It bears repeating: you must maintain books a records as long as necessary to support any claim you wish to make for a deduction or loss under the Income Tax Act (Canada) (the “Act”), especially if you are prosecuting an appeal in the Tax Court. It does not matter if some other provision of the Act appears to authorize the destruction of those records. In Dirani v R, 2023 FCA 13, the taxpayer argued that the Tax Court should not have required him to produce records for a bad debt expense he claimed in 2006 and 2007 in respect of advances he supposedly made to a corporation he owned that had been dissolved in 2001. The Court rejected the argument. The onus was on the taxpayer to maintain the books and records he needed to prove his claim. The Court pointed out that subsection 230(6)
provides that where the taxpayer serves a notice of objection, as did the appellant, or is a party to an appeal to the Tax Court, the taxpayer must retain “every record, book of account, account and voucher necessary for dealing with the objection or appeal” until the objection or appeal has been disposed of and any route for further appeal has been exhausted.
