BETWEEN:
ESTATE OF RONALD McCULLOUGH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
Let the attached copy of the Reasons for Judgment delivered from the Bench at the Tax Court of Canada, 500, Place d'Armes, Montréal, Quebec, on July 31, 2002, and revised on April 29, 2003, be filed.
Signed at Ottawa, Canada, this 30th day of April 2003.
J.T.C.C.
Translation certified true
on this 24th day of June 2004.
Sophie Debbané, Revisor
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Date: 20030430
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Citation: 2003TCC268
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Docket: 2001-2759(IT)I
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BETWEEN:
ESTATE OF RONALD McCULLOUGH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
(Delivered orally from the Bench on July 31, 2002, at Montréal, Quebec,
and revised on April 29, 2003)
Dussault, J.T.C.C.
[1] I shall deliver my judgment immediately. I am dismissing the appeals. Essentially, the reasons are those put forward by counsel Ayadi. However, there is one comment I would like to make to you, Madam, with all due respect for the deceased, Mr. McCullough. Giving a taxpayer a second chance at the draft assessment stage-the process is already very far ahead. In Canada, individual taxpayers' first responsibility is to file their income tax returns and to report all their income. That is their first responsibility.
[2] So if meeting with a person we establish that we have evidence that the person has not reported income, we show the person that evidence and ask questions about other possible unreported income; the person provides the relevant information on the source of other income. We go and find the evidence in the form of cheques─endorsed cheques or invoices─and find that there was indeed other unreported income. We ask the person, "You didn't report that income, but do you have expenses?" They say, "Yes, I have expenses, I have transportation costs." We say, "What kind of transportation costs? We allow $75 per thousand feet." Fine. No invoices are asked since the taxpayer claims to have paid cash, under the table. That expense is allowed nevertheless. What about wages? Nothing about that is mentioned either. Not a word about the other expenses.
[3] It is individual taxpayers' responsibility to do their job from the outset. I'm sorry, but there is a way of doing things in Canada and that is the way. It may not be the same in all parts of the world, but in a system of self-assessment, which is our system in Canada, the first responsibility lies with individual taxpayers. You cannot blame other people after the fact. Individual taxpayers are personally responsible for the state of their affairs. They are the ones who, in operating a business, have to keep the appropriate books and accounting records. That is an obligation under the Act. In this case there are no books, no vouchers, nothing to give to the auditor.
[4] We are not at the stage of first chance here. That stage is when individual taxpayers prepare and sign their income tax returns. That is their first responsibility. There may be some play on feelings, but things will nonetheless be put back into the proper perspective.
[5] Concerning the young woman, the forestry engineer, whom you called as a witness to establish the operating expenses, normal forestry harvesting is one thing. She can establish the average costs. She talked about wages and fringe benefits. I would really like to see what kind of fringe benefits Mr. McCullough paid to the lumberjacks he apparently hired. Probably there as well, if he hired anyone-which we do not even know from the evidence-he must not have paid much in the way of fringe benefits; it is practically certain that he must not have contributed much to a pension plan.
[6] It is nevertheless essential, as I say, to take things into account. Mr. McCullough has no vouchers indicating that he paid anything whatsoever to anyone. In any case, regarding the evidence adduced, we do not have so much as a breakdown of expenses. And this young woman you introduced as an expert tells us, "Oh, there's 50 per cent for wages and fringe benefits and 50 per cent for depreciation," whereas we do not even know whether there is any equipment. Mr. McCullough himself declared nothing whatsoever in that regard. He concealed everything.
[7] How do you think I can allow expenses in those circumstances? Obviously I cannot reduce the expenses that were allowed. There are transportation costs that were allowed despite the fact that there was not a single voucher justifying those costs. They were allowed. That is the only cost, the only expense that was at issue at the time Mr. McCullough was met. Perhaps he was not feeling very well, but he did provide quite accurate information, $75 per thousand feet, for example. Yes, other unreported income from a certain sawmill.
[8] On the basis of that information, the auditor immediately went to the sawmill and obtained the evidence. That is not contested. Those documents are not fabricated. That is what we have in the circumstances. Where the income is concerned, not only do we have the figure, but the figure is also supported by an invoice.
[9] I nevertheless wanted to make these comments because I consider them important in where the focus of the debate ought to be.
[10] Thank you all the same for coming and for endeavouring to defend your case as best as possible.
Signed at Ottawa, Canada, this 30th day of April 2003.
J.T.C.C.
Translation certified true
on this 24th day of June 2004.
Sophie Debbané, Revisor
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