The taxpayer realized gains of $1.3 million from periodically placing funds with a rogue ("Lech") who, it was later discovered, had not invested the funds in options trading but instead used them in a ponzi scheme. The taxpayer did not report the gains after being assured by Lech that the options trading had occurred in a trust which paid the taxes on the gains.
After finding that the taxpayer's gains were income from property (rather than income with no source), the Court found that the taxpayer's failure to report her income was attributable to carelessness. Sharlow J.A. stated (at para. 58):
[The taxpayer] had no factual basis for assessing the reliability of [Lech's] assurances, and she failed to do what any reasonable person in her position would have done, which was to seek independent advice (and here I agree with the Crown that seeking assurances from a fellow investor, even one who is a bookkeeper, is not the kind of independent advice that would demonstrate reasonable care). Having failed to take that obvious and simple step, she cannot claim to have considered the matter thoughtfully, deliberately and carefully as a wise and prudent person would have done.