Notice of objection

Buyers and sellers meet the term when the CRA has reassessed the company being sold and the company disputes the result. Section 165 of the Income Tax Act lets a taxpayer who objects to an assessment serve a notice of objection in writing, setting out the reasons and all relevant facts, subject to the limits in subsections 165(1.1) to (1.2), which include extra content rules for large corporations and bar objections to some assessments. A buyer can ask in due diligence whether any objection is open.

How it works

Subsection 165(2) says the notice is served by being addressed to the Chief of Appeals in a District Office or Taxation Centre of the Canada Revenue Agency and delivered or mailed there, though subsection 165(6) lets the Minister accept a notice served another way. On receipt, the Minister reconsiders the assessment and notifies the taxpayer in writing. Subsection 165(1) gives a corporation 90 days after the day the notice of assessment was sent, which the CRA’s publication P148 describes as 90 days from the date of the notice. Section 166.1 lets a taxpayer whose time has passed apply to the Minister to extend it, subject to its conditions.

What to ask

• Which tax years have an open objection, and who filed it
• What the purchase agreement says about who runs the objection and who bears the outcome
• Whether any time limit is still running, counted from the day the notice of assessment was sent

Related reading: What if the business owes back taxes the seller never mentioned?