http://decision.tcc-cci.gc.ca/site/tcc-cci/decisions/en/item/31264/index.do 
Hedzic et al. v. The Queen[1] (August 8, 2013) is a comparatively unusual example of a case where the taxpayers were largely successful in appealing net worth assessments. The taxpayers were husband and wife. The husband had been a lawyer in Bosnia before the war there forced him to leave. For a time he worked on a berry farm and as a pizza delivery person. He then bought a share in a restaurant which he sold in 2003 for $20,000. He also bought a grocery store specializing in European products which he sold in 2003 for $32,500. In 2003 he and his wife opened in Pizza business doing business as Pizza Jumelle 2003, located at 833 Myrand Avenue in Québec. It was this pizza business that was the subject of the net worth assessments of Mr. and Mrs. Hedzic for 2007 and 2008:
[9] Mr. Garneau from the Canada Revenue Agency (CRA) testified for the respondent. He conducted an audit of the Hedzics’ files. He is a CMA and has been working for the CRA for 4½ years. Prior to that, he worked for the Agence du revenu du Québec and in the private sector.
[10] Upon review of the Hedzics’ tax returns, Mr. Garneau found that the reported income was low. He therefore analyzed various methods for determining the gross income of the pizzeria before choosing the net worth method. He reviewed the pizzeria’s sales over a 6-day period and this method was inconclusive, because the total of the invoices did not equal the total of the cash register Z-tapes. He also analyzed the deposits, which was also inconclusive because Mr. Hedzic took money from the cash register to pay for certain expenses at the pizzeria, so not all the earnings were deposited. The method of calculating pizza boxes was also inconclusive; the pizzeria had a varied menu and one box did not necessarily equal one sale. He therefore proceeded with the net worth method.
[11] With the Hedzics’ authorization, Mr. Garneau obtained the credit card statements, bank statements, entry and exit records for the safety deposit box, statements regarding vehicles registered in the Hedzics’ name, a report from Equifax Canada and other documents relevant to the net worth from financial institutions and government organizations.
The taxpayer objected to the assessments on a number of bases:
[13] Mr. Hedzic claims that the Minister erred:
(i) by not taking into consideration the amounts held in their safety deposit box, after the sale of the two businesses in 2003 and not considering his salary and that of his spouse;
(ii) by adding to the non-current assets in 2008, assets the Hedzics did not own;
(iii) by erroneously adding personal expenditures. These expenditures are indicated under [translation] “personal expenditures—other expenditures” in Appendix IV of the net worth.
While the court did not accept all of the taxpayers’ contentions it accepted enough of them to substantially reduce the assessments. In light of those substantial reductions the court vacated the penalties assessed against the taxpayers.
Comment: This case is a useful example of how net worth assessments can be successfully attacked using a detailed and systematic approach.
[1] 2013 TCC 249.