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Docket: 2002-2273(IT)I |
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BETWEEN: |
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XIAO-PEI HUANG, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent.
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____________________________________________________________________Appeals heard together with the appeals of Wen Ling Zhu (2002-2292(IT)I) on May 6, 2003 at Toronto, Ontario
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Before: The Honourable Judge L.M. Little |
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Appearances: |
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Agent for the Appellant: |
Wen Ling Zhu
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Counsel for the Respondent: |
P. Michael Appavoo |
____________________________________________________________________
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1997 and 1998 taxation years are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 21st day of May 2003.
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"L.M. Little" |
J.T.C.C.
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Docket: 2002-2292(IT)I |
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BETWEEN: |
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WEN LING ZHU, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent.
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____________________________________________________________________Appeals heard together with the appeals of Xiao-Pei Huang (2002-2273(IT)I) on April 10, 2003 at Vancouver, British Columbia
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Before: The Honourable Judge L.M. Little |
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Appearances: |
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For the Appellant: |
The Appellant herself
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Counsel for the Respondent: |
P. Michael Appavoo |
____________________________________________________________________
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1997 and 1998 taxation years are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 21st day of May 2003.
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"L.M. Little" |
J.T.C.C.
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Citation: 2003TCC324 |
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Date:20030521 |
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Dockets: 2002-2273(IT)I 2002-2292(IT)I |
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BETWEEN:
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XIAO-PEI HUANG, WEN LING ZHU,
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Appellants, |
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and |
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HER MAJESTY THE QUEEN,
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Respondent. |
REASONS FOR JUDGMENT
Little, J.
A. FACTS:
[1] The above appeals were heard on common evidence in Toronto, Ontario on the 6th day of May 2003.
[2] In May 1996 the Appellants each purchased a one-half interest in the J and J Bar and Restaurant (the "Restaurant"). The Restaurant was operated by Wen Ling Zhu with assistance provided by her husband.
[3] In September 1997 the Appellant, Wen Ling Zhu, was diagnosed with a serious health problem and she required a medical operation.
[4] As a result of the serious health problem the Appellants sold the Restaurant for $45,000.00. The Appellant, Wen Ling Zhu, testified that in addition to the payment of $45,000.00 for the Restaurant the Appellants also received $4,300.00 for the inventory that was used in the Restaurant (Exhibit A-6). (Note: In reviewing deposits. to the bank account, the Minister of National Revenue (the "Minister") accepted the $45,000.00 that was received on the sale of the Restaurant but has not recognized the amount of $4,300.00 that was received on the sale of inventory.)
[5] When the Appellants filed their income tax returns for the 1997 and 1998 taxation years they each reported their share of the loss suffered by the Restaurant.
[6] Meetings were held with officials of the Canada Customs and Revenue Agency (the "CCRA") and various adjustments were made to the income from the Restaurant. Counsel for the Respondent stated that additional income was determined by officials of the CCRA carrying out an analysis of all deposits shown in the bank account of the Restaurant and in the personal bank accounts of the Appellants.
[7] On the 19th day of April 2002, the Minister issued Notices of Reassessment for the Appellants' 1997 and 1998 taxation years. In the said Reassessments the Minister determined that the understated net income from the Restaurant was as follows:
WenLing Zhu
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1997 |
1998 |
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i) |
Understated business income |
$20,644 |
($1,964) |
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ii) |
Disallowed eligible capital expense |
- 0 - |
11,250 |
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Understated net income |
$20,644 |
$9,286 |
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Xiao-PeiHuang
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1997 |
1998 |
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i) |
Understated business income |
$20,644 |
($1,964) |
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ii) |
Disallowed eligible capital expense |
- 0 - |
11,250 |
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Understated net income |
$20,644 |
$9,286 |
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B. ISSUE:
[8] The issue is whether the Minister was correct when he issued the Notices of Reassessment.
C. ANALYSIS
[9] The Appellant, Wen Ling Zhu, testified that when her parents returned to China in 1996 her parents left her with cash in the amount of $19,800.00 (Cdn. $). The Appellant said that she deposited this money into the bank account of the Restaurant. The Appellant said that she used this money to pay for the operating expenses of the Restaurant. The Appellant has not produced any evidence to corroborate this statement and the Minister has not recognized that the Appellant received a gift of $19,800.00 from her parents in 1996.
[10] During the hearing of the appeals the Appellant, Wen Ling Zhu, testified that she and her husband received a total of $3,000.00 in cash as wedding gifts when her daughter was married in 1997. The Minister has recognized the amount of $3,000.00 and allowed a deduction of $3,000.00 in reviewing the bank deposits. (Note: This amount was deducted by the Minister before the Reassessments were issued.)
[11] During the hearing of the appeals, the Appellant, Wen Ling Zhu, testified that she and her husband had received cash payments totalling $28,000.00 from their friend, Mr. Luo Pei En. Wen Ling Zhu testified that this amount was deposited in the bank account of the Restaurant. The Appellant said that this money was used to pay for the operating expenses of the Restaurant. The Appellant also stated that this money was later returned to Luo Pei En. (Note: The Minister recognized the deposit of this loan in the bank account before the Reassessments were issued.)
[12] During the hearing of the appeals the Appellant, Wen Ling Zhu, testified that the parents of her son-in-law made a gift to the Appellants of $20,000.00. At the conclusion of the hearing Mr. Michael Appavoo, Counsel for the Respondent, advised the Court that the Minister was prepared to accept the Appellants' testimony and recognize the gift of $20,000.00 from the parents of the Appellants' son-in-law.
[13] The Appellant, Wen Ling Zhu, also testified that they had received the sum of $4,300.00 when they sold the Restaurant and the money was deposited in the bank account of the Restaurant. I have carefully considered the testimony of the Appellant and I accept her testimony.
[14] However, I agree with the decision of the Minister regarding the unproven statement that Wen Ling Zhu was given the sum of $19,800.00 by her parents in 1996.
[15] The Appellants' appeals will be allowed and the Minister is instructed to issue Notices of Reassessment on the following basis:
WenLing Zhu
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1997 |
1998
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Understated Net Income |
$20,644 |
$9,286 |
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Deduct $10,000 re gift from parents of son-in law[1] |
$10,000 |
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Deduct $2,150 re sale of inventory |
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$2,150 |
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Understated net income |
$10,644 |
$7,136 |
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Xiao-PeiHuang
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1997 |
1998
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Understated Net Income |
$20,644 |
$9,286 |
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Deduct $10,000 re gift from parents of son-in law[2] |
$10,000 |
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Deduct $2,150 re sale of inventory |
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$2,150 |
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Understated net income |
$10,644 |
$7,136 |
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[16] In reviewing the documents that were filed as exhibits with the Court, I could not reconcile the recommendations contained in the Report on the Notice of Objection (See Exhibit R-2). For example, in the Report it is stated that the revised net business income for 1997, for each Appellant was to be $14,753.00. However, according to the Reply to the Notice of Appeal the understated net income for each Appellant for 1997 was $20,644.00. I request that officials of the CCRA carefully review the Reports prepared by the officials of the Appeals Section when they are making the adjustments referred to above.
Signed at Ottawa, Canada, this 21st day of May 2003.
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"L.M. Little" |
J.T.C.C.
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CITATION: |
2003TCC324 |
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COURT FILE NOS.: |
2002-2273(IT)I 2002-2292(IT)I |
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STYLE OF CAUSE: |
Xiao-Pei Huang and Wen Ling Zhu and Her Majesty the Queen |
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PLACE OF HEARING: |
Toronto, Ontario |
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DATE OF HEARING: |
May 6, 2003 |
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REASONS FOR JUDGMENT BY: |
The Honourable Judge L.M. Little |
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DATE OF JUDGMENT: |
May 21, 2003 |
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APPEARANCES: |
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For the Appellants: |
The Appellant, Wen Ling Zhu |
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Counsel for the Respondent: |
P. Michael Appavoo |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |