CRA can deny business expenses even after the normal assessment period

The taxpayer opened a “financial consulting” business in 1999, with the stated objective of selling mutual funds and life insurance, yet it has never earned a profit and revenues have never been more than $1,900 in any tax year. In nine of those taxation years, his business revenues were less than $800, and his expenses have exceeded revenues in each year by a substantial amount.Article content

The CRA reassessed the taxpayer’s 2011 return and allowed him to deduct expenses of $3,715, resulting in a business loss of $3,688. The CRA did not dispute that the taxpayer had a business, but it nonetheless disallowed $15,951 in expenses on the basis they were not incurred for the purposes of earning income or were not reasonable in the circumstances.Article content

For example, when asked about the purchase of an iPod, the taxpayer “could not remember or explain how that was related to .” Similarly, when questioned about the payment of a Canada Border Services Agency import fee, the taxpayer “could not remember or explain how the import fee was related to his business,” admitting he didn’t have any clients outside Canada.Article content

The judge similarly questioned the taxpayer’s meal expenses and travel costs. “I am skeptical that five trips … in December, including one in the week between Christmas and New Year’s and one on a Saturday, were necessary or even desirable,” the judge wrote. As to the size of the meal expenses, the judge concluded it was “not reasonable to spend hundreds of dollars on meals to earn a $27 commission.

Of course they can, what are you going to do tell them they can't? The only difference between the CRA and a mugger is, the mugger doesn't order you to fill out paperwork first.

Imagine if the government and the justice system worked together as much as they did here, but in order to hold politicians, and those responsible for all the damage, they have caused us accountable

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