Date: 19990526
Docket: 98-1637(IT)I
BETWEEN:
DUNAMIS DEVELOPMENT CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
AND:
97-3690(IT)I
BETWEEN:
JACK HOOGENDOORN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
AND:
97-3691(IT)I
BETWEEN:
HANNE HOOGENDOORN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Beaubier, J.T.C.C.
[1] These appeals
pursuant to the Informal Procedure were heard together on common
evidence by consent of the parties at Vancouver, British
Columbia, on May 21, 1999. Jack Hoogendoorn was the agent for
Dunamis Development Corporation ("Dunamis") and was the
only witness.
[2] Dunamis has
appealed a reassessment for its 1988 taxation year. Paragraphs 5
and 6 of the Reply to Dunamis' Notice of Appeal read:
5. The Minister
reassessed the Appellant for the 1988 taxation year decreasing
the loss to $2,138.00 by disallowing Wages expense of $25,123.00
and Purchase expense of $12,561.00. Note that the Purchases
expense was actually made up of the following amounts but
referred to as purchases for simplicity:
Rent
1,965.00
Purchases
5,619.94
Subcontract
375.69
Permits
599.00
Travel
78.30
Advertising
230.00
Bank
Charges
397.21
Fuel
1,052.68
Insurance
741.50
Office
564.86
Shop
484.83
Utilities
452.11
As a result of reducing the 1988 loss, the
Appellant's taxable income for the 1987, 1990 and 1991
taxation years was increased to $12,859.00, $8,032.00 and
$23,069.00, respectively.
6. In so
reassessing the Appellant, the Minister made the following
assumptions of fact:
(a)
at all relevant times, the Appellant corporation was doing
business as a contractor;
(b)
wages in the amount of $20,470.00 were not paid by the
Appellant;
(c)
wages in the amount of $4,653.31 and purchases in the total
amount of 12,561.00 (as broken down in paragraph 5 above) were
claimed twice as a deduction;
(d)
the loss for the 1988 taxation year was $2,138.00; and
(e)
arrears interest was correctly calculated by the Minister for the
1987, 1990 and 1991 taxation years.
[3] Jack Hoogendoorn
reviewed the assumptions in paragraph 6 and no evidence was led
to refute the assumptions or any allegations in the Reply to
Dunamis' appeal or to support Dunamis' Notice of Appeal.
As a result, Dunamis' appeal is dismissed.
[4] Paragraphs 3, 4,
6 and 7 of the Reply to Jack Hoogendoorn's Notice of Appeal
read:
3. In filing his
income tax returns for the 1987, 1988, 1989 and 1991 taxation
years, on March 23, 1993, the Appellant did not report any rental
income from the property located at 10220 Young Road,
Chilliwack, B.C. ("Property") or employment income from
Dunamis Development Corporation ("Dunamis").
4. The Appellant
filed his return for the 1992 taxation year on June 13, 1994 and
he did not report any rental income from the Property or
employment income from Dunamis.
...
6. In response to
the Notices of Objection filed by the Appellant for the 1987,
1988, 1989, 1991 and 1992 taxation years (the "Years"),
the Minister issued further Notices of Reassessment dated
September 19, 1997, whereby the Appellant's rental and
employment income was reduced to the following amounts:
|
|
Net Rental Income
|
Employment Income
|
|
1987
|
$7,324
|
$10,344
|
|
1988
|
$6,914
|
$10,651
|
|
1989
|
$5,511
|
$27,524
|
|
1991
|
$4,734
|
$17,886
|
|
1992
|
$4,229
|
$19,795
|
and correspondingly reduced the late filing
penalties.
7. In so
reassessing the Appellant, the Minister made the following
assumptions of fact:
(a)
the facts previously admitted and stated;
(b)
the Appellant and his spouse, Hanne Hoogendoorn, jointly own and
reside at the Property;
(c)
the Appellant is a shareholder and director of Dunamis;
(d)
a portion of the Property was rented by the Appellant and his
spouse to Dunamis, but inadequate books and records were
maintained with respect to the Property and Dunamis paid to the
Appellant and his spouse the amounts of $23,806, $23,094,
$20,455, $18,380 and $15,628, in the Years, respectively;
(e)
rental expenses with respect to the Property in excess of the
amounts allowed ($9,158, $9,266, $9,433, $8,912 and $7,170 for
the Years, respectively) have not been shown by the Appellant to
have been incurred by the Appellant, were not incurred for the
purpose of gaining or producing income from the Property, or were
personal and living expenses of the Appellant;
(f) at the
suggestion of the Appellant, the rental income and expenses for
the Property were allocated equally between the Appellant and his
spouse;
(g)
the Appellant and his spouse were equal partners with respect to
the Property;
(h)
at the relevant times, the Appellant was employed by Dunamis and
earned employment income in the amounts of $10,344, $10,651,
$27,524, $17,886 and 19,795 for the Years, respectively;
(i) the Appellant
failed to file his returns for the Years as and when required by
subsection 150(1) of the Income Tax Act (the
"Act") and late filing penalties were properly
calculated and levied;
(j) the Appellant
was not duly diligent in preparing and filing his Income Tax
Return for the Years; and
(k)
interest at the prescribed rate was properly calculated and
levied in respect of the unpaid amounts for the Years.
[5] Once again, Jack
Hoogendoorn failed to lead any evidence to refute the assumptions
or the facts stated in the Reply to the Notice of Appeal.
Respondent's counsel presented assumption 7(d) and the
particulars of the figures in assumption 7(e) to Jack Hoogendoorn
to refute and Jack offered no evidence in response. He agreed
with assumptions 7(b), (c), (f) and (g). For these reasons Jack
Hoogendoorn's appeal is dismissed.
[6] Paragraphs 3 to 6
inclusive of the Reply to Hanne Hoogendoorn's Notice of
Appeal read:
3. The
Appellant's income tax returns for the 1987, 1988, 1989,
1990, 1991 and 1992 taxation years (the "Years") were
assessed on March 16, 1988, April 7, 1989, May 23, 1990, January
17, 1992, May 15, 1992 and April 2, 1993 respectively. The
Appellant did not report any rental income from the property
located at 10220 Young Road, Chilliwack, B.C.
("Property").
4. The Appellant
filed her return for the 1990 taxation year on December 16, 1991,
and also failed to report any rental income from the
Property.
5. In response to
the Notices of Objection filed by the Appellant for the 1990 and
1991 taxation years, the Minister issued further Notices of
Reassessment dated September 19, 1997, whereby including in the
Appellant's income for the Years net rental income in the
amounts of $7,324, $6,914, $5,511, $5,147, $4,734, and $4,229
respectively.
6. In so
reassessing the Appellant, the Minister made the following
assumptions of fact.
(a)
the facts previously admitted and stated;
(b)
the Appellant and her spouse, Jack Hoogendoorn, jointly own
and reside at the Property;
(c)
a portion of the Property was rented by the Appellant and her
spouse to Dunamis Development Corporation ("Dunamis"),
but inadequate books and records were maintained with respect to
the Property and Dunamis paid to the Appellant and his spouse the
amounts of $23,806, $23,094, $20,455, $19,475, $18,380 and
$15,628 in the Years, respectively;
(d)
the Appellant, her spouse and Dunamis were related persons and
did not deal with each other at arm's length;
(e)
rental expenses with respect to the Property in excess of the
amounts allowed ($9,158, $9,266, $9,433, $9,181, $8,912 and
$7,170 for the Years, respectively) have not been shown by the
Appellant to have been incurred by the Appellant, were not
incurred for the purpose of gaining or producing income from the
Property, or were personal and living expenses of the
Appellant;
(f) at the
suggestion of the Appellant, the rental income and expenses for
the Property were allocated equally between the Appellant and her
spouse for all the Years;
(g)
for all the Years, the Appellant and her spouse were equal
partners with respect to the Property;
(h)
the Appellant made a misrepresentation that was attributable to
neglect, carelessness or wilful default in filing her returns for
the 1987, 1988, 1989 and 1992 taxation years (the "Statued
Barred Years") in supplying information under the Act
by not reporting her share of the net rental income and
subsequently requested the Minister to reassess her normally
Statued Barred Years.
(i) the Appellant
failed to file her return for the 1990 taxation year as and when
required by subsection 150(1) of the Income Tax Act (the
"Act") and late filing penalty was properly
calculated and levied;
(j) the Appellant
was not duly diligent in preparing and filing her Income Tax
Return for the Years; and
(k)
interest at the prescribed rate was properly calculated and
levied in respect of the unpaid amounts for the Years.
[7] Hanne chose to
allow Jack to testify and argue on her behalf. Jack agreed with
assumptions 6(b), (d), (f) and (g) and did not provide any
evidence to refute the remaining assumptions or the other
allegations quoted from the Reply.
[8] Her appeal is
dismissed.
[9] None of the
Appellants offered any evidence respecting the items of the
reassessments under appeal.
[10] In these circumstances
the Court must dismiss all of the appeals before the Court.
Signed at Ottawa, Canada this 26th
day of May 1999.
J.T.C.C.
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