http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/109993/index.do 
Sarmadi v. The Queen (June 3, 2015 – 2015 TCC 133, Favreau J.).
Précis: The appellant was subject to net worth assessments in 2003 and 2004 alleging that he had failed to report rental and business income as follows:
(i) the appellant failed to report rental income of $20,905 and $13,816 in the respective 2003 and 2004 taxation years; and
(j) the appellant failed to report business income of $49,206 and $68,900 in the respective 2003 and 2004 taxation years.
The sole question before the Court was whether the appellant had demonstrated that he received a loan of $90,000 from his father during the years in question which would explain a substantial portion of the net worth assessment. The Court found that the taxpayer’s evidence, and that of his father, was not credible and dismissed the appeal with costs.
Decision: This appeal turned very simply on a failure of the appellant to adduce credible evidence supporting the alleged loan from his father:
[43] The appellant’s evidence and that of his father are unreliable. Both of them did not know when the appellant started borrowing money, how much was borrowed in 2003 and 2004 or the reasons for the borrowed monies. Mr. Sarmadi Sr didn’t even know how much of the $90,000 was still left in the safe as of the date of trial but he did state that some of those monies went to pay for his daughter’s tuition and a private teacher.
[44] It is also entirely implausible that the appellant’s father walked to the bank alone at the age of 70 years old to take out $85,000 in cash. Also, it is even more unbelievable that the money remained untouched in the safe for almost a year until June 2003 when the appellant purchased the 34 Plains Road property; especially since the appellant’s father had minimal income, a small pension and required financial assistance from his children.
[45] Even if Mr. Sarmadi Sr. provided evidence in the form of bank records, a cheque or records created by the lawyer acting on the sale of his house that he sold his house, moved into the appellant’s family home and brought with him in the form of cash, all of the proceeds of sale from the house, all of this evidence is not in itself sufficient for this Court to consider that the funds were actually advanced to the appellant and that the appellant had a source of funds that were not taxable.
[46] The appellant has failed to provide a credible or reliable explanation for the discrepancy between his reported income and his net worth. His explanations were vague and uncorroborated by any documentary proof. Some corroboration is needed in a prima facie case. No reliable evidence has been produced to counter the Minister’s assumptions. The appellant has failed to shift his onus of proof and the reassessments should stand.
As a result the appeal was dismissed with costs.
TAGS: Income Tax Act, Tax Litigation, Net Worth Assessments