By Kalen Smith, Big4.com Blogger

Two plaintiffs in Nova Scotia allege that KPMG provided them with negligent tax advice. They have filed a lawsuit against the auditor in the Novia Scotia Supreme Court.

Loran Tweedie and Linda Tweedie are co-owners of First Communications Contractors Ltd. They hired KPMG to provide guidance in restructuring their company.

In their discussions, KPMG told the plaintiffs they would be eligible for a capital gains reduction if they sold their shares to other shareholders in First Communications Contractors. The plaintiffs reportedly followed their advice.

However, the Canada Revenue Agency filed a report that year that treated the sale of their shares as taxable dividends instead of capital gains. Collectively, this decision cost the plaintiffs more than $1 million in taxes. Loran Tweedie and Linda Tweedie retained counsel to request Canada Revenue Agency reconsider its position. The appeal was unsuccessful and the plaintiffs were stuck with the additional tax bill.

As a result, the plaintiffs are seeking damages from KPMG. The losses include all taxes, interest and costs the plaintiffs were obligated to pay to the CRA. Although none of the accusations have been proven in court, KPMG is required to file a defense by February 11.

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