Date: 20000626
Docket: 97-2961-IT-G
BETWEEN:
KENNETH P. WIEBE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Beaubier, J.T.C.C.
[1] These appeals pursuant to the General Procedure were heard at Vancouver, British Columbia on June 14, 2000. The Appellant testified. The Respondent called David Lam, an auditor with Revenue Canada on this file, as a witness.
[2] The hearing of this matter was set for July 19, 1999, then March 6, 2000 and then June 14, 2000. All adjournments were at the request of the Appellant who is a C.G.A., now aged 64, with a career in public practice as an accountant at Clearbrook, British Columbia, a suburb of Vancouver. The appeals are from reassessments for the years 1990, 1991, 1992 and 1993. After taking the stand, the Appellant requested another adjournment, which was denied.
[3] A table of the matters in issue in each year appealed follows:
|
1990 |
1991 |
1992 |
1993 |
||
|
(1) |
Unreported income |
$29,000 |
$7,000 |
$7,000 |
— |
|
Reply para. |
15 |
15 |
15 |
||
|
(2) |
Shareholder benefits |
— |
$11,553 |
$23,245 |
— |
|
Reply para. |
16 |
16 |
|||
|
(3) |
Interest benefits |
$18,428 |
$13,704 |
$18,439 |
— |
|
Reply para. |
16 |
17 |
17 |
||
|
(4) |
Taxable capital gain |
$10,555 |
— |
$19,730 |
$68,626 |
|
Reply para. |
17 |
18 |
13 |
||
|
(5) |
Rental income |
$22,389 |
$19,636 |
$18,395 |
$16,996 |
|
Reply para. |
18 |
18 |
19 |
14 |
|
|
(6) |
Additional professional income |
$119,386 |
$18,482 |
$3,945 |
$193,780 |
|
Reply para. |
19 |
19 |
20 |
15 |
|
|
(7) |
Carrying charges |
— |
Interest |
$36,537 |
— |
|
Reply para. |
20 |
21 |
|||
|
(8) |
Martial status or alimony disallowed |
$5,141 |
— |
$7,500 |
$15,000 |
|
Reply para. |
21 |
22 |
19 |
||
|
(9) |
RRSP deduction disallowed |
— |
— |
— |
$27,500 |
|
17 |
|||||
|
(10) |
Capital loss carry forward |
— |
— |
— |
$3,000 |
|
Reply para. |
18 |
||||
|
(11) |
Penalties Re |
(1) |
(1) & (2) |
(1) & (2) |
— |
[4] At the opening of the Respondent's case, its counsel conceded the following:
1990
Reply, paragraph 17 – Respondent admits that the Appellant lost a $276,606 investment in 1990 Farmers Ltd.
1991
Reply, subparagraph 16(b) – Of the deductions claimed, Respondent allows claims for:
(i) $1,202.00
(vi) 1,406.00
(vii) 321.41
(viii) 990.16
1992
Reply, subparagraph 16(b) – Of the deductions claimed, Respondent allows claims for:
(ii) $1,424.00
(v) 2,597.74
(vii) 592.59
(vii) 533.81
Reply, paragraph 22 – Increase $7,500 claimed to allow a total of $22,500.
1993
Reply, paragraph 13 – Respondent agrees that the amount to be allowed for proceeds from the sale of a principal residence is to be $250,000, rather than $228,000.
Reply, paragraph 19 - $15,000 claimed is allowed.
[5] During the years in appeal the Appellant was involved in many entities including:
1. Kaland Farms Ltd. ("Kaland") – a corporation which raised broiler chickens on land rented from related entities. He and his wife owned the controlling voting shares in Kaland. Its fiscal year end was July 31.
2. Kadack Developments Ltd. ("Kadack") – a corporation in which he and his wife owned the controlling voting shares which had a July 31 fiscal year end.
3. K.P. & A.S. Wiebe ("KP & AS") – a partnership between the Appellant and his wife with a June 30 fiscal year end which engaged in whatever they wished from time to time including a rental business.
4. K.P. Wiebe & Co. (the "Firm") – of which he disposed 24% of his 88% interest in 1990. It conducted his accounting practice. Its fiscal year end was January 31 in 1990 and September 30 in 1992.
5. 3 acreages in the B.C. Lower Mainland, including –
(1) 30212 Downs Road consisting of 12.35 acres on which his home was situated and on which Kaland raised broilers.
(2) 33291 Mt. Lehman Rd. consisting of approximately 30 acres with an old barn in which over flow broilers were housed and on which he "believes" KP & AS may have raised corn and cattle at one time or another.
(3) 4523 Mt. Lehman Rd. consisting of approximately 10 acres on which the farm manager resided which he testified was the property of KP & AS and was part of the poultry operation.
6. Marriage to Annie Wiebe which resulted in a divorce sometime during these taxation years.
[6] Aside from these findings, and the concessions made by the Respondent, the assumptions in the Replies were not refuted. Mr. Wiebe is not believed. He did not submit any documents at all in evidence (despite the fact that, for example, his 1990 income tax return consists of 50 pages and describes additional business entities). Mr. Wiebe was vague in his recollections and descriptions. He alleged that he had documents to support his complaints but he had not submitted them to Revenue Canada and despite his Court adjournments, he did not submit them to the Court.
[7] As an example all of the money from Kaland's property sales was ordered by the divorce judge to be paid into a lawyer's trust account in Mr. and Mrs. Wiebe's names. They, together, disposed of the money personally. Mr. Wiebe was assessed for his share of this money. He insisted that the money was Kaland's. But he did not submit the Court Order; he did not call any other witnesses; and he did not deny receiving one disbursement from the trust account of approximately $200,000. He also set up sophisticated business entities with various year ends and moved large sums of money among them at will and yet he was unable to account for these occurrences or to refute the assumptions as to their tax results, despite the fact that he is an experienced professional accountant. He disputed the shareholdings and payments assessed respecting the corporations, but he gave no detail or documents with corporate records, cheques, minutes or corporate returns respecting them. Nor did he detail the shareholdings. He raised a few payments made to his children but no evidence was submitted whether they were documented to be the children's or Mr. Wiebe's. Therefore the assessments in Mr. Wiebe's name stand.
[8] The Respondent proved by various corporate accounting records that money was taken by Mr. and Mrs. Wiebe from corporate funds. Mr. Wiebe claimed otherwise, but he did not prove his contention, he simply disputed matters.
[9] This reflects his financial activities in the years in question when he moved funds about without regard to their legal ownership or sources. It reflects his refusal to respond to Revenue Canada in most matters. It also reflects his consistent requests to adjourn. It is why he is not believed without satisfactory substantiation.
[10] The Appellant disputed assumptions that he owned 50% of the shares of Kaland and Kadack but he did not file any corporate documents to prove this. Therefore he did not refute these assumptions. He alleged that the principal residence on 31212 Downs Rd. required 5 acres of land rather than 1.234 acres allowed by the Respondent. But his evidence of this requirement was that others such as a Girl Guide Camp used it. Thus he did not refute the Minister's position. He claimed his $27,500 RRSP rollover on the basis that both Kaland and Kadack paid him a retiring allowance. But only Kaland made the payment or recorded the payment. No document of agreement by Kadack respecting this allegation was exhibited; all of the documents exhibited by the Respondent respecting it described the $27,500 as coming from Kaland. He did not refute the Minister's assumptions respecting the $27,500.
[11] Nor did he refute any of the more than 100 other assumptions respecting these assessments and not already described in these reasons.
[12] The Appellant supervised and reviewed the ledgers, financial statements and records of the various entities on which the assessments were based. They were prepared by his staff. He did so personally, but with the knowledge and experience of a C.G.A. in an active public practice. He knew taxes. He knew business. He created sophisticated business entities with sophisticated fiscal periods and he used them for financial purposes. The assessments are properly based on the records of these entities. The Appellant did not supply any records to the contrary. Moreover, it is clear to the Court that, despite Mr. Wiebe's protests to the contrary, money was taken by Mr. and Mrs. Wiebe from these entities for personal purposes and that the shareholder benefits assessed properly included land cleaning expenses which occurred on their land. The decision of the Court that his testimony is not accepted without corroboration extends to his allegation that he required a five acre subdivision to sell his residence during the year of assessment; that testimony is not accepted without the zoning or subdivision by-law properly certified and placed in evidence.
[13] Therefore, except for the concessions granted by the Respondent and described herein, the assessments are confirmed, except as to penalties, and they are referred to the Minister of National Revenue for reconsideration and reassessment to allow the concessions granted by the Respondent and described in these Reasons for Judgment.
[14] Respecting the assessments for penalties for the Appellant's 1990, 1991 and 1992 taxation years, the assumptions in paragraph 22 of the Reply for 1990 are all true and they describe corresponding assumptions in paragraph 21 for 1991 and 23 for 1992. The evidence respecting the assessment of penalties for each of 1990, 1991 and 1992 was proved by the Respondent in the course of the hearing. Paragraph 22 for 1990 reads:
22. In assessing the Appellant penalties pursuant to subsection 163(3) of the Income Tax Act, the Minister relied, inter alia, upon the following assumptions:
a) the Minister assessed the Appellant in respect of his 1990 taxation year pursuant to subsection 152(7) of the Act;
b) the Appellant filed an amended return in respect of his 1990 taxation year;
c) at all material times the Appellant was a shareholder and director of Kaland and Kadack;
d) at all material times, the Appellant was a certified general accountant;
e) the Appellant was involved in both the maintenance of his records and the preparation of his return;
f) the Appellant was involved in both the maintenance of the records of Kaland and Kadack and in the preparation of their returns;
g) the Appellant failed to include in income, employment income arising from management fees paid to him by Kaland and Kadack;
h) in failing to include in income in his return, the management fees he received from Kaland and Kadack, the Appellant knowingly, or in circumstances amounting to gross negligence, participated in, assesnted to, or acquiesced in the making of a false statement or omission in his return.
[15] On the evidence, the Appellant was grossly negligent within the meaning of subsection 163(2) of the Income Tax Act respecting his 1990, 1991 and 1992 income tax returns.
[16] For these reasons, the appeal of the assessments of penalties is dismissed.
Signed at Saskatoon, Saskatchewan this 26th day of June 2000.
"D.W. Beaubier"
J.T.C.C.