http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/127184/index.do
Dicosmo v. The Queen (December 11, 2015 – 2015 TCC 325, Woods J.).
Précis: Mr. Dicosmo was a highly paid sales person. He claimed a variety of deductions in 2003, 2004 and 2005. He claimed roughly $100,000 in unreimbursed employment expenses (including roughly $40,000 in salaries paid to his wife and two children) over the three year period; CRA allowed roughly $9,000 of the claim. He claimed allowable business investment losses of $63,999, $22,000, and $39,500 for the 2003, 2004, and 2005 taxation years, respectively; CRA rejected the claim. The investments we alleged to have been made on the advice of his tax accountant, Mr. Jones. He claimed a representation expense in the amount of $38,213 for tax services provided by Mr. Jones supported by a bill dated 2005. Finally, although it was not raised at trial, in written submissions Mr. Dicosmo’s counsel argued that the three years in question were statute-barred.
The Court rejected all of the submissions made on Mr. Dicosmo’s behalf. The deductions claimed were not supported by the evidence. The statute-barring issue was raised too late.
Decision: This was a fairly simple case where the court rejected most of the taxpayer’s evidence. As to employment expenses:
[33] Counsel for Mr. DiCosmo also submits that the CRA auditor did an unsatisfactory job in the audit. I fail to see how this assists Mr. DiCosmo in this appeal. If the audit is flawed, Mr. DiCosmo had the opportunity to establish the correct result by providing reliable evidence at the Court hearing. The evidence provided fell far short of this.
[34] Mr. DiCosmo’s position seems to be that the Court should accept self-serving testimony as to employment expenses without further support. The Federal Court of Appeal stated long ago that this is not satisfactory: Njenga v.The Queen, 96 D.T.C. 6593, at para. 3:
The Income tax system is based on self-monitoring. As a public policy matter the burden of proof of deductions and claims properly rests with the taxpayer. The Tax Court Judge held that persons such as the Appellant must maintain and have available detailed information and documentation in support of the claims they make. We agree with that finding. Ms. Njenga as the Taxpayer is responsible for documenting her own personal affairs in a reasonable manner. Self written receipts and assertion without proof are not sufficient.
In the case of the allowable business investment losses claimed:
[42] I was also not satisfied by the oral testimony of Mr. Jones, the tax accountant, or Robert Leeder, the purported shareholder of Robert Leeder Sales Limited. Mr. Jones was responsible for preparing the tax returns of Mr. DiCosmo which included the claiming of these losses. Mr. Jones was not an independent witness, and I did not believe his testimony.
[43] As for Mr. Leeder, his testimony was vague and not convincing. I would note that he is also a client of Mr. Jones and their relationship may have influenced his testimony.
[44] As for Fortuity International Inc., no one from the corporation testified. I would also comment that the purported shareholder of this corporation is the brother of Mauro Marchioni, who is Mr. DiCosmo’s counsel in this appeal. If Mr. Marchioni’s brother had evidence that was helpful to Mr. DiCosmo, I would have expected him to testify.
[45] As far as the evidence as a whole reveals, there were no investments made by Mr. DiCosmo in either of these corporations. The appeal of the allowable business investment losses will be disallowed.
In the case of the representation fee paid to Mr. Jones:
[48] According to the evidence of Mr. Jones, which I accept, this amount is for general tax services, including advice regarding the holding of shares such as shares provided under employee stock option plans.
[49] Counsel for Mr. DiCosmo did not point to any statutory provision that would give a deduction for this expense, and there was no reliable evidence that links the expenditure, or a portion of it, to any particular deductible amount. Further, even if a portion of the expenditure is deductible under some provision, there is no basis on which the Court could reasonably apportion it. The deduction will be disallowed.
Finally, on the question of statute-barring:
[7] Mr. DiCosmo submits that there is no prejudice because the Crown was aware there was a disagreement between the parties as to the date of the notices of reassessment. This is clear, it is suggested, from the Amended Reply which states that the Crown does not agree with the statements in the notice of appeal as to these dates.
[8] I do not agree with this submission. Taxpayers are required by the applicable Rules of the Court to state in their notices of appeal basic information as to the appeal, including the issues to be decided. Fairness dictates that the Crown can rely on these statements. In Mr. DiCosmo’s notice of appeal, he states the issues to be decided and the statute bar issue is not among them. Accordingly, the Crown properly led no evidence on this point. It would be unfair to the Crown to have the Court consider this issue and I decline to do so.
In the result the appeal was dismissed with costs.