Suppose you have a large tax reassessment and want it to go away. Need it to go away is likely closer. How do you negotiate its removal?
First of all, you must establish that the assessment is either wrong or in a grey area. A grey area is one where interpretation of the law is the issue.
If the assessment is clearly right, you forgot to include the income on your return, you are better off working out a deal. Perhaps avoid penalties and maybe even interest.
If it is clearly wrong, the facts are not real, then hire someone credible to present your case. Better information overcomes poor information.
The grey area is harder. Interpretation is opinion, and opinion relies on a particular version of the facts. For example, suppose I buy a piece of vacant land and resell at a profit three years later. In Canada, should it be a capital gain, taxed on 50% of the gain, or should it be regular income and fully taxed?
If you, by your activity after the purchase, can show you bought the land with a view to building a factory on it, but that plan was frustrated by local bylaws that changed before you were ready to build. They would be hard-pressed to make you a trader.
The government will prefer regular income and can make that work if they can establish your are a trader. If you bought it to resell, that seems reasonable. How it is different than someone buying and selling green beans? If you have ten similar properties in your inventory and buy and sell three or four a year, they will likely win. The properties are just stock in trade. No different than the grocer with green beans.
Activity has a nature and establishes the intent of the transaction.
Sometimes though, they will use a section that sort of deals with the question, but their interpretation of the events is different than other examples.
Re-assessments in the grey area should be appealed immediately. There is a time limit. You must protect your position. Secondarily the people who deal with appeals are not the same ones who raised the assessment. They are accustomed to negotiating rather than merely reasserting their reasoning. You cannot work out interpretation with people who cannot change.
They just need a plausible, yet different view
No one negotiates to change a position unless there are reasons to do it. It is not random.
All rational so far.
Once in a long while there will be a department promoting the action that has fallen afoul of the revenue folks. They can present support to a higher level. They won’t demand that it be repaired, but they will suggest that the policy be reviewed.
Even when the revenue department’s case is close to right, it can change.
We had a very large farming corporation client who wanted to transfer assets to his children. Section 84.1 wasn’t there at the time, so the transaction became sell for fair value, today’s money, about $6,000,000. The buyers obtained a first mortgage for $1,600,000 and the remaining balance was secured by a second mortgage entitled to receive as payment, a share of the gross proceeds each year.
The government decided it was an appropriation of corporate assets to the benefit of a shareholder and taxed the $4.4 million mortgage as income to father in the year. Nearly $3,000,000 in tax, plus interest for almost three years. Total close to $3.75 million.
Their idea of an appropriation was thin but not impossible.
As the pressure to resolve came from above, they wanted to settle but they needed a reason to change their mind.
If they are honest and know what they are doing, they will change their mind when presented with new possibilities.
In this case the section is operable if there are assets that have been taken from a corporation. The argument we used was, there are no assets expropriated from the corporation, there are merely assets whose title has changed and the corporation has not yet been paid for them. The asset merely changed its form.
A fine difference, but given the wish of their superiors to have this case go away, they agreed and said they would reverse the assessment.
People must be willing to change their mind and then another specific and factual reason they can present as why they decided as they did. The need a reason and they need to want to. All negotiation works that way.
You need someone with the authority to make it happen. When the appeals supervisor said they would remove the assessment, I asked them to just do it now.
His reply, “When we write off almost $4,000,000 of tax, you need to talk to someone with carpet on the floor.”
When you want to persuade people, there is a set of requirements:
I help people have more retirement income and larger, more liquid estates.
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