On November 28, 2017, The newspaper Le Devoir announced a new audit project for Canadian luxury homeowners (http://bit.ly/2nczBUA).
Through this audit program, Revenue Canada verifies that some homeowners have actually reported the required resources and the required wages, based on the value of their home.
For example, a family that reports an annual income of $ 50,000 and resides in a $ 3,000,000 home might be targeted by the CRA, whom could then process to an additional audit.
At that time, Revenue Canada will probably communicate in writing with the taxpayers concerned. As has already been seen by previous similar programs..
Obviously, there can be some legitimate explanations to why the family lives in a quite expensive house even though they do not have the annual salary to back it up. Maybe the person has inherited, donated or won a lottery. Since this is not taxable, it is understandable that a simple reading of the tax report does not mention it.
However, if a taxpayer is unable to provide a verifiable trace of the origin of the funds and a concrete explanation of the financing of his or her luxury residence, it is likely that Revenue Canada will proceed with a net asset or wealth index assessment and then issue new assessment notice.
Our law firm and tax experts provide first-rate expertise regarding tax audit from Revenue Canada and Revenu Québec. We are in a position to assist you in drafting the answers to the questionnaire and to structure an accounting, tax and legal proof to answer questions from the tax authorities.
Louis Sirois, lawyer