I just finished examinations for discovery of a Canada Revenue Agency (CRA) auditor (I was on my best behaviour). My client had a lot of income attributed to him for tax purposes, the evidence of which is almost nil. What was most interesting is CRA attributing to my client the money to pay taxes in the total income. In other words, if CRA says that you have $50,000 in hidden income, they say that you must pay taxes on the income and they increase the amount of the income by the taxes you should have paid and readjust the tax figure upward. Or at least that's what I think they did because the auditor, to his credit, honestly stated that she could not tell me the logic of the policy or the calculator, simply that it was the policy of CRA.

Also interesting was the requirement to show a negative. Say my client does not smoke or drink but Statistics Canada says that the average Canadian spends a certain amount on tobacco and alcohol, the CRA attributes the Stats Canada amount to my client as expenditures which require the income to make the purchase. How my client can show no receipts for no cigarette purchases from no store is hard to understand, but what the hell. The same goes for life insurance. My client does not have life insurance but has an income amount attributed based on the Stats Canada numbers. You cannot show a contract that does not exist.

It was an eye-opener.

 I think I should be able to get a decent result in this particular case despite the reverse onus that is almost impossible to meet  simply becayuse the onus is almost impossible to meet.

(crosspost at The London Fog)