The federal authorities has filed in court docket a 100-page reply to John Risley’s newest tax enchantment, arguing intimately why the Canada Income Company believes the rich and distinguished Nova Scotia businessman underreported his revenue by hundreds of thousands of {dollars} a 12 months.
The doc is the newest salvo in a long-running Tax Court battle instigated by Risley, who has filed three separate appeals over roughly $90 million in advantages the CRA claims he acquired from his firms over a 20-year interval however did not declare on his taxes.
The newest enchantment, for the years 2012 to 2019, was filed this summer time. Risley, who’s finest often known as the co-founder of Clearwater Seafoods, has mentioned he reported what he believed have been the proper quantities on his taxes and has denied making misrepresentations or false statements.
However in a reply filed final month, the federal authorities claims the worth of advantages that flowed to Risley from his firms, together with his Halifax mansion, sprawling Chester, N.S., property, Montana ski lodge and stays on luxurious yachts, was far higher than what was proven on his taxes.
Beneath the Earnings Tax Act, the worth of “advantages” conferred by a company to a shareholder — a company-paid trip, as an illustration — are thought-about a part of the particular person’s revenue and must be taxed.
The CRA has claimed that Risley’s firms funded his residing bills, hobbies and “private endeavours.” The businesses personal a number of houses the place he lives, however additionally different property, together with an unique Labrador fishing lodge the place Risley stayed for quite a few nights and luxurious yachts that have been chartered to 3rd events however which Risley typically used.
The federal government’s latest submitting says Risley reported to the CRA between $1.5 million and $3.2 million a 12 months in complete revenue from 2012 to 2019, a lot of it within the type of advantages from his firms.
However the CRA claims these figures vastly underrepresent the worth of the advantages Risley truly acquired. In some years, the company calculated his revenue from advantages was $6 million or $7 million greater than what his tax filings confirmed.
It is clear from the court docket data that Risley and the CRA have been at loggerheads for a number of a long time. He is confronted a number of reassessments, lots of which he’s presently interesting.
Risley “has made misrepresentations in his tax returns relating to taxable advantages since 1985, which has resulted in materials reassessments over time,” Division of Justice lawyer Cecil Woon wrote in a Dec. 20 court docket submitting.
Risley didn’t reply to an interview request. Final fall, he advised CBC Information he would not take subject with paying tax on shareholder advantages, however he would not imagine the CRA is accurately calculating these advantages and they’re too excessive.
His legal professionals have mentioned in court docket filings that he relied on accountants and tax specialists to advise him and put together his returns.
The biggest dispute surrounds a property in Chester, on Nova Scotia’s South Shore, the place a Risley firm constructed a mansion in 1998 utilizing $28 million in interest-free loans from Clearwater Effective Meals Inc., a holding and funding agency Risley chaired.
Risley’s appeals have claimed the home was solely “partly used personally,” and that it hosted company enterprise growth features, was used to entertain dignitaries and kinds a part of a sequence of properties which are “long-term investments.” The CRA has countered it was “completely used personally” by Risley.
Two of the appeals, associated to the years 2000 to 2011, have been filed in 2018 however have nonetheless not been adjudicated. In June, Risley’s lawyer wrote to the Tax Courtroom that it might be “untimely” to set down dates for a listening to, as her shopper needed to consolidate his new enchantment with the previous ones.
This summer time, Woon urged a decide to set dates for a listening to, noting a few of the tax years underneath enchantment date again greater than twenty years.
He fearful there can be “additional erosion of proof” if Risley’s legal professionals have been allowed to hitch this summer time’s enchantment with these from 2018, as a result of it might add a number of years of pretrial litigation.
Final month, a Tax Courtroom decide requested each side to seek out dates earlier than June 2026.
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