RE Bought And Sold – “I concluded that the taxpayer had numerous foreign assets that were not previously disclosed.”

3275 Campion Rd, Victoria, BC
9,300 sqft SFH on 8.4 acres; ask price $6.7M (down from $15M).

“The Appellant resides at 3275 Campion Road in Saanichton, Vancouver Island, British Columbia.”

“When the Appellant filed his Canadian income tax returns for the 2002 and 2003 taxation years, he reported the following income:
2002 Net Rental Income $20,000; Net Income $19,100
2003 Net Rental Income $20,000; Net Income $22,312” …
“After completing the Net Worth Analysis and reviewing the Notices of Objection, officials of the CRA concluded that the Appellant earned and failed to report the following income:
2002 $287,340
2003 $177,380
(Note: Pension income of $2400 was also included for each year.)”

“Q. Okay, and in particular what did you gather from this new information? What did it tell you?
A. That there was some accounts and assets held outside of Canada that I had not previously been aware of.
Q. So with respect to the assets then, what did that screen from the bank indicate?
A. That the UBS account value was [$] 2,097,000. There was also an account in Germany that had a value estimated at [$] 200,000. And there were blue-chip stock holdings in Iran worth [$] 800,000.
Q. And I notice also it indicates there was a Banker’s Acceptance worth [$] 200,000, is that right?
A. Yes it does.”

“It should also be noted that the Appellant sold a home located at Beech Drive in Victoria for $4,500,000 (original purchase price was $1,075,000 and significant improvements were added). The Appellant’s home at 3275 Campion Road is currently for sale. The original asking price of the Campion Road property was $15,000,000. The current asking price is $13,500,000.”

“Based on the comments as outlined above, I believe that the gross negligence penalties imposed by the Minister should be upheld.
Before concluding, I wish to quote from United States Supreme Court Justice Oliver Wendell Holmes. Justice Holmes said:
“Taxes are the price we pay for civilized society”.
I believe that this comment by Justice Holmes applies in this situation.”

– from ‘Saeed Korki v Her Majesty The Queen’, Tax Court of Canada, Docket 2008-74(IT)G, 2010
[hat-tip to ‘oh oh’ at VCI 23 Sep 2012 3:06pm for alerting us to this case. – ed.]

21 responses to “RE Bought And Sold – “I concluded that the taxpayer had numerous foreign assets that were not previously disclosed.”

  1. Not HAM, Persian. Guess the CRA guy just googled his name. I wonder if the CRA will learn to google people’s names in other character sets and what sorts of other interesting people will be outed?

    Address: No. 86, Africa Exp. Way, Corner of Golfam,
    Tehran, Iran
    Tel: (+9821) 2050491
    Fax: (+9821) 2056670
    Mng. dir: Saeed Korki
    Activity: Spinning – weaving printing and finishing of cotton, polyester/viscose,
    polyester/cotton fabrics

  2. There’s also that principal residence exemption on capital gains. I wonder how many people are using that to their advantage, when they really live overseas. That might account for a lot of those empty houses.

    • UBCGhettodweller

      See: Point Grey

      The difference between lived-in and “as a bank account” houses at that end of town is sort of sick.

      Face it Vancouverites, you thought you could get rich quickly by inviting the Pacific Rim’s economic elite over to play. The thing is, the plan ran away on you and you’ve buggered your city with your greed. A single generation benefited, the rest will suffer.

    • If anyone at the CRA is reading this, please consider doing a massive project on empty houses in Vancouver.

      I have seen so many and have felt indignant about them, given the housing crisis in Vancouver and the probability that, as people on this thread have said, they might be owned by people who want to use Canada as a hotel or a bomb (or tax) shelter.

      Once I tried to phone the CRA about a house very near me that was very clearly unoccupied for a full year. They asked me for all kinds of information about the owner.

      But of course nobody had seen anyone around the place, and the person I understood to be the builder/buyer of the land, whom I had introduced myself to (I had thought at first he was going to be my new neighbour) barely spoke English and had not been seen since the last stone was put in the yard wall. No, I didn’t have his social insurance number….

      At the end of the year — surprise, surprise — the house went up for sale.

      • West Coast Woman

        The CRA doesn’t know whether houses are lived in or not unless someone tells them. It also takes some time before things work through the various processes – the case cited was decided in 2010, but involved the 2002 and 2003 tax years. CRA has up to 5(?) years to reassess you for a particular tax year – longer if they know fraud is involved.

        I suspect the CRA is aware there is some flipping going on in the Vancouver real estate market. A few months ago, Bob Rennie was on the national news talking about all the Asians wanting to buy in Vancouver, and that they’re buying for “capital appreciation”. I laughed my head off when he said that – he just confirmed on the news that people were buying condos/houses in Vancouver they weren’t living in! Furthermore, there is no “capital appreciation” unless the property is “capital property”. Property that is not used as a principal residence or for the purpose of earning income (such as rental income) is NOT capital property. Therefore any gain on the sale would be an income gain, taxed the same as employment or other income, at the person’s marginal tax rate.

        For the empty house, I’d suggest calling CRA again to give them the MLS number. Once the property is sold, CRA can assess on the gain from the sale.

    • West Coast Woman

      To claim the principal residence exemption, you have to actually be living in the property for every year that you own/claim it. If not, then the gain is not tax-free – it could be classified as either an income gain or a capital gain.

  3. we pay taxes because we are a brainwashed society. Singapore tax rate is 15%. They are doing alright. the more gov’t take from us, the more they foolishly spend, then have to take more..we are idiot serfs

    • If you feel that way, generate debate and try to decrease taxes, don’t break the law with illegal tax evasion. The Canadian arrangement is what it is; a social democracy. That’s apparent to anybody coming here, and to those of us who choose to stay.

    • @World Of Antiques :

      If Singapore is so great, why aren’t you living there instead of advocating breaking the law in another country where you don’t like the tax arrangements? Either work within the law as VREAA suggests, or leave. Personally, I’m happy to see that CRA is finally cracking down on criminals like the homeowner in the OP. I hope they start doing more of it. Collecting back taxes from fraudsters like this means that I need to pay less for the services my taxes are supposed to fund, which actually benefit citizens rather than people who see Canada as a free hotel.

    • If you lived in Singapore and conducted yourself the way you suggest you’d almost assuredly be in prison (or worse). And as you well know, Singaporean prisons are a little more modest than their Canadian counterparts.

      Singapore is run like a large company. They import labour from neighbouring countries who work, eat, and sleep on construction sites and are deported as soon the project is completed. Civic dissent is verboten and freeloading loafers are shunned.

      Oh yea, and beer costs $15 a pint (no HST though).

      Sounds like nirvana.

      • Actually, singapore is amazing and tons of people are trying to move here. Funny what you can do with no resources and a free market economy.

        And there certainly is dissent. They even have elections. Not as politically free as some places but it’s a new country in a bad neighbourhood with a historically volatile mix of races. Yet it opens up more all the time.

        Let me know how the social democratic model works out for you after the bubble pops. Maybe you can take some cues on recovering from Europe.

      • Hey Chip, I didn’t say you couldn’t make money in Singapore – it’s a great place for those on top of the food chain. But saying that Singapore has elections is a bit of stretch don’t you think? You’ve had the same government for some 40 years.

        Anyhow, I’m a fan of the place but last I checked Singapore real estate was hardly a bargain.

        “Singapore real estate bubble”: About 4,480,000 results

        “Vancouver real estate bubble”: About 1,790,000 results

    • Paging whoever let their demented boomer parents out on the internet. Cleanup in aisle 2.

  4. Here is the satellite view of the property:
    Interesting. It is surrounded by RV park and agriculture land. Apparently, somebody has heavily invested in this piece of land to build this beauty.

  5. Cameron the Economister

    Why is it that rich people has such strange tastes? Fake eagles in their front lawn = flamingos for richies, ugly drapes, ugly gold faucets, ugly tile, ugly art on the walls. BTW – the fake eagle is zoomed in on twice thanks to UBERTOR.

    I am glad I pay taxes, I just don’t like how they’re misused to line the wrong peoples pockets sometimes. Tax evasion is wrong

    • The ‘SultansOfSwag’, as they are fondly known in certain supranational ‘regulatory’ fora, have deservedly acquired their reputation for rococo ornamentation… Forget about their landscaping, CameronTheEconomeister… Have you ever seen a Persian ClockRadio?

      [NoteToEd: the iPhone DockingStation has been deviously concealed in the ElephantBoy’sBasket.]

  6. I appreciate the line in the report:
    “the Appellant sold a home located at Beech Drive in Victoria for $4,500,000 (original purchase price was $1,075,000 and significant improvements were added).”
    Why there is no question in the court where are the money for these million worth improvements were coming from with the reported income of $20,000?

    • “Why there is no question in the court where are the money for these million worth improvements were coming from”

      There’s a chance it came from your bank account deposits. Adding improvements are self-financing as long as a buyer can be found. Welcome to Canada.

    • West Coast Woman

      “Why there is no question in the court where are the money for these million worth improvements were coming from with the reported income of $20,000?”

      The case says that Revenue Canada did a “net worth” assessment to determine the person’s income for 2002 and 2003. A net worth assessment is where Revenue Canada looks at your assets and lifestyle determines how much money you had to have earned in order to own those assets and live that lifestyle. Some money may have come from the undeclared offshore accounts. And not all questions and answers are published in the judgment – just the ones the judge wants to emphasize.

      Also, the judge upheld the penalty for gross negligence – which can double the tax owing. Add to that the interest, calculated from 2002 and 2003 – when the tax should have been paid.

  7. I wonder who’s statistically more likely to significantly evade Canadian taxes? A foreigner holding dual passports or that from another country or someone holding only a Canadian passport? What really irks me is that the rest of Canada is subsidizing these criminals by paying their fair share of Federal income tax. If it was just BC provincial tax payers carrying these freeriders then so be it if it’s in their bleeding liberal/socialist hearts to ignore the problem. This is not the only issue. The tax system is set up to benefit these freeriders with the 50% capital gains exemption and the “principal residence” exemption. This is more than just a rich vs. poor issue! BC and Canada get your act together before we end up like Greece where the only way to collect taxes is from those that work for the Greek goverrnment.

    • West Coast Woman

      See my responses to epte and olga62, above. If they don’t live in the housing unit, they don’t qualify for the principal residence exemption. If the property is not used to earn income, then the gain would be an income gain and should be taxed as such.

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