# Illegal Income



## appleseed123 (Jul 30, 2012)

For this example, lets say i am a drug dealer. I have made a pretty good living this year, and its enough to retire. All the dealing is done, so the only crime I will probably be caught for now is tax evasion. How would i list my income of lets say $1,000,000? Do you have to list the source of your income or any proof (receipts)? To make things simple, lets say i dont have a day job.

Do I report this a income or capital gains tax since i bought low and sold high  lol?


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## indexxx (Oct 31, 2011)

appleseed123 said:


> For this example, lets say i am a drug dealer. I have made a pretty good living this year, and its enough to retire. All the dealing is done, so the only crime I will probably be caught for now is tax evasion. How would i list my income of lets say $1,000,000? Do you have to list the source of your income or any proof (receipts)? To make things simple, lets say i dont have a day job.
> 
> Do I report this a income or capital gains tax since i bought low and sold high  lol?


You were high when you sold???


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## MoneyGal (Apr 24, 2009)

It isn't tax evasion. Proceeds of criminal activity aren't taxable. Consider if you'd given the example of robbing banks. Would you think you'd need to pay tax on the money you stole from banks, simply because it represents your "income"?


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## Homerhomer (Oct 18, 2010)

MoneyGal said:


> It isn't tax evasion. Proceeds of criminal activity aren't taxable. "?


I disagree, not only they are taxable for income tax purposes, there should also be GST collected.

I quickly googled cra website but didn't find what I was looking for (and do not feel like spending more time on it), but I came across link to a CA site who share the same opinion as mine and they link to a court case regarding sales tax.

http://vereecke.ca/index.php/dont-forget-to-collect-hst-on-the-sale-of-illegal-drugs/


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## appleseed123 (Jul 30, 2012)

@indexx, its a joke..

@moneygal, well if illegal income is untaxable then the cra shouldnt do net worth audits since the difference between net worth and income that was taxed could just be illegal income thus no tax penalty (but they do use it).


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## omegacanuck (Jun 16, 2011)

MoneyGal said:


> It isn't tax evasion. Proceeds of criminal activity aren't taxable. Consider if you'd given the example of robbing banks. Would you think you'd need to pay tax on the money you stole from banks, simply because it represents your "income"?


Actually, proceeds of crime ARE taxable. Enforcement of this is pretty weak as most criminals don't get a lot of receipts. In your example of the bank robber, you're likely right that wouldn't be likely to be taxed as if CRA ever managed to find the money, the bank would be there knocking on the door saying 'Ahem, that's OUR money you've got there'. However, in the example of the drug dealer, once the police are done, CRA can at times follow in and tax the dealer. Even if you don't have great records, they can perform what is known as a 'Net Worth Audit'.

Also, consider this. If criminal activity wasn't taxable, how would CRA ever collect from people who perpetrate tax evasion? Tax evasion it itself a criminal activity.


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## billiam (Aug 24, 2009)

More info. for your consideration:

http://blog.simpsonwigle.com/2010/05/proceeds-of-crime/


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## MoneyGal (Apr 24, 2009)

Oh, hilarious. 

I am familiar with net worth audits but the only case I know in detail wasn't the result of illegal income - the guy was a hairdresser.


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## appleseed123 (Jul 30, 2012)

ok but how do you state the illegal gains? Do you state you are a drug dealer? or do you leave occupation blank? Are drugs classified as capital property since you intend to make income from them? Or possible personal property which is also capital gains, or are all illegal deals no matter what taxed at income tax rates


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## Sampson (Apr 3, 2009)

Just use the 'other income' category. Self employment income is a broad category, I don't think you have to state what your occupation or how you derived the income in your return.


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## MoneyGal (Apr 24, 2009)

Sampson said:


> Just use the 'other income' category. Self employment income is a broad category, I don't think you have to state what your occupation or how you derived the income in your return.


But you do. I don't know what the industry code for "drug dealer" is. "Other personal services not otherwise specified"?


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## Sampson (Apr 3, 2009)

A drug dealer who wants to report income out of fear of a net worth audit should probably be able to come up with a few phony jobs here and there. Look up what reasonable income could be derived from "other personal services" and get a cover. Or develop untraceable gift sources, isn't that what the mobsters do in the movies?

Or simply pay off people within the CRA.


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## blin10 (Jun 27, 2011)

why would a drug dealer want to report anything? just live off spending cash ?


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## andrewf (Mar 1, 2010)

Become a waiter and declare reasonable cash amounts as tips. Done.


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## Charlie (May 20, 2011)

You don't need receipts to support income (only deductions). Your income is taxable and could be reported as "other services" I suppose. You might have issues with any deductions you want to claim since illegal payments aren't deductible, and you may have trouble with receipts. 

Same capital gains/income rules apply....ongoing sales are income; sale of equipment/client lists/web sites may be cap gains? You may need to verify your Canadian source stuff if you want to claim capital gains exemptions . But it is definitely not exempt. 

Wasn't Al Capone convicted of tax evasion?

You may also have an HST issue. Unless your product is....um......medicinal.

Marc Emory...a BC pot advocate, claims he reported his income each year on his tax return.


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## Daenerys Targaryen (May 11, 2012)

I read an Macleans article that was an indepth interview with a high-class prostitute in Toronto, she said she filed her taxes every year and claimed approximately $60,000 a year in income as a "freelance writer'. According to the Macleans artcle the $60,000 was about a third of her actual income and she kept the rest in cash in various safety deposit boxes throughout the city.

I dont know how common or true this practice is amongst those who make thier living from illegal means


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## iherald (Apr 18, 2009)

Buy a 'gym' and declare income based upon all the members you have. It's an easy way to launder money (or a laundry mat... no pun intended)


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## Feruk (Aug 15, 2012)

Buy a car wash. Get your wife to run it and "launder" money through it. Watch some Breaking Bad.


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## peterk (May 16, 2010)

Also, smuggle the cash inside skids full of pop with the center case of pop removed, so none of your car wash employees suspect anything.


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## appleseed123 (Jul 30, 2012)

serious guys, question answered at "other personal services" answer


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