As taxpayer did not carry on business or incur business expenses court must find he knowingly made false statement in tax returns

Taxpayer claimed business losses and loss carry-backs based on theory of separation of legal entity and human being or “person”. Minister re-assessed taxpayer, disallowing claimed business losses and carry-backs and assessing gross negligence penalties. Taxpayer appealed. Appeal dismissed. Person or human being can operate business under Canadian law but no distinction between that person and individual who has a social insurance number and earns employment income. Taxpayer must be able to demonstrate that activities were undertaken with view to realizing a profit. As taxpayer did not carry on business and did not incur business expenses in question court must find he knowingly made false statement in tax returns. Taxpayer’s general level of intelligence, magnitude of advantage as compared to previous tax refunds, blatantness of false statement, lack of former knowledge of tax preparer, incomprehensible explanations made by tax preparer, failure to make enquiries of third parties, accountant or CRA taken together suggested taxpayer was either wilfully blind or grossly negligent in preparation of tax returns. Taxpayer’s witness, who was proponent of “separation of legal entity and a human being or person,” had been convicted of fraud and testimony inherently unreliable and of no probative value.

Kim v. The Queen (2017), 2017 CarswellNat 7346, 2017 TCC 246, Guy R. Smith J. (T.C.C. [General Procedure]).