Taxman Rules Supreme: “Gifts from God” are Taxable

The Provincial Court of British Columbia heard an interesting defence to allegations of tax evasion faced by a father and son in Nanaimo, British Columbia recently.

Graydon and Mathew Tyskerud were accused of tax evasion by the Canada Revenue Agency (CRA) and found themselves in court having to answer to Judge MacCarthy.

An investigation by the CRA revealed that Graydon was operating as a sole proprietor until 2001 when he incorporated under the name Graydon Tyskerud/Elite Service Inc (Elite). Graydon was the only shareholder of Elite Service Inc. and transferred funds from the corporate account of Elite to his own personal accounts. He never once reported income or benefits received from Elite and he also used funds from the corporate account for his personal expenses. After four years of operating in such a manner, Graydon ceased doing business and issuing invoices under the corporate name and began invoicing as a sole proprietor again. When he made this switch, he failed to even report the income he made personally in 2005 and 2006. In total, Graydon failed to report $109,837 of income for the 2003 through 2005 taxation years, evading $14,186 in federal income tax.

Graydon’s son Mathew failed to report income of $53,588 for the 2004, 2005, and 2006 taxation years, thereby evading $3,320 in taxes.

The Tyskerud’s defence was unusual; they told the Court their income was "gifts from God." Referring to themselves as "Children of God," they believed they had the right to arrange their affairs in a way that would exempt them from paying income tax. Judge MacCarthy ruled that such a concept has “no foundation in our present Canadian legal system.”

Graydon proclaimed to study a myriad of subjects in his free time, from law to religion and fiscal studies. From his religious studies he learned that he should be seeking to use legal fictions (such as a corporation) to rearrange his affairs in such a manner as to comply with his understanding of God's laws.

In the words of Judge MacCarthy:

Accordingly, he incorporated Elite Service Inc. with the assistance of an organization called Euro-West Consulting which was then operated by a now deceased accountant with the first name of Girard. Graydon Tyskerud then commenced to conduct his business affairs through that corporate entity.

As I understand it, Graydon Tyskerud was of the view that by doing so, he was able to comply with God's direction to him that he "cannot serve both God and mammon" by which I understand him to mean that he could not serve both God and the pursuit of profit. By using this corporate legal fiction to interact with his customers, Graydon Tyskerud’s belief according to his testimony was that he was not personally being involved and thereby violating God’s law.

Mr. Tyskerud’s interrelation of knowledge is commendable, but no sound legal argument can be constructed in such a manner. Notwithstanding the references to God in the Canadian Constitution, the taxman rules supreme in this country.

Source: Article 1, Article 2