http://decision.tcc-cci.gc.ca/site/tcc-cci/decisions/en/item/31226/index.do 
Tibilla v. The Queen[1] (July 3, 2013) involved an unreported capital gain on the disposition of a piece of real estate in 2007. The appellant claimed that the gain occurred in 2008 and should, in any event, be reduced by capital expenses of $52,810:
[2] On December 18, 2007, the appellant sold for $285,000 a rental property that he had acquired on November 14, 2002 for $172,000. Both transactions were completed by notarial deeds (Exhibit R-1, Tabs 13 and 14).
[3] In filing his tax return for the 2007 taxation year, the appellant did not declare any capital gain on the sale of that property.
[4] On August 31, 2010, the Canada Revenue Agency (CRA) advised the appellant by letter that his income tax return for the year 2007 was under review and that he was required to provide information and documents concerning the rental property sold in 2007, namely: copies of the contracts of purchase and sale, a statement of the capital cost allowance claimed over the years he owned the property, and a list of any expenses related to the purchase and the disposition along with the corresponding receipts (Exhibit R-1, Tab 2).
[5] The appellant was late in filing his tax return for 2008 and copy of it, dated August 17, 2008, was received by the CRA on September 10, 2010 (Exhibit R-1, Tab 3, page 21, and Tab 18). In his tax return for the year 2008, the appellant declared a capital gain of $41,571.64 and a taxable capital gain of $20,785.82 (50% of the capital gain) on the sale of the above-mentioned rental property (Exhibit R-1, Tab 3, pages 2 and 6).
[6] In calculating the amount of the capital gain, the appellant added to the cost of the property an amount of $52,810, which he claimed represented renovation expenses that he incurred with respect to the property from April 2002, before his acquisition of it. The calculation of the capital gain by the appellant is found in his 2008 tax return (Exhibit R-1, Tab 3, page 17), to which he attached forms (Schedule 8) normally used by corporations for capital cost allowance (CCA). There is one such form for the taxation year ended December 31, 2002 (page 18) and another for the taxation year ended December 31, 2008 (page 10). The appellant acknowledged in court that in filing his 2008 tax return he filled in both forms, in which he indicated the amount of $52,810 as the “cost of acquisitions during the year”.
[Footnotes omitted]
The court rejected the argument that the gain was incurred in 2008:
[21] In the present case, the sale occurred by deed of sale before a notary in the province of Quebec on December 18, 2007. The deed provided that the purchaser became the owner, with immediate possession and occupation on that same date (see deed of sale, Exhibit R-1, Tab 14, page 3 “Possession”). The consideration for the sale was $285,000, which the vendor (the appellant) acknowledged having received from the purchaser and for which complete discharge was given (see deed of sale, Exhibit R-1, Tab 14, page 6 “Prix”). The sale was registered in the official land register on December 19, 2007 as having been sold for that price (Exhibit R-1, Tab 15).
[22] It is therefore logical to conclude that the disposition happened in 2007 and should have been declared as a disposition of a capital property in the 2007 taxation year. The fact that the purchaser might have subsequently challenged the purchase price (an allegation that is not substantiated by any tangible evidence) is irrelevant here. The appellant in fact disposed of his property and received the proceeds of disposition in 2007. The capital gain had to be included in income for the 2007 taxation year pursuant to the above-mentioned provisions of the ITA.
[23] The appellant also argued that he was advised by someone from the CRA that his capital gain should be included in income for the 2008 taxation year, and that the respondent is bound by that advice. First, there is no evidence that any such advice was given. Second, even if it was, the question is not whether CRA officials exercised their powers properly but whether the amounts assessed can be shown to be properly owing under the ITA. What is in issue before this Court is the validity of the assessment and not the process by which it is established (see
Main Rehabilitation Co. v. The Queen, 2004 FCA 403, 2004 DTC 6762, paragraph 8).
[24] I therefore conclude that the capital gain had to be declared in the 2007 taxation year.
The court also rejected the appellant’s evidence that his receipts for capital expenditures were lost in a flood:
[31] I find the appellant’s explanations difficult to believe. They are all the more so since he never disclosed the flooding to the CRA, although he was asked for documentation at the audit and at the appeal stages. He did not mention it during his examination for discovery either. Furthermore, it appears that the appellant did not disclose in his 2002 tax return the existence of the capital expenditures in question (according to the testimony of Ms. Lefebvre of the CRA).
[32] Finally, the appellant claims that those expenses were incurred before the acquisition of the property, which is another allegation that is difficult to believe without corroborating evidence. This Court, when it is not satisfied with regard to the credibility of a witness, in particular when the taxpayer is seeking to deduct expenses, has discretion to require the taxpayer to adduce supporting documents to prove his point (
House v. The Queen, 2011 FCA 234, 2011 DTC 5142, paragraph 80). As stated by the Federal Court of Appeal in
Njenga v. The Queen., 96 DTC 6593 at page 6594, referred to in the
House case:
The Income tax system is based on self monitoring. As a public policy matter the burden of proof of deductions and claims properly rests with the taxpayer. The Tax Court Judge held that persons such as the Appellant must maintain and have available detailed information and documentation in support of the claim they make. We agree with that finding. Ms. Njenga as the Taxpayer is responsible for documenting her own personal affairs in a reasonable manner. Self written receipts and assertion without proof are not sufficient.
[33] I therefore agree with the respondent that the appellant was not entitled to add the expenses in question to the adjusted cost base of the property without supporting them with adequate vouchers.
Finally, the court rejected the appellant’s argument that he was not required to keep a record of the alleged capital expenditures more than six years after they were incurred, i.e., not beyond 2008:
[36] It is obvious from subsection 230(6) of the ITA that a taxpayer who objects to or appeals from an assessment must maintain his books and records until such time as the objection or appeal is resolved. The onus of proof is on the appellant to prove that the minister’s assumptions in assessing him are wrong (
Hickman Motors Ltd. v. Canada, [1997] 2 S.C.R. 336, paragraphs 92 and 93).
[37] Further, subsection 230(1) requires the taxpayer to keep records and books of account in order to make it possible to determine the taxes that are payable or amounts that are deductible. In addition, pursuant to subsection 230(4), all records and books of account, together with every account and voucher necessary to verify the information contained therein, must be retained until the expiration of six years from the end of the last taxation year to which the records and books of account relate.
[38] The reference to the expiration of six years from the end of the last taxation year to which the books and records relate is to be read in context. Here, I am of the view that, even though the expenses were incurred in 2002, the last taxation year to which the vouchers relate is the year in which the appellant claimed the expenses in order to reduce his capital gain, which he realized in 2007. Therefore, the vouchers could not be destroyed before the later of the expiration of six years after 2007 (subsection 230(4)) and the date on which his appeal is finally disposed of (subsection 230(6)).
[39] The appeals are dismissed, with costs to the respondent.
[1] 2013 TCC 215.