Tax Court of Canada


Tax

Income tax

Non-residents

Minister produced sufficient evidence to refute taxpayer’s net worth assessments

Taxpayer came to Canada through business immigration program but was no longer resident. Taxpayer invested in real estate properties to derive rental income, and bought and sold properties. Minister of National Revenue issues assessments for 2005, 2006, and 2007 taxation years to include additional income for net worth assessment in amounts of $122,100, $291,663, and $74,943, respectively. Gross negligence penalties were also assessed. Net worth assessment imputed income on both taxpayer and his former spouse; taxpayer was responsible for 50 percent share of that unreported income. Taxpayer appealed. Appeal allowed. Taxpayer rebutted net worth assessment to extent of 84 percent of additional income asserted and gross negligence penalties were not to apply. Taxpayer gave reasonable explanations with respect to how he maintained his lifestyle during years in question, taking into consideration loans from his aunt and his family. Only 16 percent of additional income calculated under net worth assessment would be assessed. Translated documents submitted by taxpayer, including foreign financial documents, to Minister’s counsel met requirements set out by R. 89 of Tax Court of Canada Rules and were admitted. Taxpayer received loans totalling $385,288 from his aunt, $439,216 from his family, and $125,000 from company. Taxpayer also submitted that shareholders’ loan balance in T Ltd. for $325,362 was undervalued due to accounting balance and should have been for $558,610.89. Taxpayer made prima facie rebuttal of Minister’s assumptions with respect to loans from his aunt and from his family. As with net worth assessments, taxpayer’s share in loans was also 50 percent, which reduced his additional income by approximately 84 percent. However, taxpayer did not make out prima facie case with respect to various loans from company, balance in shareholders’ loan in D Ltd. and Scheduled D of reply. Since taxpayer was unable to have accountant from T Ltd. testify as to undervaluation of shareholders’ loan balance, that amount was determined to be valued at $352,362. Minister produced sufficient evidence to refute concerns raised by taxpayer with respect to accuracy of Schedule D which formed part of his net worth assessments (amounts included water, fuel, electricity, communications expenses).

Tang v. The Queen (2017), 2017 CarswellNat 4350, 2017 TCC 168, Dominique Lafleur J. (T.C.C. [General Procedure]).

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