Kim v. The Queen (December 7, 2017 – 2017 TCC 246, Smith J.).
Précis: Mr. Kim claimed business losses in 2009 and 2010 when he did not in fact carry on any business activities and used those losses to attempt to shelter his income from employment with Bombardier in those years and in 2006, 2007 and 2008. As has been the case in all of the reported Fiscal Arbitrators decisions his appeal was dismissed. The Tax Court found that gross negligence penalties were applicable and awarded $5,000 in costs to the Crown.
Decision: The Court rejected Mr. Kim’s evidence entirely:
 Since I have already concluded that the Appellant did not carry on a business and did not incur the business expenses in question, it logically follows that the Court must also find that he knowingly made a false statement in his tax returns.
 Even if the Court considers for a moment that the Appellant mistakenly believed that he had a business, which defies credulity, he must have known that he had not in fact incurred the business expenses in question. There is little doubt that he was motivated by a desire to avoid paying income taxes and by the prospect of receiving a substantial tax refund.
 Turning to the language used in Wynter, supra, the Appellant either knew or was deliberately ignorant according to the doctrine of wilful blindness. In other words, he either knew of the false statement or such knowledge is imputed to him. If he had a suspicion, which he must have had, “he deliberately chose not to make enquiries in order to avoid verifying that which might be such an inconvenient truth” (par. 17).
 Referring to the various factors set out by Miller J., in Torres, supra, notably 1) the Appellant’s general level of intelligence, 2) the magnitude of the advantage as compared to tax refunds received in previous years, 3) the blatantness of the false statement, 4) the lack of former knowledge of the tax preparer, 5) the incomprehensible and nonsensical explanations made by the tax preparer, 6) the failure to make enquiries of third parties, an accountant or the CRA. These factors taken together suggest that the Appellant was either wilfully blind or grossly negligent in the preparation of his tax returns.
 On that basis, I find that the Respondent has met the burden set out in subsection 163(3) of the ITA and I conclude that the Appellant knowingly or in circumstances amounting to gross negligence made a false statement in his 2009 and 2010 tax returns. As a result, the Minister is entitled to the gross negligence penalties.
In an odd twist Mr. Kim called one of the principals of Fiscal Arbitrators as a witness. The Court was not impressed:
 What can be said about the testimony of Mr. Watts who, unbeknownst to the Court at the time of the hearing, had been found guilty by a jury of fraud in connection with his activities with Fiscal Arbitrators, as reported at 2016 ONSC 4843. On June 6, 2016, he was sentenced to six years in jail and ordered to pay a fine of $149,129. The trial judge indicated that:
 Following a twenty-three-day jury trial, Lawrence Watts was found guilty of one count of fraud, in an amount exceeding $5,000, contrary to section 380(1)(a) of the Criminal Code. The charge arose from the preparation, by the offender, of one or more income tax returns for 241 Canadian taxpayers. In each case, a non-existent business loss, of a non-existent business, was reported which had the effect of extinguishing the taxpayer’s tax liability for the then current, and three previous years. This resulted in a claim for a refund of all of the tax paid in the three previous years, and of the money withheld at source by their employers for the then current year. The taxpayers who testified at trial gave evidence that they had not carried on a business, or incurred the losses reported on their returns, had not suggested to Watts that they had incurred losses, and did not know where the numbers on their returns had come from.
 The total amount of federal tax revenue that would have been lost had all of the returns been assessed as filed was $10,507,131, based upon the reporting of $64,253,889 of non-existent losses. However, at some point, Canada Revenue Agency caught on to the scheme and began to disallow the refund claims. The actual amount paid out in federal tax refunds, or otherwise credited to the taxpayers’ federal tax accounts, was $2,750,288.
 In preparing the tax returns, Mr. Watts used the business name “Fiscal Arbitrators”. For his services, the taxpayers were charged twenty per cent of the tax refunds, or credits, received from CRA. Documents seized from Watts’ office showed projected revenue of $1,902,227.
 Despite the foregoing, Mr. Watts was happy to step forward as a witness for the Appellant and repeat his mantra that each and every Canadian was entitled to claim business losses to eliminate income tax they might have paid on their employment income. Having acknowledged that he had been involved in the preparation of the Appellant’s tax returns, he was asked by the Appellant if he could point to a false statement or omission in the tax returns. Mr. Watts responded by assuring the Court that there were none. As indicated above, his testimony is inherently unreliable and of no probative value whatsoever. In any event, his responses go to the heart of the issues that must be determined by this Court and not by Mr. Watts.
As has been the case in all of the reported Fiscal Arbitrators decisions Mr. Kim’s appeal was dismissed. The Tax Court found that gross negligence penalties were applicable and awarded $5,000 in costs to the Crown.