Tax Department response
Some things the various tax departments have actually said
- These expenses are disallowed because you have no receipts to support the amount claimed. The amount represented supplies for a small start up manufacturing business and the receipts lost in a move and a flood. (Canada, United States). Overturned in Canada and partially successful in the United States.
- These expenses are not valid because you cannot connect them to a business. The amount represented payments to a secretary in a film shoot. The auditor took the view that the film was capital property. (Canada)
- This repair cost more than $250; it is not an expense but is a capital item and cannot be deducted from income. The actual amount was $10,678 and represented the cost of replacing a small part of a jet engine on a light executive aircraft. The part was known to have a very limited life, the result was overturned. (Canada)
- These expenses are not deductible; you do not have financial statements prepared according to GAAP. GAAP are generally accepted accounting principles. The plumber in question had never heard of GAAP. (Canada)
- We take no notice of shareholder resolutions. This was in response to a shareholder who was a contract computer programmer with a corporation in which he had a shareholding. The statement has some merit, if the circumstances do not support the resolution or other written material, then the written material will be ignored and preference given to what actually happened.(Canada)
- All the amounts paid to a taxpayer for board and lodging were classified as income. The taxpayer was temporarily assigned to work in Washington D.C. for a period of 4 years. The auditor took the view that temporary means 2 years or less. This was later reversed in court. (Canada)
- There are no records to support the purchase of these stocks, the cost of the stock is therefore $nil and all of the gain is income. (United States). Eventually overturned based on evidence from the broker.
- Vehicle rental amounts are not deductible; the taxpayer has to use transit. This is an example of an auditor saying one thing to the taxpayer and writing another thing in a report that the taxpayer never saw. (Canada)
- Just pay the tax assessment, it is not a lot of money (no other reason given). Similar to the previous example, one thing said another written. The written material carries more weight, but if the taxpayer never sees it, all manner of things can happen.(Canada)
