Date: 20010503
Docket:2000-1763-IT-I
BETWEEN:
THERESA GOERK ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2000-1765-IT-I
AND BETWEEN:
MICHAEL GOERK ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2000-1766-IT-I
AND BETWEEN:
RITA KOZUCH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
(delivered orally from the Bench at
Toronto, Ontario on May 3, 2001)
Beaubier, J.T.C.C.
[1] The appeals of Rita Kozuch were heard on common evidence with the appeals of Theresa Goerk and Michael Goerk at Toronto, Ontario, pursuant to the Informal Procedure on May 3, 2001. The Appellants did not call any evidence. The Respondent called the auditor on the file, Mr. Menniti.
[2] The assumptions in Rita Kozuch's Reply to the Notice of Appeal in paragraph 6 read:
(a) in her return of income for the 1994 taxation year, the Appellant reported an alleged partnership loss in the amount of $41,430;
(b) in support of her claim for the alleged partnership loss, the Appellant filed with her return of income for the 1994 taxation year, financial statements of a purported partnership called Norex for its fiscal year ending December 31, 1994;
(c) these financial statement reported gross revenue of $537,000, expenses of $14,347,000, resulting in a net loss of 13,810,000;
(d) the firm of chartered accountants that allegedly prepared these financial statements did not exist;
(e) John Genser ("Genser") first approached the Appellant to invest in Norex in only 1995;
(f) Genser was allegedly the general partner of Norex;
(g) Genser sold the alleged loss of Norex to the Appellant in return for a portion of the income tax refund that would result from the deduction of this alleged loss by the Appellant in computing her income;
(h) Genser revised the financial statements of Norex for its fiscal year ending December 31 1994, in which expenses that had not yet been incurred by Norex were stated;
(i) Norex earned no revenue and incurred no expenses or loss during its fiscal year ending December 31, 1994;
(j) Norex did not carry on business during its fiscal year ending December 31, 1994;
(k) Norex was, at all material times, a fictitious entity; and
(l) the Appellant was not a partner of Norex at any time in her 1994 taxation year.
[3] The assumptions were never refuted by the evidence. In fact, there was no business. For this reason the appeals of Rita Kozuch are dismissed.
[4] The assumptions in Theresa Goerk's Reply are similar to those in Michael Goerk's Reply. Paragraph 6 of Theresa Goerk's Reply reads:
(a) the Appellant and her spouse invested a total amount of $54,653 and were silent and non-active partners in a limited partnership known as Buy-Rite;
(b) the Appellant had, at all material times, a 20% interest in Buy-Rite;
(c) John Genser was allegedly the general and active partner of Buy-Rite;
(d) for the 1992, 1993 and 1994 taxation years, the Appellant filed with her returns of income the income statements of Buy-Rite for its fiscal years ending December 31, 1992, December 31, 1993 and December 31, 1994. Those statements are summarised as follows:
|
1992 |
1993 |
1994 |
|
|
Income |
nil |
$56,150 |
$97,835 |
|
Gross Margin |
nil |
$7,490 |
$32,605 |
|
Operating Expenses |
$60,720 |
$116,862 |
$162,432 |
|
Net Income (Loss) |
($60,720) |
($109,372) |
($129,827) |
(e) these financial statements of Buy-Rite were prepared by John Genser based on his projections for the business at the time of filing the Appellant's tax returns;
(f) the financial statements of Buy-Rite were subsequently revised and submitted to the Minister during an audit of the Appellant's returns of income. They are summarised as follows:
|
1992 |
1993 |
1994 |
|
|
Income |
nil |
$36,100 |
$7,038 |
|
Gross Margin |
nil |
$13,100 |
$3,703 |
|
Operating Expenses |
$150,000 |
$263,100 |
$468,703 |
|
Net Income (Loss) |
($150,000) |
($250,000) |
($465,000) |
(g) included in the alleged operating expenses were purported "advertising accruals" of $80,618, $142,588 and $416,040 for the fiscal years ending Dec. 31 1992, Dec. 31 1993 and Dec. 31 1994, respectively, and purported administration salaries (allegedly paid to Genser) of $50,000 for each of the fiscal years in 1992, 1993 and 1994;
(h) no advertising or administration expenses were incurred in respect of Buy-Rite at any material time; and
(i) the Minister disallowed the purported advertising and administration expenses and accordingly revised the Appellant's share of the loss or income of Buy-Rite for each of her 1992, 1993 and 1994 taxation years, as follows:
|
1992 |
1993 |
1994 |
|
|
Income |
nil |
$13,100 |
$7,038 |
|
Gross Margin |
nil |
$13,100 |
$3,703 |
|
Operating Expenses |
$16,476 |
$70,511 |
$2,663 |
|
Net Income (Loss) |
($16,476) |
($57,411) |
$1,040 |
|
The Appellant's Share (20%) |
($3,295) |
($11,482) |
$208 |
[5] None of the assumptions were refuted by the evidence.
[6] In particular, John Genser, as agent for the Appellants, argued that his management fee was deductible insofar as the Appellants shared it. However, on the evidence of Mr. Menniti, any amounts of alleged losses were fictitious, and the expenses claimed, including particularly the management fee, were never paid or approved. Moreover, on any reasonable basis, there was nothing from which to approve the losses or the management fee. Certainly the numbers in dispute come from Mr. Genser's imagination. They had no basis either in fact or in any other credible form.
[7] For these reasons the appeals of Theresa Goerk and Michael Goerk are dismissed.
Signed at Saskatoon, Saskatchewan, this 10th day of September 2001.
"D.W. Beaubier"
J.T.C.C.
COURT FILE NO.: 2000-1763(IT)I
2000-1765(IT)I
2000-1766(IT)I
STYLE OF CAUSE: Theresa Goerk v. The Queen
Michael Goerk v. The Queen
Rita Kozuch v. The Queen
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: May 3, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge D.W. Beaubier
DATE OF REASONS: September 10, 2001
APPEARANCES:
Agent for the Appellants: John William Genser
Counsel for the Respondent: Andrea Jackett
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-1349(IT)I
BETWEEN:
EVELYN ELLEN WILSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 11, 2001 at Toronto, Ontario, by
the Honourable Judge T.E. Margeson
Appearances
Counsel for the Appellant: John David Buote
Counsel for the Respondent: Meghan Castle
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1996 taxation year is allowed and referred back to the Minister of National Revenue for reconsideration and reassessment in order for the Minister to reconsider any proper receipts in support of any allowable medical expenses in support of this claim when they are presented.
In all other respects, the appeal is dismissed and the Minister's assessment is confirmed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 10th day of September 2001.
|
"T.E. Margeson" |
J.T.C.C.