Gogol v. R., [1998] 1 CTC 2198

Lamarre Proulx T.C.J. .

The Appellant is appealing by way of the informal procedure assessments made by the Minister of National Revenue (the “Minister”) for the years 1989, 1990 and 1991. These assessments were made by the net worth method under paragraph 152(7) of the Income Tax Act (the “Act’).

In assessing the Appellant, the Minister made the assumptions of fact described in paragraph 6 of the Reply to the Notice of Appeal as follows:

(a) the Appellant’s returns of income for the 1989, 1990 and 1991 taxation years were required to be filed with the Minister on or before April 30, 1990, April 30, 1991 and April 30, 1992, respectively;

(b) the Appellant failed to file income tax returns for her 1989, 1990 and 1991 taxation years as and when required by subsection 150(1) of the

Act;

(c) in the 1989 taxation year, the Appellant purchased a property located at 24 Marion Street, Toronto, Ontario (the “Property”) for $175,000.00;

(d) at all material times, the Appellant’s son and his common-law spouse resided in the Property;

(e) the unreported income of the Appellant during the 1989, 1990 and 1991 taxation years were [sic] $59,783.00, $27,573.00 and $41,645.00, respectively;

(f) the Minister used information available to him to determine the unreported amounts by the net worth method (a copy of the Statement of Personal Net Worth is attached as Schedule A);

(g) the Minister used the net worth method to prepare assessments of the Appellant’s taxes payable for the 1989, 1990 and 1991 taxation years, concurrent notices of which were dated April 10, 1995, in accordance with the provisions of subsection 152(7) of the Act.

The Appellant and her son, Mr. Gordon Washington, testified at the request of counsel for the Appellant. Mr. Cesare Chiarotto, an appeals officer for the Minister, testified for the Respondent.

The Appellant testified that she had received from her father, in the year 1988 or 1989, an amount of money in the neighbourhood of $15,000, and that she received an inheritance at the death of her father in 1992. The agent for the Minister testified that the auditors had seen an amount received in 1992 but not that allegedly received in 1988 or 1989.

The Appellant said that the property had been paid for by loans from friends and that her son, Gordon Washington, had made the mortgage payments. She also stated that her son paid half her personal expenses.

Mr. Gordon Washington’s testimony was to the same effect as his mother’s except that he said that he had paid all his mother’s personal expenses. He said that he had never filed any income tax returns but that he made enough money from a billiard room that he owned to pay these expenses. He said that he had intended to sort things out with Revenue Canada but, that in the end, his affairs were not going well enough for him to do so. He also stated that he had received loans from his friends. On this last subject, counsel for the Appellant wanted to introduce as evidence affidavits by some of the son’s friends stating that they had loaned money to him in the year in question. Counsel for the Respondent objected on the basis that the persons having sworn the affidavits were not there to testify. I upheld the objection but I allowed questions to be put to the witness regarding the receipt of these loans. The testimony was vague and unclear as to the time, the amount and the terms of reimbursement of these alleged loans from friends.

There was no documentary evidence concerning either the amount allegedly received by the Appellant from her father in 1989 or the alleged loans from her son’s friends, nor was there any documentary evidence that it was the Appellant’s son who made the mortgage payments. In fact, the mortgage payments appear very clearly in the mother’s bank accounts, as shown in Exhibit R-2.

Only one document was produced by the Appellant and that was the statement of adjustments between the vendor and the puchaser regarding the property located at 24 Marion Street, Toronto (Exhibit A-1). It showed that “due to encroachments” the sale price had been abated by $5,000. Although this document had not been seen previously by the Minister’s auditors, it is to all appearances genuine and I believe it should be accepted.

Schedule A to the Reply to the Notice of Appeal (the “Reply”) was entirely proven by Exhibits R-1 to R-11. These exhibits are statements of a Visa account and of two bank accounts in the Appellant’s name (Exhibits R-1 to R-3), a document showing the rental payments for the apartment occupied by the Appellant on Dundas Street (Exhibit R-4), a document showing the mortgage payments made with respect to the Marion Street property (Exhibit R-5), a statement of municipal taxes and the water and sewage statement of account for the property located on Marion Street (Exhibit R-6 and the first page of Exhibit R-7), a statement of the cablevision payments for the apartment located on Dundas Street (the other pages of Exhibit R-7), the deed of transfer of the Marion Street property to the Appellant (Exhibit R-11). These Exhibits confirmed the statement made in subparagraph 2(f) of the Reply. Respecting the abatement of the purchase price previously mentioned and shown in Exhibit A-1, Mr. Chiarotto stated that if the Court were to accept the abatement as a fact, that it would affect only the accrued income for the year 1989.

Analysis

The allegations as to income received from the friends of the Appellant’s son and from the Appellant’s father have not been validly proven and cannot stand in the fact of a net worth audit based entirely on documents in the Appellant’s name and carried out very conservatively with regard to the Appellant’s personal expenses.

The appeals for the years 1990 and 1991 are dismissed and the appeal for the year 1989 is allowed only to the extent of reducing the increase in net worth by $5,000, the whole without costs.

Appeal dismissed.