Arbitrary (net worth) assessments are one of the mostpowerful weapons in the Taxman’s arsenal. Based on a comparative statement of net worth in simplified form, it usually works as follows:
A period of time is selected for the calculations. The amount of undeclared income will be the difference between the taxpayer’s net worth at the end of this period plus the estimated cost of living during that time and his/her net worth at the beginning of the period. CRA auditors use the taxpayer’s bank statements, credit cards, other bills and style of living as part of the information they feed into their computers to generate the assessment. Cost of living numbers obtained from Statistics Canada are also added to the mix.
Some typical taxpayer defences are:
– part of the net worth is offset by outstanding loans or liabilities
– a portion of the total property, held at the end of thetime frame, should have been included in the net worth at the beginning of the period
– there was cash on hand at the beginning of the net worth period in addition to the cash represented by the taxpayer’s bank deposits
– some of the increase is attributable to non-professional gambling gains or an inheritance
– estimated living expenses are too high
– the taxpayer’s accounting records prove the real amount of income for the period despite the net worth figures produced by the CRA
– some of the increase in the taxpayer’s net worth is attributable to gifts received.
Specialized knowledge is necessary to fight such assessments. In a civil case, because of the reverse onus of proof, if the taxpayer cannot prove the net worth is wrong, he or she will lose.
But it can get worse! An arbitrary assessment can be the basis on which the Crown lays tax evasion charges. In that case, in addition to civil penalties, a criminal penalty of between 100% and 200% of the tax evaded (plus dailyinterest) will be added to the tab. The only benefit in this latter situation is that the onus of proof is on the Crown.
The foregoing provides only an overview and does not constitute legal advice. You are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained in the context of your own particular circumstances.
Arbitrary (net worth) assessments are one of the mostpowerful weapons in the Taxman’s arsenal. Based on a comparative statement of net worth in simplified form, it usually works as follows:
A period of time is selected for the calculations. The amount of undeclared income will be the difference between the taxpayer’s net worth at the end of this period plus the estimated cost of living during that time and his/her net worth at the beginning of the period. CRA auditors use the taxpayer’s bank statements, credit cards, other bills and style of living as part of the information they feed into their computers to generate the assessment. Cost of living numbers obtained from Statistics Canada are also added to the mix.
Some typical taxpayer defences are:
– part of the net worth is offset by outstanding loans or liabilities
– a portion of the total property, held at the end of thetime frame, should have been included in the net worth at the beginning of the period
– there was cash on hand at the beginning of the net worth period in addition to the cash represented by the taxpayer’s bank deposits
– some of the increase is attributable to non-professional gambling gains or an inheritance
– estimated living expenses are too high
– the taxpayer’s accounting records prove the real amount of income for the period despite the net worth figures produced by the CRA
– some of the increase in the taxpayer’s net worth is attributable to gifts received.
Specialized knowledge is necessary to fight such assessments. In a civil case, because of the reverse onus of proof, if the taxpayer cannot prove the net worth is wrong, he or she will lose.
But it can get worse! An arbitrary assessment can be the basis on which the Crown lays tax evasion charges. In that case, in addition to civil penalties, a criminal penalty of between 100% and 200% of the tax evaded (plus dailyinterest) will be added to the tab. The only benefit in this latter situation is that the onus of proof is on the Crown.
The foregoing provides only an overview and does not constitute legal advice. You are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained in the context of your own particular circumstances.
Tax Law
DioGuardi offers solutions for tax problems such as:
Unreported income
Unfiled tax returns
Payment arrangements
Unpayable tax debt
Tax dispute litigation
Criminal tax defense
Wills, Estates & Trusts
DioGuardi Law offers these will, estate and trust services for individuals and business-owners:
Wills
Preparation of trust agreements
Powers of attorney
Estate administration
Probate
Representation in estate driven litigation
Real Estate
DioGuardi Law can assist you with all your real estate needs including:
Newly constructed/Resale
Purchases and Sales
Title transfers
Leases
Private mortgages
Refinancing
Condominiums
Vacant land
Tax Debt Relief
When your tax balance is too large to be affordable, DioGuardi Law can protect your home, your cash flow and your financial assets from the Taxman. It is essential that we begin planning a strategy before the CRA registers a lien against your properties or seizes financial accounts, and before you engage with an insolvency trustee.
Business & Tax Planning
DioGuardi Law has the experience to provide:
Resident and non-resident corporate restructuring
Optimum use of holding corporations
Continuity and succession planning
Tax-free transfers
Losses and ABIL planning
Making interest tax deductible
Small business planning
Corporate & Commercial Law
DioGuardi Law have represented business clients for the last 50 plus years and have supported their legal requirements on an on-going basis by offering the following services:
Incorporations and corporate governance
Corporate reorganizations and transactions for the directors and shareholders
Negotiation and drafting of agreements, professional corporations, minute book maintenance
Brigitte DioGuardi
B.A., LL.B
Brigitte obtained her Law Degree from the University of Sheffield in the United Kingdom. Upon her return, she qualified for the Bar and was called to the Law Society of Ontario (formerly the Law Society of Upper Canada) in 2002. She was also a member of the Bar of British Columbia and headed up the Vancouver office of DioGuardi Tax Law. Fluently bilingual in English and French, Brigitte has broad experience in the areas of:
Joyce Bruno has worked as executive legal assistant to Paul Dioguardi for 35 years and continues to offer her expertise and experience to the Dioguardi Law firm. Joyce’s role has evolved over the years and has acquired and developed many skills. She is an invaluable asset in case management and ensures the smooth running of our office.
Paul DioGuardi
B.A., LL.B, KING’S COUNSEL, SENIOR COUNSEL
Paul obtained his Law Degree from Queen’s University in 1964. He is a member of the Bars of Ontario, British Columbia and the Turks and Caicos Islands, a British tax free territory in the West Indies. He has over 50 years of experience and was trained at the Ottawa head offices of Revenue Canada and the Tax Litigation Section at the Department of Justice. Paul has had and continues with an extensive career in various areas of law such as:
