Dunamis Development Corp. v. R, [1999] 3 CTC 2475 (Informal Procedure)

Beaubier T . C.J.:

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.

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.

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.

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
199]	$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.

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.

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 “Art”) 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.

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.

Her appeal is dismissed.

None of the Appellants offered any evidence respecting the items of the reassessments under appeal.

In these circumstances the Court must dismiss all of the appeals before the Court.

Appeals dismissed.