R. v. Kleysen, 96 DTC 6265, [1996] 2 CTC 201 (Man QB) -- summary under Paragraph 239(1)(a)

The prosecution had failed to satisfy Schwartz J. that the accused taxpayers had understated their incomes by reporting sales of equipment to a related off-shore corporation ("Carib") for agreed sale prices that were substantially lower than the proceeds received by Carib for on-selling the equipment to U.S. purchasers. Carib may have been established in order to shield the taxpayers from potential liabilities to the ultimate U.S. purchasers and to get around possible restrictions on the sale of the equipment outside Canada. Furthermore, the large mark-up might be attributable to the equipment having a higher market value in the United States than in Canada and to repair work done on some of the equipment by Carib. The low selling price by the accused was attributable in part to their desire to choose a low value as the best possible starting point for negotiations with Revenue Canada on audit.