Gelderland District Court recently ruled that a lady failed to make a plausible case that the full amount she deducted in home equity interest in her tax return burdened her.
Reimbursements from father
This lady owned her own home for which she paid over €60,000 in interest on a loan from her father. Her father transferred just over €40,000 to her annually. The Inland Revenue argues that this amount is intended to offset interest costs, so the interest for this part does not burden the woman. On balance, only €20,000 of owner-occupied home interest is then deductible.
The woman argues the that payments she received from her father related to dividends from shares she held in a private limited company and to her share of rental income from two properties of which she is half owner. But she does not support this claim with written records.
Nor, according to the court, is plausible her claim that she had sufficient monetary resources, which she could use as she saw fit. The court bases this on the father's contradictory statements and other documents in the file. The court notes that, despite agreements made about this, the dividends from the BV and the rent from the premises were not written off from the debt.
Reversal of burden of proof
The case does factor in that the Inland Revenue has successfully reversed the burden of proof. This means that Ms has to prove quite convincingly that her contentions are correct.
The burden of proof was reversed because Ms filed incorrect and incomplete returns. She failed to mention shares in the BV in her returns (box 3) and also failed to include a claim against her father in box 3. The returns had been prepared by her father.
Care
The court also rejected Ms's appeal to the principles of proportionality and due care. She argues that the Tax Office requested so much and so often information for a relatively small financial interest that the investigation contains an invasion of her privacy. The court considered that it is up to the inspector to weigh up the extent to which he wants to investigate a return more thoroughly by asking further questions. The court takes into account the initial refusal to provide bank statements, the father's varying statements and the woman's small income compared to the amount of the mortgage debt.