Taxpayers proved that combined income should be reduced for currency conversion issues

Tax - Income Tax - Administration and Enforcement

Canada Revenue Agency (CRA) conducted net worth analysis of taxpayers MD, PD and corporation and issued reassessments and gross negligence penalties on basis of unreported income. Taxpayers appealed. Appeals allowed. Parties made certain concessions, leaving as issues unreported income in 2012 and gross negligence penalties. Taxpayers were unsuccessful in establishing any change to analysis by reason of interest expense, income tax arrears, alleged double counting of expenditures associated with Mexican vacations, reimbursed employment expenses, and potential rental rebate. Taxpayers were successful in proving that combined income of MD and PD for 2012, as determined pursuant to net worth analysis, should be reduced by total of $27,607, for currency conversion issues, credit card and bank accounts, property taxes, return of capital, and motor vehicle expenses. After taking into consideration concessions made by Minister of National Revenue, amount of combined income that remained in dispute was $27,237. As amount of income determined by CRA pursuant to net worth analysis was excessive by $27,607, taxpayers’ appeals relating to unreported income should be allowed.

Duffy v. The Queen (2019), 2019 CarswellNat 1041, 2019 TCC 75, Don R. Sommerfeldt J. (T.C.C. [General Procedure]).

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