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CRA Ordered to Keep Hands off Stripper’s Assets  : CRA SOTW

Tax Court rules former stripper doesn’t owe tax on gifts from wealthy
benefactor

Fri, August 21, 2009
By SIDHARTHA BANERJEE, THE CANADIAN PRESS

MONTREAL -- In a legal showdown against a tax-wary former stripper,
it's the Canada Revenue Agency that's been caught with its pants
down.

The legal saga over $2 million in undeclared revenue began in
storybook fashion at Chez Paree -- a pricey Montreal strip club
patronized over the years by wealthy executives and visiting athletes,
including some prominent Hockey Hall of Famers.

Martine Landry was a dancer at the Montreal institution and was
particularly popular with one rich, elderly customer who struck up a
relationship with her.

He showered her with gifts over the years worth about $2 million: a
Corvette, money to buy a BMW, eight fur coats, jewels, a vacation,
cash to buy a downtown bar and get out of the dancing business, and
$168,000 in $1,000 bills for a down payment on a house.
According to a judgment rendered by the Tax Court of Canada, the
mystery benefactor, named in court documents as Mr. X, paid Landry to
keep him company, not to dance.

Landry in turn recounted she was attracted to his vast knowledge of
all things and, over time, the publishing-industry magnate, now 80,
began to introduce her to a whole new world. Landry would often
accompany her benefactor to the Montreal casino, where he would give
her the winnings to deposit in her account.

But eventually her low income statements and sky-high living expenses
raised alarm bells at the federal revenue agency.

By this time, Landry had long quit dancing and was owner of the
popular Montreal watering hole Mr. X helped her acquire.

A net-worth audit showed a major discrepancy between revenues
evaluated against assets and outgoing expenses, the difference being
subject to taxes unless she could prove where the money came from.

Like many Canadians, Landry had a difference of opinion with the
federal tax man about how much money she actually owed.

The feds demanded $602,617 in taxes and penalties for the years 1998
to 2002.
But the Tax Court of Canada sided with Landry in a recent judgment.
Judge Robert Hogan ruled the gifts could not be taxed.

In Canada, gifts, inheritances and gains from lotteries or other
gambling are not taxable.
But tax experts say it's common for people who frequently receive
gifts -- exotic dancers being a notable example -- to be caught in
such a legal quagmire.

Hogan ruled a more thorough investigation by the CRA would have
provided the answers they sought without having to drag the matter to
court.

But the story's not over. Revenue Quebec still wants $643,000 in taxes
and penalties and that case is playing out in a Quebec court.
Ouellette hopes the favourable decision will help in the Quebec case.

There's one final order of business in this affair: Landry is now
considering a lawsuit against the Canada Revenue Agency.

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Alan Baggett – Tax Collector’s Bible