Mr. DiFlorio carried on a business of selling illegal drugs to improve racehorse performance. CRA assessed him and his wife for unremitted GST, treating them as partners in the illegal business. Mrs. DiFlorio appealed saying she wasn’t a partner.
Chief Justice Rip agreed:
“ Courts are therefore reluctant to infer a business partnership between a husband and wife unless evidence of the intention to establish one is clearly made out. Conduct that is reflective of a good spousal relationship is insufficient. A different standard of proof is required than as between non-spouses.”
So Mrs. DiFlorio won her appeal with costs.
This may not be the end for Mrs. DiFlorio though. As the Chief Justice noted:
“ The appellant did much of the family banking. She shared bank accounts with Mr. DiFlorio. She changed money at the bank, deposited his pay cheques as well as government cheques and cheques given as gifts. She "always" endorsed the cheques. Household bills were paid by Mr. DiFlorio.”
Also, the auditor had said: “she also used the proceeds of the criminal activities of her husband to support her lifestyle and day-to-day expenditures as she didn't have any significant income from other sources”. (Para. 16.) So there is a chance that CRA may still assess Mrs. DiFlorio under ETA section 325 as a non-arm’s length transferee, though there may be some obstacles for CRA with that.
See DiFlorio v. The Queen, (2014 TCC Rip CJ)