Tax court of Canada | Tax | Income tax | Administration and enforcement
Taxpayer C was real estate agent and grandmother of taxpayer D. C and D signed contracts of purchase and sale to acquire condos in 2006, purchases closed in 2010 and both condos were sold within months. Neither C nor D reported any income relating to condo on her 2010 tax return. Minister of National Revenue reassessed D’s tax year on basis that she had failed to report business income of $106,025 on sale of condo, reassessed C’s tax year on basis that she had failed to report business income of $103,206 on sale of condo and assessed gross negligence penalties against both. Taxpayers appealed. Appeal by D allowed and appeal by C dismissed. C was grossly negligent in not reporting her profit. When C filed her tax return, she had been real estate agent for 23 years, and it was not believed that she was unaware that profits made selling real estate that was not one’s principal residence were taxable. C’s unreported income was more than five times higher that reported taxable income on her tax return. D was not grossly negligent and her appeal was allowed on this ground. D was 17 when she signed contract of purchase and sale and 21 when sale occurred. D simply signed documents that her grandmother and father asked her to sign and did not receive any of profit from sale. It was reasonable for D to rely on her grandmother and father to tell her if she needed to report income on her tax return.
DaCosta v. The Queen (2017), 2017 CarswellNat 7652, 2017 TCC 235, David E. Graham J. (T.C.C.).
