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Income tax and GST — real estate agent's business expenses

My clients was a real estate agent. He and his wife operated in partnership, earning real estate commissions. They did not keep many of their expense receipts and their financial records were not in good shape.

The CRA audited the partnership and concluded that many of the expenses claimed were either personal or unsupported. The auditor reassessed the couple to disallow hundreds of thousands of dollars of expenses and impose gross-negligence penalties.

I filed a Notice of Objection on their behalf, submitting affidavits and other supporting documentation on such expense items as dues, advertising, parking, car expenses, photocopying, telephone expenses, capital cost allowance and payments to the couple's adult children for work they had done.

After a lengthy meeting and further submissions, the Appeals Officer agreed to drop the gross-negligence penalties and to accept some of the expenses. My clients, who had paid the reassessments, received a refund exceeding $50,000.

Given the state of my clients' documentation, this was the best result that could have been achieved.

(2008)