Zinn v. R., [1999] 4 CTC 2521 (Informal Procedure)

Watson D.]. T.C.:

This appeal was heard in Regina, Saskatchewan on August 5, 1999, under the Informal Procedure.

In computing income for the 1994, 1995 and 1996 taxation years, the Appellant claimed child care expenses in the amount of $3,010.00 for 1994 and $1,655.00 for 1995 and a personal credit in respect of a wholly dependent person in the amount of $5,380.00 for each year, 17% of which is the actual non-refundable tax credit.

In reassessing the Appellant for the 1994, 1995 and 1996 taxation years, the Minister of National Revenue (the “Minister”) disallowed the claim for child care expenses of $3,010.00 for 1994; reduced the claim for child care expenses by $775.00 to $880.00; disallowed the claim for personal credit in respect of a wholly dependent person in the amount of $5,380.00 for each year; and assessed penalties in the amounts of $471.20, $471.25 and $471.67 respectively pursuant to subsection 163(2) of the Income Tax Act (the “Acf”).

In reassessing the Appellant for the three years in issue, the Minister made the following assumptions of fact taken from the Reply to Notice of Appeal:

(a) the Appellant is the natural mother of two dependent children, as follows:

Name	Date of Birth
Jenna Lorraine Zinn (“Jenna”)	July 28, 1993
Dalton Zinn (“Dalton”)	February, 1997

(b) child care expenses claimed in the amount of $3,010.00 for 1994 and $1,655.00 for 1995 were in respect of payments made for child care services provided by Jaime VanLoosen (“Jaime”);

(c) Jaime is the sister of the Appellant;

(d) Jaime is related to the Appellant within the meaning of the Act',

(e) child care expenses disallowed in the amount of $3,010.00 for 1994 and $755.00 for 1995 were in respect child care services provided by Jaime during the period of time that she was under 18 years of age;

(f) the claim for the personal credit for a wholly dependent person that was made by the Appellant for each year was in respect of Jenna;

(g) Curtis Zinn is the natural father of both Jenna and Dalton:

(h) at all relevant times to the 1994, 1995 and 1996 taxation years, the Appellant cohabited with Curtis Zinn, who is a person of the opposite sex, in a conjugal relationship;

(1) the Appellant knowingly, or under circumstances amounting to gross negligence in carrying out a duty or obligation imposed by or under the Act, made or participated in, assented to or acquiesced in the making of a false statement or omission in the income tax returns filed for the 1994, 1995 and 1996 taxation years, as a result of which the tax that would have been payable assessed on the information provided in the Appellant’s income tax returns filed for those years was less than the tax payable by the amount of $942.40 for 1994, $942.50 for 1995 and $943.34 for 1996.

At the hearing, the Appellant admitted paragraphs (a) to (g) and denied paragraphs (h) and (1).

The Respondent admitted the following allegations of fact of the Appellant in her Notice of Appeal:

(a) that the address and the telephone number Curtis Zinn used were that of the Appellant;

(b) that Curtis Zinn jointly signed the power bills with the Appellant;

(c) that the enumeration was done with a city address; and

(d) that beneficiary forms were done in the Appellant’s name for her daughter, Jenna.

At the hearing of the appeal, the Appellant agreed that the child care expenses of $3,010.00 and $775.00 for 1994 and 1995 respectively were properly disallowed by the Minister in his reassessment. The two issues before the Court in the appeal are:

(a) is the Appellant entitled to a personal tax credit in respect of a wholly dependent person for the 1994, 1995 and 1996 taxation years;

and

(b) did the Minister properly assess penalties for the three years in issue pursuant to subsection 163(2) of the Act.

The Appellant has the onus of establishing on a balance of probabilities that the Minister’s reassessment disallowing the personal tax credit for the three years in issue was ill-founded in fact and in law; the Respondent has the onus insofar as the penalties are concerned.

The three witnesses heard at the appeal were the Appellant, Curtis Zinn and Paul Gee, the Revenue Canada auditor charged with the reassessment. The Appellant did not dispute the fact that Mr. Zinn was the father of her two children; however, she disputed the allegation that he cohabited with her during the three years in issue. The Appellant’s testimony relied on a vague memory of the years in issue; much of her testimony was unreliable and contradicted not only by a great amount of documentary evidence but also by her admission in cross-examination that Mr. Zinn resided at her address about 50% of the time during the three years in issue; in the Designation of Beneficiary dated December 23, 1995, the one dated March 26, 1996 and the Benefits Plan enrolment form dated August 17, 1996, the Appellant admitted that she was referred to as the common law spouse of Curtis Zinn.

In his testimony, Mr. Zinn admitted that he used the Appellant’s address on documentation relating to his place of employment, T4, Unemployment Insurance benefit applications, group life insurance enrolment forms and income tax returns; he also gave his telephone number as the one of the Appellant’s residence.

Taking into consideration all of the circumstances, including the testimony of the witnesses, the admissions and documentary evidence in the light of subsection 252(4) of the Act and the case law provided at the hearing, I am satisfied that the Appellant has failed in her onus of establishing on a balance of probabilities that she was entitled to the personal tax credit in respect of a wholly dependent child for the 1994, 1995 and 1996 taxation years.

Furthermore, I am satisfied that the Respondent has succeeded in establishing on a balance of probabilities that the Appellant knowingly participated in making false statements in the 1994, 1995 and 1996 income tax returns and that the penalties in the amounts of $471.20, $471.25 and $471.67 respectively for the three years were properly assessed pursuant to subsection 163(2) of the Act.

The appeal is accordingly dismissed.

Appeal dismissed.