October 07, 2011

Gisela Stellmacher (Appellant) v. Her Majesty the Queen (Respondent)

96 DTC 1422
Tax Court of Canada
June 21, 1996

(Court File No. 94-1116(IT)G.)

Unreported income — Penalties — Taxpayer failing to report funds arising from sales made by corporation owned by her, and diverted to bank account for her personal use — Taxpayer also failing to report interest income from such bank account — Whether taxpayer able to impugn Minister’s assessment including all unreported amounts in her income — Whether taxpayer’s conduct justify imposition of penalties — Income Tax Act, R.S.C. 1985, Chapter 1 (5th Supp.), ss. 12(1)(c) and 15(1).

The Minister alleged that the taxpayer had appropriated unreported amounts aggregating $88,706 from M Ltd., a corporation of which she was the sole shareholder, and that she had diverted them for her personal use to a bank account held in the joint names of herself and her mother. The Minister further alleged that the taxpayer had failed to report interest from such bank account. Accordingly, in assessing the taxpayer for her 1988 to 1990 taxation years, the Minister included in her income for those years all of the unreported amounts mentioned. Alleging that the amounts from M Ltd. represented sales by it of goods belonging to herself personally, and that at least 80% of the interest earned by the joint bank account belonged to her mother, the taxpayer appealed to the Tax Court of Canada.

Held: The taxpayer’s appeal was dismissed. The taxpayer’s testimony simply lacked credibility. She had the opportunity to call a number of witnesses to corroborate her evidence but did not do so. She was, therefore, unable to impugn the accuracy of the Minister’s assessments. As for the penalties involved, the taxpayer’s conduct involved high degrees of negligence in misstating her income for the years under appeal. Accordingly, the Minister’s assessments, including penalties, had to be affirmed.