.e t w>rants fur!r 3sid],n4 #hc4 ,%d ,h1dqu>t]s agree t ! situ,n w>rants audit1 ! field (fice m/ !n 9=m ! advisor/prep>] t he or %e w 2 audit$ =a possi# p5alty applic,n4 #hd4 ,at -ple;n (! field "w (! audit1 & af 3sid],n (! repres5t,ns (! advisor/prep>]1 ! field (fice w prep>e a recomm5d,n report z 6:e!r p5alties >e appropriate 9 ! situ,n4 ,if ! recomm5d,n is 6propose ! p5alty1 ? ac;n m/ 2 support$ 0! manage;t (! field (fice 2f 2+ ref]r$ 6! ,,tpprc4 ,on ! o!r h&1 if ! field (fice decides n 6recomm5d a p5alty1 x m/ 9=m ! advisor/prep>] 9 writ+ & close ! audit4 #he4 ,h1dqu>t]s w review ! facts ( ea* case 9clud+ ! repres5t,ns (! ?ird "py 2f a p5alty proposal is made 6! ?ird #ef ,process f#aj "py4 ,6? 5d1 ! memb]s (! ,,tpprc w meet z nec 63sid] p5alty ref]rals4 #hf4 ,if ! recomm5d,n 0! field (fice is n 5dors$ 0! ,,tpprc1 x w notify ! field (fice 9 writ+4 ,if1 af review (! facts1 ! ,-mittee does 5dorse ! recomm5d,n report1 ! field (fice w !n s5d a proposal lr 6! advisor/prep>] reg>d+ ! -------------------------------------#aa applic,n (a p5alty4 ,! advisor/prep>] !n has #cj "ds 6submit 8 or h] response4 #hg4 ,af ! expir,n (! #cj-"d p]iod1 ! field (fice w s5d any repres5t,ns rcvd1 9 _! 5tirety1 al;g )! -;ts (! field (fice 6! ,,tpprc4 #hh4 ,^u review (! -plete repres5t,ns &! p5alty recomm5d,n report1 ! ,,tpprc w ei seek a4i;nal 9=m,n or provide xs deci.n 6support or reject ! recomm5d,n (! field (fice4 #hi4 ,! advisor/prep>] w 2 9=m$1 9 writ+1 (! f9al deci.n4 ,if ! #eg ,process a#aa ,,tpprc decides n 6support ! applic,n (! p5alty1 ! advisor/prep>] w 2 advis$ 9 writ+4 ,o!rwise1 an assess;t p]ta9+ 6! p5alty w 2 issu$4 #ij4 ,": an auditor 5visages ! applic,n ( sec;n #bci (! ,,ita or sec;n #cbg (! ,,eta1 ! case wd 2 ref]r$ 6! ,9ve/ig,n ,divi.n (! local tax s]vices (fice &! abv process wd 2 replac$ 0! 9ve/ig,n process4 ,if circum/.es w>rant ! applic,n (! p5alty1 ! ,9ve/ig,ns ,divi.n w make ! ref]ral 6! ,,tpprc 9 a mann] & tim+ t is appropriate 9 ! 3text (! 9ve/ig,n4 #ia4 ,! ,,ccra is prohibit$ 0sec;n #bda (! ,,ita & sec;n #bie (! ,,eta f 4clos+ 6! taxpay] any 9=m,n relat+ 6! advisor or tax return prep>]4 ,3sequ5tly1 at no "t w ! taxpay] 2 9=m$ t ! ,,ccra is ga!r+ 9=m,n 6det]m9e :e!r ! taxpay]'s advisor or tax return prep>] cd 2 subject 6! p5alty4 #eh ,p]iodic ,update b#aa #ib4 ,! ,,ccra is -mitt$ 6provid+ ! tax -mun;y ) p]iodic updates on ! ,,ccra's exp]i;e 9 apply+ ! p5alties ei directly at practi;n] ev5ts1 or "? 9=m,n provid$ 6v>i\s gr\ps 9 writ+4 -------------------------------------#ab ,app5dix--,examples ,! foll[+ examples 3sid] only ! possi# applic,n (! ?ird-"py p5alties4 ,z a result1 ! ,,ccra is limit+ xs -;ts 6civil p5alties t cd 2 assess$4 ,any o!r tax issues t may >ise \ ( ^! examples >e n 3sid]$4 ,situ,ns ,": ! ,p5alty ,wd ,g5],y ,n ,apply ,example #a3 ,gd ,fai? ,reli.e on ,cli5t's ,9=m,n ,a newly acquir$ cli5t1 :o is self- employ$1 br+s 6his a3.tant a li/+ #ei ,example #a a#ab ( 8 busi;s exp5ses4 ,! cli5t al provides ! a3.tant )a figure = 8 total rev5ue4 ,he 9/ructs 8 a3.tant 6prep>e an 9come /ate;t & 8 tax return bas$ on ? 9=m,n4 ,! a3.tant has a qk look at ! exp5ses4 ,! exp5ses seem 6be relat$ 6! type ( busi;s (! cli5t & no?+ /&s \ z obvi\sly unr1sona#4 ,af ! cli5t's 9come /ate;t is prep>$1 x reflects 4#hj1jjj ( rev5ue & 4#ee1jjj ( exp5ses &! 9come tax return is fil$ on t basis4 ,^u audit1 ! ,,ccra f9ds a l>ge propor;n (! exp5ses claim$ _c 2 sub/antiat$ 0adequate docu;t,n & may n h be5 9curr$4 ,fur!rmore1 ! report$ rev5ue is only half ( actual rev5ue4 ,-;ts ,9 view (! busi;s t ! taxpay] is in1 "! 0 no?+ 9 ! 9come /ate;t t wd h made ! a3.tant "q ! valid;y (! 9=m,n provid$ 6hm4 ,"!=e1 he cd rely on ! gd fai? reli.e excep;n & wd n 2 subject 6! prep>] p5alty4 #fj ,example #b3 ,reli.e on b#ab ,9=m,n ,provid$ 0,ano!r ,profes.nal ,an a3.tant relies on ! f9ancial /ate;ts prep>$ 0ano!r profes.nal a3.tant 6report 8 cli5t's self-employ;t 9come4 ,! /ate;ts did n look obvi\sly unr1sona#4 ,! ,,ccra 3ducts an audit & 4cov]s t ! 9come /ate;t 3ta9$ mat]ial misrepres5t,ns4 ,-;ts ,al? ! tax return 3ta9s "o or m false /ate;ts1 ! a3.tant wd 2 5titl$ 6! gd fai? def5se s9ce he reli$1 9 gd fai?1 on 9=m,n 7! f9ancial /ate;ts7 provid$ 0ano!r profes.nal on 2half (! cli5t t 0 n obvi\sly unr1sona#4 ,"!=e1 he wd n 2 subject 6! prep>] p5alty4 ,! ?ird-"py p5alties may 2 appli$ 6! o!r a3.tant if he knew or wd 2 expect$ 6"k1 b = circum/.es am.t+ 6culpa# #fa ,example #b c#ab 3duct1 t ! f9ancial /ate;ts 3ta9$ a false /ate;t4 ,example #c3 ,h"o/ ,]ror ,ne> ! midni$ & fil$4 ,due 6! hurry 9 meet+ ! /atutory d1dl9e1 & 3fid;e 9 ! qualific,ns (! s5ior p]sonnel :o prep>$ ! return1 ! return is fil$ )\t normal review4 ,dur+ an audit1 x is 4cov]$ t c>ry+ *>ges 7 mis/at$ 2c ( an app>5t record+ ]ror4 ,! actual am.t ( 4#a1jih 0 claim$ z 4#aj1jih4 ,-;ts ,? situ,n wd n w>rant ! applic,n (! ?ird-"py civil p5alties4 ,:ile ! prep>] mie 8 return4 ,! a3.tant is giv5 a ,t#d ) 4#be1jjj 9 9come report$4 ,?9k+ t ! gross 9come is on ! l[ side1 ! a3.tant asks if ? is all ! 9come he has &! fr replies t x is s4 ,! a3.tant is / n satisfi$ )! answ] z ! 9come seems 6be \ ( propor;n )! liv+ /&>d (! fr1 s he !n asks hm if he has rcvd m"oy f any s\rce o!r ?an 8 employ;t &! fr replies t he rcvd an 9h]it.e f 8 "m la/ ye>4 ,! a3.tant does n ask any fur!r "qs b prep>es & files ! return4 ,:5 ! taxpay] is audit$ x is 4cov]$ t he has ov] 4#bjj1jjj 9 9come4 #fc ,example #d e#ab ,-;ts ,! a3.tant wd n 2 subject 6! p5alties = "picipat+ or acquiesc+ 9 ! "u/ate;t (a tax liabil;y4 ,! facts 7 hi up ! d\bt 9 8 m9d t ! cli5t 0 n pres5t+ hm ) implausi# 9=m,n4 ,! response a4ress$ ! 3c]n & 0 n 9consi/5t )! k he possess$4 ,example #e3 ,foll[+ ,,ccra ,adm9i/rative ,policy ,xco is a small busi;s1 usu,y ) less ?an 4#bjj1jjj annual 9come4 ,:5 prep>+ f9ancial /ate;ts af ! ye>-5d (! busi;s1 ! ext]nal a3.tant det]m9es taxa# 9come 6be 4#bej1jjj1 & books a bonus paya# ( 4#ej1jjj 6be pd 6! pr9cipal %>ehold]- manag]4 ,! tax return is prep>$ & fil$ on ? basis s9ce ! g5]al -------------------------------------#ac practice (! corpor,n is 64tribute ! pr(its 9 ! =m ( bonuses4 #fd ,example #e a#ac ,-;ts ,9 g5]al1 ! ,,ccra does n *all5ge ! r1sona#;s ( sal>ies & bonuses pd 6! pr9cipal %>ehold]-manag]s (a corpor,n :53 7a7 ! g5]al practice (! corpor,n is 64tribute ! pr(its (! -pany 6xs %>ehold]-manag]s 9 ! =m ( bonuses or a4i;nal sal>ies2 or 7b7 ! -pany has adopt$ a policy ( dclg bonuses 6! %>ehold]s 6remun]ate !m =! pr(its ! -pany has e>n$ t >e1 9 fact1 attributa# 6! special "k-h[1 3nec;ns1 or 5trepr5eurial skills (! %>ehold]s4 ,! abv-m5;n$ policy al applies 6! f/ ye> ( op],ns (a busi;s4 ,bonuses pd 6%>ehold]s o!r ?an pr9cipal %>ehold]-manag]s w 2 subject 6! normal te/ ( r1sona#;s4 ,9 view (! abv1 ! prep>] p5alty wd n apply4 #fe ,example #f3 ,mak+ b#ac ,su6ici5t ,9quiries ,a tax advisor is a "pn] 9 a firm t has a "picul> corporate cli5t4 ,! cli5t has rec5tly 9cr1s$ ! royalty pay;ts 6xs non-resid5t p>5t -pany z 9/ruct$ 0xs p>5t -pany4 ,! tax advisor suspects t ! deduc;n ( royalties mige 9cr1se ov] ! previ\s ye>4 ,! advisor reviews ! cli5t's records & 4cusses ! issue )! cli5t4 ,bas$ on ! review &! 4cus.n1 ! advisor is satisfi$ t ! deduc;n is r1sona# & files ! corporate tax return on t basis4 ,subsequ5tly1 an audit (! corpor,n det]m9es t ! -pany did n satisfy ! require;ts ( subsec;n #bdg7#d7 (! ,,ita1 z x fail$ 6e/abli% t r1sona# ef=ts 7 made 6det]m9e & use >m's l5g? transf] prices on ! royalties4 ,! royalties adju/;ts =! ye> >e 9 excess ( #aj@3p (! -pany's gross rev5ues4 #ff ,example #f c#ac ,-;ts ,! tax advisor 0 suspici\s (! 9=m,n provid$ 0! cli5t4 ,"!=e1 he review$ ! cli5t's records & _h a 4cus.n )! cli5t4 ,! advisor 0 satisfi$ )! 9quiries4 ,al? ! ,,ccra came 6a di6]5t 3clu.n 9 a subsequ5t audit1 x 0 satisfi$ t ! false /ate;t 0 n made "k+ly or 9 circum/.es am.t+ 6culpa# 3duct4 ,! tax advisor _h made su6ici5t 5quiries4 ,fur!rmore1 8 response 6! answ]s provid$ 0! corporate cli5t did n %[ an 9di6];e 6-pli.e )! ,,ita4 ,! corporate cli5t may 2 subject 6! transf]-pric+ p5alty "u subsec;n #bdg7#c71 s9ce he fail$ 6make r1sona# ef=ts 6det]m9e & use >m's l5g? transf] prices on ! royalties4 ,2f ! transf]- pric+ p5alty c 2 propos$1 ! matt] m/ 2 approv$ 0! ,transf] ,pric+ ,review ,-mittee4 #fg ,example #g3 ,4cus.n d#ac ,reg>d+ ,volunt>y ,4closure ,an advisor is ask$ 0a new cli5t 64cuss a pot5tial volunt>y 4closure )! ,,ccra on a no-"n basis1 6det]m9e ! implic,ns ( mak+ a volunt>y 4closure ) respect 6prior ye> 9come omis.ns4 ,! advisor is 9=m$ (! implic,ns ( mak+ ! 4closure1 9clud+ ! e/imat$ 9come tax & relat$ 9t]e/ liabil;y1 0a ,volunt>y ,4closure ,program (fic]4 ,! cli5t is 9=m$ 0! advisor & decides n 6proce$ )! volunt>y 4closure4 ,-;ts ,9 ? situ,n1 ! advisor wd n 2 subject 6! ?ird-"py p5alty4 ,! advisor is n responsi# =! omis.ns 9 ! prior ye> 9come tax returns1 not)/&+ t ! advisor is aw>e (! omis.ns & may h advis$ ! cli5t 6proce$ )! volunt>y 4closure4 ,h["e1 z /at$ 9 p>agraph #fg1 ! advisor wd 2 expect$ 6rectify ! situ,n #fh ,example #g e#ac 6! ext5t t ! false /ate;t a6ects ! tax return (! curr5t ye>4 ,situ,ns ,": ! ,p5alty ,cd ,apply ,3duct ,t ,is ,tantam.t 6,9t5;nal ,3duct ,example #h3 ,delib]ate ,ov]- ,valu,n 9 a ,tax ,%elt]-,l ,>range;t ,a promot] sells a tax %elt]-l >range;t 69dividual taxpay]s 9volv+ #aj1jjj pieces ( >t4 ,ea* taxpay] acquires "o piece ( >t = xs fair m>ket value ( 4#ajj4 ,! valuator is aw>e ( ? 9=m,n b agrees 6appraise ea* >t piece at 4#a1jjj4 ,3curr5tly1 ! promot] solicits a regi/]$ *>;y t agrees 6a3ept ! >t z a *>ita# don,n & issue a *>ita# don,n receipt 9 ! am.t (! apprais$ value #fi ,example #h f#ac 74#a1jjj p] >t piece74 ,? *>;y immly auc;ns (f ! >t 6! hi]1 :o does n h any direct k (! false /ate;t1 prep>es ! 9come tax return ( 8 cli5t1 :o _h acquir$ & donat$ >t mak+ use (! abv- m5;n$ >range;t4 ,! ,,ccra 3ducts a review (! cli5t's return & det]m9es t x 3ta9s a false /ate;t 7! ov]-valu,n (! prop]ty donat$74 ,-;ts ,! promot] organiz$ an >range;t t he or %e knew 9clud$ a false /ate;t 7i4e41 ab ! 4crepancy 2t 4#ajj value (! >t &! issu.e ( 4#a1jjj *>ita# don,n receipts71 s ! ,,ccra wd 3sid] assess+ ! promot] )! plann] p5alty4 ,! valuator has furni%$ false /ate;ts "k+ly relat+ 6! >range;t & is lia# 6! p5alties un.s he c prove ! /at$ #gj ,example #h a#ad value 0 r1sona# 9 ! circum/.es1 & t ! /ate;t 0 made 9 gd fai?4 ,if ! *>;y knew1 or wd h r1sonably be5 expect$ 6"k b = circum/.es am.t+ 6culpa# 3duct1 t ! valu,ns 7 9correct1 x wd 2 lia# =! p5alties = issu+ false receipts4 ,al? ! tax return did 3ta9 a false /ate;t1 ! tax return prep>] did n "k (! false /ate;t1 nor wd he r1sonably 2 expect$ 6"k b = circum/.es am.t+ 6culpa# 3duct4 ,z a result1 ! prep>] wd n 2 assess$ a ?ird-"py civil p5alty4 ,example #i3 ,delib]ate ,ov]- ,valu,n 9 an ,abusive ,tax ,%elt] ,a -pany is sell+ units 9 a limit$ "pn]%ip tax %elt]4 ,! -pany _h acquir$ s(tw>e = 4#ej1jjj on ! op5 m>ket & #ga ,example #i b#ad transf]r$ x 6! limit$ "pn]%ip on ! same "d = 4#aj1jjj1jjj4 ,! prospectus prep>$ 0! -pany /ates t ! fair m>ket value (! s(tw>e is 4#aj1jjj1jjj & is support$ 0an appraisal4 ,! tax %elt] is regi/]$ )! ,,ccra & is availa# z an 9ve/;t opportun;y 9 ! curr5t ye>4 ,! -pany's gross 5title;ts >e 4#b1jjj1jjj4 ,! ,,ccra reviews ! tax %elt] & det]m9es t ! fair m>ket value (! s(tw>e on ! "d ( transf] 96! limit$ "pn]%ip is 4#ej1jjj4 ,! appraisal support+ ! 4#aj1jjj1jjj value 0 prep>$ 0an 9dep5d5t apprais]4 ,h["e1 x 0 n prep>$ us+ normal valu,n pr9ciples4 ,! apprais] 9=m$ ! ,,ccra t all 8 calcul,ns 7 bas$ on ! assump;ns & o!r relevant facts provid$ 6hm 0! -pany4 ,! apprais] 0 pd 4#ge1jjj =! appraisal4 ,-;ts ,! prospectus prep>$ 0! -pany 3ta9s a false /ate;t 7ov]/at$ fair m>ket value (! s(tw>e7 t cd 2 us$ = tax #gb ,example #i c#ad purposes4 ,! -pany knew or wd r1sonably 2 expect$ 6"k1 b = culpa# 3duct1 t ! fair m>ket value (! s(tw>e 0 a false /ate;t4 ,s9ce ! -pany is 5gag$ 9 an exclud$ activ;y1 x _c rely on ! gd fai? reli.e excep;n ) respect 6! valu,n4 ,! ,,ccra wd 3sid] assess+ ! -pany ) ?ird-"py p5alties 9 ! am.t ( 4#b1jjj1jjj 7i4e41 ! gross 5title;ts74 ,! ,,ccra wd al 3sid] assess+ ! apprais] ) ?ird-"py civil p5alties4 ,! am.t (! p5alty wd 2 8 gross 5title;ts f ! valu,n activ;y1 : is 4#ge1jjj4 ,example #aj3 ,promo;n ,9volv+ a ,false ,/ate;t ,a p]son is sell+ ,,gst/,,hst exemp;n c>ds 63sum]s4 ,=a pay;t (a c]ta9 am.t1 a 3sum] wd rcv a c>d t /ates ! c>dhold] is 5titl$ 6pur*ase gds & s]vices free ( ,,gst/,,hst4 #gc ,example #aj d#ad ,-;ts ,! p]son sell+ ! ,,gst/,,hst exemp;n c>ds is r1sonably expect$ 6"k t ! ,,gst/,,hst exemp;n c>d does n 5title ! 3sum]s 6pur*ase gds & s]vices free ( tax4 ,9 provid+ s* assur.e & issu+ ! c>d1 ! p]son is mak+ a false /ate;t ei "k+ly or 9 circum/.es am.t+ 6culpa# 3duct4 ,3sequ5tly1 ! ,,ccra wd 3sid] assess+ ! p]son )! ?ird-"py civil p5alties s* z ! plann] p5alty4 ,! p]son's gross 5title;ts =! purposes ( calculat+ ! plann] p5alty >e ! total ( all am.ts he is 5titl$ 6collect f ! sale (! ,,gst/,,hst exemp;n c>ds4 ,example #aa3 ,promot+ ,non- ,compli.e ,)! ,,eta ,an organiz,n is advocat+ ! posi;n t ! ,,gst/,,hst is uncon/itu;nal1 &1 "!=e1 p %d n pay1 collect1 or remit ! ,,gst/- ,,hst4 ,! organiz,n makes pres5t,ns & #gd ,example #aa e#ad publi%es a numb] ( public,ns 3ta9+ /ate;ts ( t nature4 ,-;ts ,! /ate;t t ! ,,gst/,,hst is uncon/itu;nal is cle>ly a false /ate;t4 ,? matt] has be5 3sid]$ 9 a numb] ( c\rt cases 9clud+ ,w9t]hav5 ,/a#s ,ltd4 v4 ,attorney ,g5]al ( ,canada ,7#aihh7' #ec ,d4,l4,r4 7#d?7 #dac 7,alta4 ,c4,a471 ,j1n-,maurice ,*>bonn1u v4 ,m9i/] ( ,n,nal ,rev5ue1 #if ,,dtc #fjeh 7,,fc-;td71 & ,j1n- ,luc ,/-,laur5t v4 ,h] ,maje/y ! ,que51 #ig ,,dtc #ecb4 ,a p]son wd "k1 or wd r1sonably 2 expect$ 6"k1 t ! /ate;t is a false /ate;t4 ,! ,,ccra wd -------------------------------------#ae 3sid] assess+ ! p]son :o has made ! false /ate;t )! ?ird-"py civil p5alty4 ,9 ! abs;e ( gross 5title;ts 7e4g41 rev5ues f ! sale ( public,ns 3ta9+ false /ate;ts71 ! m9imum p5alty am.t ( 4#a1jjj wd apply4 #ge ,3duct ,: ,describes an a#ae ,9di6];e z 6,:e!r ,"! ,is ,-pli.e ,)! ,legisl,n ,example #ab3 ,9di6];e ,:5 ,"! ,is a ,lack ( ,9=m,n ,submitt$ ,a taxpay] approa*es a tax return prep>] 6prep>e & ;e-file 8 tax return4 ,prior 6?1 ! tax return prep>] & 8 firm did n provide any s]vices 6! taxpay] & !y did n "k ea* o!r4 ,! taxpay] provides ! tax return prep>] )a ,t#d slip 9dicat+ t ! taxpay] has 4#cb1jjj ( employ;t 9come1 : repres5ts 8 sole s\rce ( 9come4 ,! taxpay] tells ! tax return prep>] t he made a *>ita# don,n ( 4#bj1jjj b =got ! receipt at home4 ,! taxpay] asks t ! tax return prep>] immly prep>e & ;e-file ! tax return )\t obta9+ ! receipt4 ,-;ts ,on ^! facts1 if ! tax return prep>] 7 6prep>e & ;e-file ! taxpay]'s #gf ,example #ab b#ae return )\t obta9+ ! *>ita# don,n receipt1 ! ,,ccra wd 3sid] assess+ ! tax return prep>] )! prep>] p5alty4 ,giv5 t ! quantum (! deduc;n is s 4propor;nate 6! taxpay]'s app>5t res\rces z 6defy cr$ibil;y1 6proce$ un"q+ly 9 ? situ,n wd %[ wil;l bl;s & ?us an 9di6];e z 6:e!r ! ,,ita is -pli$ )4 ,example #ac3 ,9=m,n a ,tax ,prep>] ,is ,r1sonably ,expect$ 6,"k ,an annual ,,gst/,,hst return fil] 9=ms h] a3.tant t %e has n kept records (! ,,gst/,,hst pd or paya# on h] busi;s pur*ases =! ye>4 ,! a3.tant 9=ms h] t he wd make an 9put tax cr$it 7,,itc7 claim bas$ on ! f9ancial /ate;ts ( h] busi;s4 ,! a3.tant applies a factor ( #g ov] #ajg 7z ! fil] is locat$ 9 a non ,,hst,'-"picipat+ prov9ce7 6all exp5ses %[n 9 ! 9come /ate;t4 ,? 9cludes ! #gg ,example #ac c#ae co/ ( sales & all acquisi;ns %[n 9 ! bal.e %eet4 ,! am.ts >e r1sona# & h be5 9curr$4 ,! 9come /ate;t 9cludes a l>ge am.t ( payroll exp5ses 79curr$ 9 ! non ,,hst,'-"picipat+ prov9ce7 & 9t]e/ exp5se on : ,,gst/,,hst is n pd or paya#4 ,! co/ ( sales 9cludes a l>ge propor;n ( pur*ases t >e z]o-rat$4 ,! a3.tant applies ! #g ov] #ajg factor 6payroll1 9t]e/1 & z]o-rat$ pur*ases4 ,? results 9 an ov]/ate;t ( 9put tax cr$its report$ on ! ,,gst/,,hst return4 ,-;ts ,! factors 9 p>agraph #ag wd 2 3sid]$ 9 det]m9+ :e!r ! prep>] p5alty wd 2 appli$4 ,! a3.tant is expect$ 6"k t ,,gst is n paya# on mo/ ( payroll exp5ses1 9t]e/ exp5ses1 & z]o-rat$ pur*ases4 ,9 fil+ a claim t 9cludes ! abv items1 ! a3.tant made a false /ate;t1 ei "k+ly1 or 9 circum/.es am.t+ 6culpa# 3duct4 ,3sequ5tly1 #gh ,example #ac d#ae ! ,,ccra wd 3sid] assess+ ! a3.tant )! ?ird-"py civil p5alty1 specific,y1 ! prep>] p5alty4 ,example #ad3 ,delib]ately ,ov]/at$ ,tax ,cr$its ,an exp]i;ed tax practi;n] prep>es a ,sci5tific ,rese>* & ,exp]i;tal ,develop;t 7,,sr&,,ed7 claim on 2half (a cli5t4 ,! practi;n]'s fee is bas$ on ! total 9ve/;t tax cr$it claim$ 0! claimant4 ,! "w claim$ is prop]ly def9$ & "!=e eligi# z a ,,sr&,,ed activ;y2 h["e1 ! alloc,n (! -pany's exp5ses 6! subsec;n #cg7#a7 (! ,,ita ,,sr&,,ed exp5ditures is obvi\sly 9flat$ & is mat]ial 9 nature4 ,al? ! co/s 7 9curr$1 mo/ (! co/s >e n attributa# 6,,sr&,,ed activities4 ,-;ts ,! ,,sr&,,ed claim 3ta9s a false /ate;t 79flat$ alloc,n ( #gi ,example #ad e#ae ,,sr&,,ed exp5ditures74 ,if ! tax practi;n] knew or wd r1sonably 2 expect$ 6"k1 b = culpa# 3duct1 t ! claim 3ta9s a false /ate;t1 ! ,,ccra wd 3sid] assess+ ! tax practi;n] )! prep>] p5alty4 ,3duct ,demon/rat+ a ,wil;l1 ,reck.s1 or ,wanton ,4reg>d (! ,law ,example #ae3 ,ignor+ a ,c\rt ,deci.n ,an a3.tant has s"eal cli5ts :o h be5 reassess$ =a tax %elt]4 ,! a3.tant "ks t ! ,,ccra is *all5g+ ! tax b5efits claim$ =! tax %elt] on ! basis t ! %elt] is n a busi;s1 is bas$ on a significant ov]- valu,n (! relat$ prop]ty &1 alt]natively1 is te*nic,y defici5t4 ,! ,tax ,c\rt ( ,canada1 9 a te/ case 7g5]al proc$ure71 d5ies deduc;ns claim$ =! tax %elt] 9 a previ\s ye> 0a #hj ,example #ae f#ae cli5t (! a3.tant 7i4e41 ! cli5t's app1l is 4miss$74 ,! case is n app1l$ &! a3.tant is aw>e (! ,c\rt's deci.n4 -------------------------------------#af ,! a3.tant prep>es & files a tax return on 2half (a di6]5t cli5t t 9cludes a claim =! same tax %elt] t ! ,tax ,c\rt det]m9$ 0 9e6ective4 ,-;ts ,on ^! facts1 ! ,,ccra wd 3sid] assess+ ! a3.tant )! prep>] p5alty4 ,h["e1 if ! a3.tant _h det]m9$1 & 0 a# 6demon/rate t ! fact situ,n 0 di6]5t or "! 0 a r1sona# basis ^u : ! ,tax ,c\rt deci.n cd 2 ov]turn$ 0a hi<] c\rt1 ! p5alty wd n apply4 ,example #af3 ,9di6];e ,reg>d+ ,p]sonal ,exp5ses ,claim$ z ,busi;s ,exp5ses ,an a3.tant rcvs a box ( p]sonal & busi;s receipts f 8 cli5t & agrees #ha ,example #af a#af 6prep>e a busi;s exp5se /ate;t = hm4 ,! a3.tant 9cludes ! 4#aj1jjj co/ (! cli5t's family vac,n 7: he knew 6be a non-deducti# p]sonal exp5se7 z a busi;s exp5se 9 ! cli5t's tax return4 ,! a3.tant prep>es & f9alizes ! cli5t's tax return & advises ! cli5t t he w 2 rcvg a 4#e1jjj tax refund4 ,! cli5t signs & files ! tax return4 ,! ,,ccra 3ducts an audit & 4cov]s ! 4#aj1jjj ( p]sonal exp5ses deduct$ 9 ! cli5t's tax return4 ,! auditor al 4cov]s t ! families (! a3.tant &! cli5t vac,n$ tgr4 ,"!=e1 ! a3.tant knew ! exp5se 0 p]sonal at ! "t he 9clud$ x 9 ! busi;s exp5ses4 ,-;ts ,! ,,ccra wd 3sid] assess+ ! a3.tant )! prep>] p5alty 2c ! return 0 prep>$ & fil$ despite 8 k (! false /ate;t4 ,al1 ! ,,ccra wd 3sid] apply+ ! gross neglig;e p5alty 7subsec;n #afc7#b7 (! #hb ,example #af b#af ,,ita7 6! cli5t 9 ^: tax return ! false /ate;t 0 made4 ,example #ag3 ,9come ,splitt+ ,:5 ,s]vices ,>e ,n ,r5d]$ ,f9ancial /ate;ts & tax returns = ,familyco >e prep>$ 0an a3.tant4 ,familyco pays sal>ies 6all family memb]s1 two ( :om >e 9 univ]s;y & "o ( :om lives \tside ,canada4 ,! taxpay] 9=ms ! a3.tant t ! family meets a few "ts a ye> 64cuss -pany busi;s4 ,-;ts ,g5],y1 r1sona#;s ( sal>ies 6family memb]s :o provide s]vices 9 ! c\rse (! busi;s is n an issue t wd 2 subject 6! ?ird-"py civil p5alties4 ,9 extreme situ,ns ^! p5alties may apply4 ,": family memb]s h provid$ no s]vices &! a3.tant "ks ? fact1 ! prep>] p5alty wd 2 3sid]$4 #hc ,example #ag c#af ,if ! a3.tant did n "k1 b wd 2 r1sonably expect$ 6"k (! false /ate;t1 "o ne$s 6det]m9e if ! a3.tant's ac;n result$ 9 culpa# 3duct4 ,facts 6be 3sid]$ ) reg>d 6:e!r ! p5alties wd 2 appli$ 9clude ^? li/$ 9 p>agraph #ag4 ,example #ah3 ,possi# ,wil;l ,bl;s ,an advisor is responsi# =! fil+ ( returns (a gr\p ( relat$ subsidi>y -panies4 ,he is employ$ 0"o (! -panies 9 ! gr\p4 ,! transf] prices us$ h be5 provid$ 0! =eign p>5t &! advisor does n "k !y >e appropriate = ,canadian 9come tax purposes4 ,he makes a reque/ ( ea* ,canadian -pany 6provide details ( _! pric+ deci.ns4 ,"s -panies respond t ! docu;ts & records !y ma9ta9 = transf] pric+ purposes satisfy ! require;ts ( subsec;n #bdg7#d7 (! ,,ita4 ,o!rs1 ^: transf] prices _h 9cr1s$ significantly f prior ye>s1 9dicate t al? !y d n #hd ,example #ah d#af ma9ta9 docu;ts & records 9 a3ord.e )! require;ts ( subsec;n #bdg7#d71 !y 2lieve !y wd 2 a# 6ju/ify ! transf] prices4 ,an audit ( "o (! subsidi>ies 7! advisor is n employ$ 0! subsidi>y audit$7 results 9 net transf] pric+ adju/;ts =! ye> 9 excess ( #aj@3p (! -pany's gross rev5ue4 ,x is fur!r det]m9$ t ! -pany did n satisfy ! require;ts ( subsec;n #bdg7#d71 z x fail$ 6e/abli% t r1sona# ef=ts 7 made 6det]m9e & use >m's l5g? transf] prices or alloc,ns4 ,-;ts ,:e!r ! p5alties >e appli$ wd dep5d on :e!r "! is culpa# 3duct4 ,! crit]ia /at$ 9 p>agraph #ag wd 2 us$ 6det]m9e if ! p5alties >e applica#4 ,9 ! situ,n at h&1 ! advisor knew t c]ta9 memb]s (! relat$ gr\p 7 n -ply+ )! docu;t,n require;ts ( subsec;n #bdg7#d74 ,! advisor al knew t ! transf] #he ,example #ah e#af prices (! gds & s]vices suppli$ 0^! -panies 6_! ,canadian subsidi>ies _h significantly 9cr1s$ f prior ye>s4 ,9 view ( ^! facts1 x appe>s t ! advisor mid+ ! applicabil;y (! employee exemp;n1 ! 9t]nal advisor is n an employee (! -pany t 0 reassess$4 ,"!=e1 9 law1 ! subsec;n #afc.b7#ae7 exemp;n wd n 2 availa# 6! 9t]nal advisor4 ,h["e1 if a p5alty 7 6be appli$1 x wd n 2 -------------------------------------#ag appli$ 6! 9t]nal advisor b 6his employ] z p] p>agraph #ei4 ,! non- resid5t p>5t "picipat$ 9 ! mak+ (! false /ate;t 7z x 9itiat$ x71 & "!=e1 x may al 2 subject 6! ?ird-"py #hf ,example #ah a#ag civil p5alty4 ,employees (! non- resid5t p>5t wd h ! same protec;n z ! 9t]nal advisor4 ,! corporate cli5t may al 2 subject 6! transf]-pric+ p5alty "u subsec;n #bdg7#c71 s9ce x fail$ 6make r1sona# ef=ts 6det]m9e & use >m's l5g? transf] prices on ! gds & s]vices4 ,2f ! transf]-pric+ p5alty c 2 propos$1 ! matt] m/ 2 approv$ 0! ,transf] ,pric+ ,review ,-mittee4 #hg