To v. R. - TCC: Taxpayer assessed for unreported income - appeal dismissed

To v. R. - TCC:  Taxpayer assessed for unreported income - appeal dismissed

To v. The Queen (July 27, 2016 – 2016 TCC 176, V. Miller J.).

Précis:   Ms. To was assessed for unreported income for the period 2006-2009 based on cash seized in the course of a raid at her home.  The cash, roughly, $65,000, was, on her evidence, mostly her savings since the time of her marriage and $4,400 US which belonged to her mother.  The Court rejected her evidence entirely.  Nevertheless the Crown conceded at trial that there was no unreported income in the years 2006-2008.  Gross negligence penalties were deleted for all taxation years also on a concession from the Crown.  The Crown also agreed to a reduction of the unreported income in 2009.  The appeal was allowed only to the extent of the concessions made by the Crown and the deletion of all gross negligence penalties.  There was no order as to costs since this was an informal procedure appeal.

Decision:   Ms. To was unrepresented.  Crown counsel, to her credit, conceded at trial that the original reassessments overstated Ms. To’s unreported income by roughly $80,000 and agreed that all gross negligence penalties should be deleted.

[2]             The Minister of National Revenue (the “Minister”) used a net worth analysis to reassess the Appellant’s income tax liability for her 2006, 2007, 2008 and 2009 taxation years. The 2006 and 2007 taxation years were reassessed beyond the limitation period pursuant to subsection 152(4) of the Income Tax Act and gross negligence penalties were assessed in accordance with subsection 163(2) for each of the taxation years at issue. According to the net worth analysis, the Appellant failed to include the following amounts in her income:

Taxation Year

Reported Income

Unreported Income
















[3]             The amount included in the Appellant’s income as unreported income was calculated by deducting her total liabilities from her total assets and adding her personal expenditures to the result. Adjustments were made for her income tax refund, GST/HST credit refund and the Child Tax Benefit.

[4]             The Appellant’s total assets included the results from a bank deposit analysis and the cash found in her home. She had no liabilities. The personal expenditures were calculated using Statistics Canada information.

[5]             At the beginning of the hearing, counsel for the Respondent conceded that the amounts included in the Appellant’s income for personal expenditures were too high. Counsel stated that the amounts estimated by the Appellant for personal expenditures were more accurate and counsel submitted a document with those amounts. The result of this concession is that there is no unreported income for 2006, 2007 and 2008 and the unreported income for 2009 is reduced to $53,689. With the deletion of the unreported income for 2006, 2007 and 2008, the gross negligence penalties are also deleted for those years. The Respondent conceded that the gross negligence penalties for 2009 should also be deleted.

The Tax Court Judge rejected Ms. To’s evidence completely:

[12]        I found that the Appellant’s evidence was implausible. She stated that she was “holding” US$4,400 for her mother but she did not have her mother attend at the hearing to corroborate her testimony.

[13]        The Appellant stated that $30,000 of the money found in her bedroom were gifts which she received at her wedding in 1988. Besides the Appellant’s self-serving testimony, there was no evidence to support her statement that she received $30,000 as wedding gifts.

[14]        There are several reasons why I have difficulty believing that the Appellant had $30,000 for 21 years and she did not use it to help pay for the basic necessities of daily life. First, she reported that she had little employment income for several years and no employment income for other years. For the 18 year period from 1988 to 2005, the Appellant reported total net income of $119,848. I note that in 1999 and 1998, the Appellant reported net income of $1 each year. For the period 2006 to 2009, the Appellant did not report any employment or business income. Her only reported income consisted of social assistance payments, Child Tax Benefits and Universal Child Care Benefits. Second, the Appellant had three dependent children. Third, her spouse did not contribute towards her support or that of their children since at least 2002.

[15]        It is also my view that it is unlikely that the Appellant earned only $3,744 in 2009. Counsel for the Respondent suggested that it was reasonable to infer that the Appellant earned $30,000 in 2009 and the unreported income for 2009 should be reduced to reflect this amount. However, the difficulty I have with this suggestion is that the Appellant gave no evidence which would allow me to reach this conclusion. Her evidence was that most of the $69,273.19 cash consisted of gifts and I found that this explanation was not credible.

[16]        The appeal is allowed only to the extent of the concessions made by the Respondent as follows:

a)     The amount of $18,615, $30,869.90 and $9,479.95 is deleted from the Appellant’s income in 2006, 2007 and 2008 respectively;

b)    The amount of unreported income for 2009 is reduced to $53,689;

c)     Gross negligence penalties are deleted from the Appellant’s income in 2006, 2007, 2008 and 2009.

Presumably Ms. To had no savings.