https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/343633/index.do
Sycheva v. The Queen (August 28, 2018 – 2018 TCC 180, Russell J.).
Précis: The taxpayers, husband and wife, were reassessed on a net worth basis for the 2009-2011 taxation years. The taxpayers made three arguments:
1. The wife, Mrs. Sycheva, had received a gift of $422,000 U.S. in 2005 from the estate of her late parents which the taxpayers kept intact until 2009 and used to cover some of their expenses in the years under appeal.
2. They claimed to have received a loan of $119,000 Cdn. from a Mr. Kogan in January of 2009 which was repaid in cash in 2011. They argued that the repayment was made from the funds saved from the 2005 gift from the estate of Mrs. Sycheva’s parents.
3. They claimed to have received a loan of $123,000 Cdn. from a Mr. Kravchenko in January of 2009 which was repaid in cash in late 2010. Again, they argued that the repayment was made from the funds saved from the 2005 gift from the estate of Mrs. Sycheva’s parents.
The Tax Court accepted the evidence of the Kogan loan but rejected the taxpayers’ other two arguments. Since the success on the appeal was split, the Court made no order as to costs.
Decision: The Court rejected the argument that the 2005 gift was kept intact as a “nest egg” until 2009 and beyond:
[12] The appellants’ evidence on this issue of the monetary gift was all uncorroborated viva voce. I make clear that the issue was not whether the gift was received in 2005 - it was - but rather whether this large sum was retained, substantively unspent, until at least December 31, 2008. The appellants’ evidence was that in the latter part of 2005 they moved this large sum in instalments permitted by the bank which had received these funds from abroad, into their own custody, and kept in a safe at their Toronto residence. This was said to be because of mistrust of banks, with general references to past bank failures in Russia. The result is that there is no bank documentation confirming the continued existence of this large sum intact over the subsequent months and years to December 31, 2008 and thereafter.
…
[15] The appellants’ evidence was that the loans were being paid back by funds from the 2005 money gift, said to be a “nest egg”. It was said that most of those funds were used to pay back the loans, and otherwise for payment of credit card expenses. It was said that by December 2010 there was a remaining balance of $270,000 - $280,000 (U.S.). Again there was no documentary or other confirmatory evidence of this. What then happened to this large remainder? More essentially, why borrow in the first place, and pay interest, with these “nest egg” funds at hand? Why not just have used these funds directly for the supposed purpose of the loans, to advance SZ’s business interests, of which there was no confirmatory evidence either.
Similarly the Court rejected the evidence of the Kravchenko loan:
[19] The last issue is the allegation of a loan of $123,000 from Ms. S. Kravchenko to the appellants or either of them also in January 2009, said to have been repaid in full by December 2010. In this instance there are two items of intended corroborating evidence. One is a promissory note signed by ZS and supposedly witnessed by Ms. Kravchenko’s boyfriend, who was not there to testify. I do not consider this corroboration as at the end of the day the only signature that was proved was that of the appellant ZS. We heard no evidence from or otherwise on behalf of Ms. Kravchenko, said to have moved or moved back to Moscow. The evidence of witnesses saying they overheard portions of conversations at social occasions between either of the appellants and Ms. Kravchenko, and saw packages that could be money passed between them, was too speculative to be accorded judicial weight. And again I am left to wonder why borrow money in the first place with the gifted funds at hand for use, without interest having to be paid. Further, why borrow when these gifted funds were supposedly on hand, and ostensibly used promptly to repay the borrowed funds.
[20] On the bases of the foregoing I am unable to conclude in relation to the claimed loan from Ms. Kravchenko that the Minister’s assumption that the appellants did not receive funds in 2009, 2010 or 2011 other than what already was reflected in the net worth analysis being the basis of the appealed reassessments has been disproved, on a prima facie or otherwise basis.
However the Court did accept the evidence of the Kogan loan:
[18] In any event Mr. Kogan’s widow, Ms. Raisa Kogan testified. She confirmed the signature on the above mentioned payment receipt as being Mr. Kogan’s. She also testified that Mr. Kogan had told her he had loaned money to the appellants and that the amount loaned had been fully repaid. I do not consider that Ms. Kogan’s evidence was significantly impeached on cross-examination. Nor in my view did any evidence called by the respondent do so. Accordingly I accept that the appellants have established at least a prima facie case that the alleged loan of $119,000 from Mr. Kogan was in fact made, in January 2009, and paid back in full by not later than December 2011. However, this evidence does not establish on a prima facie basis or otherwise that any repayment of the Kogan loan was sourced from the 2005 monetary gift to the appellant ZS from her sister.
Thus the reassessments were referred back to the Minister for reconsideration and reassessment on the basis that the taxpayers received a loan of $119.000 from S. Kogan that was repaid by December 2011. Since success was mixed there was no order as to costs.