Gratuities fell within ambit of taxable income

Tax – Income tax – Source of income

Taxpayer worked as slot attendant at casino and reported income for two taxation years, which did not include tips. Minister reassessed taxpayer and added unreported income for each of taxation years, respectively, and imposed gross negligence penalties for both taxation years. Tax Court found that tips earned by taxpayer from his employment as slot attendant at casino were properly included in his income for taxation years at issue. Trial judge also upheld gross negligence penalties levied against taxpayer under subsection 163(2) of Income Tax Act, based inter alia on fact that he had knowledge of tax matters from his previous experience. Taxpayer appealed. Appeal dismissed. Tax court made no reviewable error in dismissing this argument, as s. 5(1) and s. 6(1)(a) of Income Tax Act were quite broad as to what constituted income. It was clear from language of these provisions that gratuities fell within ambit of taxable income. Decision of tax court was consistent with previous decisions according to which tips paid out of gambling winnings constituted taxable income. Taxpayer did not convince that trial judge erred in coming to conclusion that he displayed “dismissive and indifferent attitude” in failing to inquire as to whether he should report tip amounts.

Xia v. Canada (2020), 2020 CarswellNat 269, 2020 FCA 35, Rennie J.A., Yves de Montigny J.A., and Locke J.A. (F.C.A.); affirmed (2018), 2018 CarswellNat 8942, 2018 CarswellNat 9106, 2019 TCC 30, 2019 CCI 30, Diane Campbell J. (T.C.C. [Informal Procedure]).

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