Assessment Based on Net Worth

The Canada Revenue Agency sometimes uses a basis of accounting known as net worth to assess, calculate and issue assessments against certain taxpayers.

The net worth basis of accounting consists of determining the amounts a taxpayer would have omitted to report, by proceeding with an analysis of his assets, year after year.

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Tax Audit

A tax audit is the procedure whereby taxation authorities ensure a taxpayer’s legality and compliance with tax laws.

As the taxation system in Canada is based on the principle of self-assessment, it is important for taxation officers to have the possibility to audit a taxpayer’s accounting books, records and other such documents in order to ensure compliance with the law, including make sure that what is reported is a reflection of reality.

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