Albeit arbitrary, the "net worth increase" method is a tax assessment technique recognized by courts. However, it should be used as a last resort by the tax authorities due to its many flaws and inaccuracies.
This method is used primarily when a taxpayer has failed to file income tax returns, produces a patently false tax return or refuses to comply with the requirement to provide the information necessary to establish the reliability of his/her tax return. It is based on an often incorrect assumption that the enrichment of a taxpayer over a given period is entirely due to its taxable income, (some or all of which was not reported). Therefore, the taxpayer must exercise his burden of proof to show that all or part of his/her net worth increase between these two dates comes from income not subject to tax.
At DUPUIS PAQUIN, we ensure that the use of the net worth assessment method is justified and that its arbitrary use remains within the limits specified by court.
In this practice area, our team meets your needs in several ways, including: