http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/234962/index.do
Soheili v. The Queen (September 7, 2017 – 2017 TCC 172, C. Miller J.).
Précis: This case involved loss carryforwards denied by CRA. The taxpayer had claimed loss carry forwards of $29,520 in 2010 and $5,520 in 2011. A CRA audit allowed $6,120 loss carry forwards from 2009 into 2010 and denied the balance of the losses claimed. The taxpayer appealed to the Tax Court. In the Tax Court the Minister defended the assessments under appeal on the basis that the losses all arose from a home the taxpayer had built for his family. The Minister argued that no losses should have been allowed at all at the audit level. Although the taxpayer never occupied the property in question the Court concluded that it had been both acquired and held as the taxpayer’s personal property. As a result, he was not entitled to any of the losses at issue in the appeal. In addition, the Court rejected the taxpayer’s claim of roughly $300,000 in construction costs beyond that which was allowed at the audit level. As a consequence, the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.
Decision: The property in question was an 8 bedroom home that Mr. Soheili testified he had constructed originally with the objective of providing a home for his family, his brother’s family and his parents. There was a fire at the premises before it was completed which caused an estrangement with his brother. Mr. Soheili testified that this caused him to change his intention and he decided to complete the building of the home for the purpose of resale. The Court was not receptive to his evidence:
[11] Dealing with the Respondent’s first position, I have not been convinced by Mr. Soheili that in fact there was any change of intention after the fire. My reasons for this conclusion are manyfold. First, in his testimony in chief, Mr. Soheili claimed that he altered plans to go from an eight bedroom home suitable for three branches of his family to a five bedroom home, more suitable for one family wanting an executive home. The listing of the home on foreclosure, however, showed there was indeed still eight bedrooms, three described as master bedrooms, along with eight bathrooms. This is more in keeping with the original plans. Mr. Soheili told me that he could go to the City of Surrey to get copies of the building application and blueprints which would show the changes. It is always regrettable that Appellants do not come fully prepared for their day in court. Mr. Soheili was well aware that an issue was the nature of the Abbey Drive property, business or personal, and therefore the purported altered plan would be most significant. The only credible evidence I am left with is in the form of the listing that simply does not support Mr. Soheili’s explanation.
[12] Second, Mr. Soheili made no mention to the auditor at their interview in May 2012 of any change in intention. Mr. Sandhu, the auditor, referred to his notes which makes no reference to any such intention for the property other than as a family residence and he recalled no such mention.
[13] Third, Mr. Soheili called no other family members, his brother or any others to provide any corroboration of his story.
[14] Fourth, in two cases where he was sued by suppliers, the judgments, one in 2011 and another in 2013 (Dynasty Kitchen Cabinets and Miracle 786 Flooring), both indicate that, based on Mr. Soheili’s testimony, the property was intended for the family’s residence. The Dynasty decision was ultimately vacated but the trial judge’s finding on this point remains on the record.
The Court went further to reject Mr. Soheili’s claim of roughly $300,000 in additional building costs:
[16] I wish to comment further, however, on Mr. Soheili’s lack of proof for his expenses, even if I had found that this was a commercial venture. As mentioned previously, there is approximately a $300,000 discrepancy between what the auditor found as costs of construction versus what Mr. Soheili claims. The only evidence Mr. Soheili relied upon to support these additional costs was the fact that he had to borrow so much. This is simply insufficient proof. Again, while recognizing it can be difficult for a taxpayer acting on his own behalf to appreciate what evidence is required to prove their point, this case was about the quantum of expenses. Mr. Soheili knew that, yet could provide no evidence to support his claim of costs in excess of $1,500,000. I add this lack of corroborative evidence to his testimony that he took insurance proceeds and invested them in the United States to confirm my view that simply saying he borrowed so much money to go towards building the residence falls well short of any standard for proving the issue of the amount of construction costs. He could just have likely invested more in the United States. No, Mr. Soheili has simply been unable to satisfy me he incurred the costs he claims, and I could also dismiss his Appeal on that basis.
As a consequence, the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.