Truong v. R. - TCC: $1.8 million increase in net worth not explained by “Ziploc bags of cash”

Truong v. R. - TCC:  $1.8 million increase in net worth not explained by “Ziploc bags of cash”

Truong v. The Queen (February 8, 2017 – 2017 TCC 22, Bocock J.).

Précis:   A net worth assessment of the taxpayer revealed a $1.8 million increase in her net worth from 2005 to 2009.  She was assessed for both income tax and GST on the unreported income and taxable supplies at issue.  She had a variety of explanations for the increase including a particularly amusing story about her brother bringing her Ziploc bags of cash from her boyfriend.  The Court was not amused and dismissed the appeals (apart from a $4,800 error in math) and sustained the imposition of gross negligence penalties.  Costs were awarded to the Crown subject to the right of the parties to make submissions on costs within 30 days.

Decision:   This was very much your run of the mill net worth case with the addition of some colourful explanations:

[11]        Ms. Truong was a regular attendee at various casinos commencing in 2005. Casinos throughout Ontario and also Quebec and the state of New York were frequently visited. Based upon attendances recorded in the win/loss statements and trip/transaction analyses, Ms. Truong attended several times a week and a dozen or more times a month. Generally for gamblers, in such endeavours, “the odds favour the house”. Based upon the win/loss statements produced by the various casinos, Ms. Truong neither beat the odds nor disapprove the saying.

[12]        Ms. Truong, her sister, friend and nephew testified that her boyfriend would, at least after he and Ms. Truong became involved in late 2006, fund these expeditions with “Ziploc bags of cash”. Ms. Truong’s sister testified she would use Ms. Truong’s player’s card to obscure the sister’s visit to the casinos “from my husband”. Ms. Truong’s nephew testified he attended the casinos, but did not participate. Ms. Truong’s friend testified the win/loss statements and player’s cards (described below) were not accurate of a person’s gambling because persons other than Ms. Truong could use the player’s card which would cause the usage data recorded on the card to be unreliable. Ms. Truong’s boyfriend indicated he only gave Ms. Truong money by cheque and, at that, only to buy assets such as real properties.

The humour was lost on the Court:

[58]        Demonstrating further Ms. Truong’s business knowledge was Ms. Truong’s evidence in re-direct on the issue of the gambling records. It was also instructive and informative for the Court on the issue of her comprehension level in commercial matters which is relevant to the penalties. She was able to explain, with relative ease, concepts which the Court, the interpreter and likely others, heard for the first time: “Player Card”, “Rated Play” and “win/loss statements”, among other terms. This testimony stood in contrast to denials of comprehension surrounding answers given at examinations for discovery and their variance with testimony given at trial. These discrepancies involved accuracy of win/loss records, contents within various tax returns and inconsistent statements regarding enhanced loans. Ms. Truong’s credibility evaporated with such contradictions.

[59]        These overarching credibility gaps are at the heart of knowledge or, at least, of wilful blindness and its sub-category: indifference regarding compliance with the law.

[60]        Quite apart from Ms. Truong’s inconsistency on her lack of knowledge or appreciation of her affairs, the Minister’s evidence concerning knowledge or gross negligence was detailed, source-based and informed. That documentary consistency was established through third party records and underlying title documents. In vive voce evidence, it was established through the CRA auditor. This jointly source evidence of the Respondent established that Ms. Truong was insouciant to compliance with her legal obligations, grossly negligent in the keeping of books and records and in filing her returns. Ms. Truong admitted and she failed to review or read her income tax and GST returns before same were filed.

[61]        Once this record was established by the Minister, Ms. Truong’s testimony did not refute the facts surrounding actual knowledge or wilful blindness. Rather, she buttressed the foundations of both initially established by the Minister. The admission of the factual accuracy of the statement of net worth, statement of assets and the underlying source documents reflecting same provides the Court with the initial basis to find, given the magnitude of the difference between reported income, on one hand, and the admitted net worth and business activity, on the other, that Ms. Truong knowingly failed to declare income and GST collected. Once established, in reply, Ms. Truong provided no plausible or credible explanation for the degree, consistency and duration of this disparity. This leaves the finding of filing false tax returns, or filing under circumstances amounting to gross negligence unavoidable. As such, the penalties are justified and shall remain.

[Footnote omitted]

The appeals were dismissed with costs awarded to the Crown subject to the right of the parties to make submissions on costs within 30 days.